As Filed With The Securities and Exchange Commission on November 22, 1996February 4, 1998
Registration No. 333-_________333-43243
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 6711 55-0619957
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number)Number Identification No.)
3601 MACCORKLE AVENUE, S.E.
CHARLESTON, WEST VIRGINIA 2530425 Gatewater Road
P.O. Box 7520
Cross Lanes, West Virginia 25313
(304) 925-6611769-1102
(Address, including zip code, and telephone number, including area code, Of
registrant's principal executive offices)
STEVEN J. DAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3601 MACCORKLE AVENUE, S.E.
CHARLESTON, WEST VIRGINIA 25304President and Chief Executive Officer
25 Gatewater Road
P.O. Box 7520
Cross Lanes, West Virginia 25313
(304) 925-6611769-1102
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
Copies to:
LATHAN M. EWERS, JR. TALFOURD H. KEMPER
HUNTONPETER F. McANDREWS
RANDALL S. PARKS STEPHEN S. AUSTIN
Hunton & WILLIAMS WOODS, ROGERSWilliams Adams, McAndrews, Matson & HAZLEGROVE, PLCLandsberg
951 EAST BYRD STREET 10 SOUTH JEFFERSON STREET, SUITE 1400
RICHMOND, VIRGINIAEast Byrd Street 429 Santa Monica Boulevard, Suite 550
Richmond, Virginia 23219 ROANOKE, VIRGINIA 24011Santa Monica, California 90401
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: From time to time after the
effective date of this Registration Statement.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) REGISTRATION FEE
- ------------------------------ ------------- ----------------- ------------------ ----------------
Common Stock(2) 481,000 shs. $9.28 $4,465,725 $1,353
(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant which are expected to be issued in connection with the
transactions described herein.
(2) Estimated in accordance with Rule 457(f)(2) for the purpose of calculating
the registration fee, with the value of the Bank Common Stock being exchanged in
the transaction for City Holding Common Stock being based upon the book value of
Bank Common Stock at September 30, 1996, the latest practicable data prior to
filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
CITY HOLDING COMPANY
CROSS REFERENCE SHEET
ITEM OF FORM S-4 LOCATION IN PROXY
STATEMENT/PROSPECTUS
1. Forepart of Registration Statement and Outside Facing Page; Cross Reference Sheet; Outside Front
Front Cover Page of Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Table of Contents; Available
Prospectus Information; Incorporation of Certain Information by
Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges Summary; Comparative Per Share Data; Selected
and Other Information Financial Data
4. Terms of the Transaction Summary; The Bank Merger; City Holding Company;
Price Range of City Holding Common Stock and
Dividends; Comparative Rights of Shareholders;
Incorporation of Certain Information by Reference;
Annex I; Annex II
5. ProForma Financial Information Not Applicable
6. Material Contracts with the Company Being Not Applicable
Acquired
7. Additional Information Required for Reoffering Not Applicable
by Persons and Parties Deemed to be
Underwriters
8. Interests of Named Experts and Counsel Not Applicable
9. Disclosure of Commission's Position on Not Applicable
Indemnification for Securities Act Liabilities
10. Information with Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Information by Not Applicable
Reference
12. Information with Respect to S-2 or S-3 Available Information; Incorporation of Certain
Registrants Information by Reference; Summary; Selected Financial
Data; City Holding Company; Price Range of City
Holding Common Stock and Dividends; Regulation and
Supervision
13. Incorporation of Certain Information by Incorporation of Certain Information by Reference
Reference
14. Information with Respect to Registrants Other Not Applicable
than S-2 or S-3 Registrants
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Not Applicable
Companies
17. Information with Respect to Companies other Selected Financial Data; The Old National Bank of
than S-2 or S-3 Companies Huntington Management's Discussion and Analysis of
Operations; The Old National Bank of Huntington;
Market For and Dividends Paid on Bank Common
Stock; The Old National Bank of Huntington Financial
Statements
18. Information if Proxies, Consents or Incorporation of Certain Information By Reference;
Authorizations are to be Solicited Summary -- Shareholder Meeting; The Bank Merger;
Summary -- Rights of Shareholders Electing to Exercise
Their Right of Appraisal; Comparative Rights of
Shareholders; Annex II
19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited, or
in an Exchange Offer
[The Old National[Del Amo Savings Bank, of HuntingtonFSB Letterhead]
Dear Shareholders:
You are cordially invited to attend the Special Meeting of Shareholders of The
Old NationalDel
Amo Savings Bank, of HuntingtonFSB ("the Bank") on __________, __________ __, 1997,Monday, March 9, 1998, at __:__ _.m.10:00 a.m.,
EasternPacific Time, at ____________________ ____________________.the Torrance Chamber of Commerce, 3400 Torrance Blvd., Suite
100, Torrance, California. This is a very important meeting regarding your
investment in the common stock of the Bank.
The purpose of the meeting is to consider and vote upon the Amended and Restated
Agreement and Plan of Reorganization, dated as of August 13, 1996,February 2, 1998, by and among
the Bank, City Holding Company ("City Holding") and ONBCity Acquisition Subsidiary, N.A.Sub, F.S.B.
(in organization) ("Acquisition") and the related Plan of Merger (together, the
"Agreement"), pursuant to which, among other things, the Bank will be merged
with and into Acquisition (the "Bank Merger""Merger") and become a subsidiary of City
Holding. In the
Bank Merger, each share of Common Stock of the Bank, other than
dissenters' shares, will be converted into the right to receive shares of Common
Stock of City Holding, as described in the accompanying Proxy
Statement/Prospectus. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE AGREEMENT AND THE BANK MERGER, WHICH THE BOARD BELIEVES IS IN
THE BEST INTERESTS OF SHAREHOLDERS OF THE BANK.
Enclosed is a Notice of the Special Meeting of Shareholders, a Proxy
Statement/Prospectus containing a discussion of the Agreement and the Bank Merger and
a proxy card. Please complete, sign and date the enclosed proxy card and return
it as soon as possible in the envelope provided.
If you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy. It is important that you
understand that the Agreement and Bank Merger must be approved by the holders of more
than two-thirds of all outstanding shares of Common Stock of the Bank, and that
the failure to vote will have the same effect as a vote against the proposal. On
behalf of the Board, thank you for your attention to this important matter.
Very truly yours,
William M. FrazierNicholas Barakonski
President and Chief Executive Officer
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON
999 4TH AVENUE
HUNTINGTON, WEST VIRGINIA 25701
(304) 525-7500FSB
3422 CARSON STREET
TORRANCE, CALIFORNIA 90503
(800) 961-6636
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________ __, 1997MARCH 9, 1998
TO THE SHAREHOLDERS OF THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON:FSB:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders has been called by
the Board of Directors of The Old NationalDel Amo Savings Bank, of HuntingtonFSB ("the Bank") and will be
held at _________________________,the Torrance Chamber of Commerce, located at ______________________________,3400 Torrance Blvd., Suite
100, Torrance, California, on __________, __________ __, 1997,Monday, March 9, 1998, at __:__
_.m. Eastern10:00 a.m. Pacific Time
for the purpose of considering and voting upon the following matters:
1. Proposed Bank Merger. To consider and vote upon the Amended and Restated Agreement
and Plan of Reorganization dated as of August 13, 1996February 2, 1998, and a related Plan of
Merger (together, the "Agreement") providing for the merger of the Bank with and
into ONBCity Acquisition Subsidiary, N.A.Sub, F.S.B. (in organization), a wholly-owned subsidiary
of City Holding Company (the "Bank Merger""Merger"). The Agreement is attached to the
accompanying Proxy Statement/Prospectus as Annex I;A; and
2. Other Business. To consider and vote upon such other matters as may properly
come before the meeting.
Only those holders of shares of Common Stock of the Bank ("Bank Common Stock")
of record at the close of business on __________ __, 199_January 26, 1998, are entitled to notice
of and to vote at the meeting.
Huntington, West VirginiaTorrance, California By Order of the Board of Directors,
__________ __, 199_
Leon K. OxleyFebruary 6, 1998
Diana Bowers
Secretary
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
BANKTHE SHARES OF THE BANK'S COMMON STOCK VOTE TO APPROVEIN FAVOR OF THE BANK MERGER PROPOSAL.AGREEMENT AND THE
MERGER.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. SHAREHOLDERS ATTENDING THE MEETING
MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE CONSIDERED, IN WHICH EVENT THE
SIGNED PROXIES ARE REVOKED. ANY PROXY MAY BE REVOKED BY YOU IN WRITING OR IN
PERSON AT ANY TIME PRIOR TO THE EXERCISEVOTING THEREOF.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
OF
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTONFSB
TO BE HELD ON __________ __, 199_MARCH 9, 1998
PROSPECTUS OF
CITY HOLDING COMPANY
COMMON STOCK
This Proxy Statement/Prospectus is being furnished to the holders of shares of
Common Stock, par value $10.00$2.50 per share ("Bank Common Stock"), of The Old NationalDel Amo
Savings Bank, of Huntington,FSB, a national banking associationFederally chartered savings bank (the "Bank"), in
connection with the solicitation of proxies by the Board of Directors of the
Bank (the "Bank Board") for use at the Special Meeting of Bank Shareholders to
be held at __:__ _.m. Eastern10:00 a.m. Pacific Time on __________ __, 199_,March 9, 1998, at _______________,the Torrance Chamber of
Commerce, located at ______________________________3400 Torrance Blvd., Suite 100, Torrance, California (the
"Bank Shareholder Meeting" or the "Special Meeting").
At the Bank Shareholder Meeting, shareholders of record of Bank Common Stock as
of the close of business on __________ __, 199_,January 26, 1998, will consider and vote upon a
proposal to approve the Amended and Restated Agreement and Plan of
Reorganization, dated as of August
13, 1996,February 2, 1998, and a related Plan of Merger
(together, the "Agreement") by and among City Holding Company, a West Virginia
corporation ("City Holding"), ONBCity Acquisition Subsidiary, N.A.Sub, F.S.B., an interim national banking association (in
organization)a wholly owned
bysubsidiary of City Holding (in organization) ("Acquisition"), and the Bank
pursuant to which, among other things, the Bank will merge into Acquisition (the
"Bank
Merger""Merger"). Upon consummation of the Bank Merger, which is expected to occur on or
about JanuaryMarch 31, 1997,1998, each outstanding share of Bank Common Stock, other than
shares as to which the holder exercises and perfects the statutory right to an
appraisal ("Dissenting Shares"), shall be converted into and represent the right
to receive a number of shares of common stock, $2.50 par value, of City Holding
("City Holding Common Stock,Stock"), determined by the Exchange Ratio (as defined
herein), subject to adjustment as set forth in the Agreement. The number
of Dissenting Shares as defined in Section 2.3 of the Agreement and fractional
shares settled in cash may not exceed 9.9% of the outstanding shares of Bank
Common Stock. See "The Bank Merger - ---
Determination of Exchange Ratio and Exchange for City Holding Common Stock." For
a description of the Agreement, which is included herein as Annex IA to this
Proxy Statement/Prospectus, see "The
Bank Merger."
This Proxy Statement/Prospectus and the accompanying proxy card are first being
mailed to shareholders of the Bank on or about __________ __, 199_.February 6, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF CITY HOLDING COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is __________ __, 1996.February 6, 1998.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION........................................................................................... 1INFORMATION.............................................................................1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................................................... 1
SUMMARY......................................................................................................... 2REFERENCE.................................................1
SUMMARY...........................................................................................2
Parties to the Bank Merger................................................................................ 2Merger....................................................................2
Shareholder Meeting....................................................................................... 2Meeting......................................................................2
Vote Required; Record Date................................................................................ 3Date...............................................................3
The Merger...............................................................................3
Determination of Exchange Ratio..........................................................3
Exchange of Bank Merger........................................................................................... 3
The Exchange Ratio........................................................................................ 3Stock for City Holding Common Stock.....................................4
Effective Time of the Merger.............................................................4
Recommendation of the Board of Directors of Bank; Reasons for the Bank Merger............................. 3
Effective TimeMerger.................4
Opinion of the Bank's Financial Advisor..................................................5
Business of the Bank Merger......................................................................... 4Pending the Merger.................................................5
Conditions to Consummation of the Merger.................................................5
Interests of Certain Persons in the Merger...............................................5
Certain Federal Income Tax Consequences..................................................5
Rights of Shareholders Electing to Exercise their Dissenter Rights of Appraisal..................................... 4
Conditions to Consummation................................................................................ 4
Conduct of Business Pending the Bank Merger............................................................... 4
Interests of Certain Persons in the Bank Merger........................................................... 5Appraisal..........5
Resale of City Holding Common Stock....................................................................... 5
Certain Federal Income Tax Consequences of the Bank Merger................................................ 5Stock......................................................6
Market Prices Prior to Announcement of the Bank Merger.................................................... 5Merger........................................6
Comparative Per Share Data................................................................................ 5Data...............................................................6
SELECTED FINANCIAL DATA......................................................................................... 7DATA...........................................................................8
GENERAL INFORMATION..............................................................................12
THE OLD NATIONAL BANK OF HUNTINGTON
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................................................................. 11
GENERAL INFORMATION............................................................................................. 21
THE BANK MERGER................................................................................................. 22
Effective Time of the Bank Merger......................................................................... 22MERGER.......................................................................................13
Determination of Exchange Ratio;Ratio.........................................................13
Exchange of Bank Stock for City Holding Common Stock..................... 22Stock....................................14
Exchange of Options Granted Under Bank's 1990 Stock Option Plan.........................14
Effective Time of the Merger............................................................15
Recommendation of the Board of Directors of Bank; Reasons for the Merger................15
Opinion of the Bank's Financial Advisor.................................................16
Business of the Bank Pending the Bank Merger.............................................................. 23Merger.................................................18
Conditions to Consummation of the Bank Merger............................................................. 23
Termination............................................................................................... 23Merger................................................19
Termination.............................................................................19
Accounting Treatment...................................................................................... 24Treatment....................................................................19
Operations After the Bank Merger.......................................................................... 24Merger.............................................................19
Interests of Certain Persons in the Bank Merger........................................................... 24Merger..............................................19
Effect on the Bank Employee Benefits Plans................................................................ 24Plans..............................................20
Certain Federal Income Tax Consequences................................................................... 25Consequences.................................................20
Rights of Shareholders Electing to Exercise theirDissenter's Right of Appraisal...................................... 26Appraisal..............21
CITY HOLDING COMPANY............................................................................................ 27COMPANY.............................................................................23
PRICE RANGE OF CITY HOLDING COMMON STOCK AND DIVIDENDS.......................................................... 28
THE OLD NATIONALDIVIDENDS...........................................24
DEL AMO SAVINGS BANK, OF HUNTINGTON............................................................................. 28
General................................................................................................... 28
FSB........................................................................24
General.................................................................................24
MARKET FOR AND DIVIDENDS PAID ON BANK COMMON STOCK.............................................................. 29STOCK...............................................24
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS OF BANK STOCK............................................................ 29STOCK.............................................25
REGULATION AND SUPERVISION...................................................................................... 31SUPERVISION.......................................................................27
Bank Holding Companies.................................................................................... 31Companies..................................................................27
Capital Requirements...................................................................................... 32Requirements....................................................................28
Limits on Dividends and Other Payments.................................................................... 35
FIRREA.................................................................................................... 35
FDICIA.................................................................................................... 36
Banks .................................................................................................... 36
FDIC Insurance Assessments................................................................................ 36Payments..................................................28
City National...........................................................................29
Governmental Policies..................................................................................... 36
OtherPolicies and other Safety and Soundness Regulations.................................................................... 37Regulations........................29
DESCRIPTION OF CAPITAL STOCK OF CITY HOLDING.................................................................... 37HOLDING.....................................................29
Common Stock.............................................................................................. 38Stock............................................................................30
Preferred Stock........................................................................................... 38Stock.........................................................................30
Preferred Stock Purchase Rights Plan; Change of Control................................................... 38Control.................................30
Reports to Shareholders................................................................................... 39Shareholders.................................................................31
Transfer Agent............................................................................................ 39Agent..........................................................................31
COMPARATIVE RIGHTS OF SHAREHOLDERS.............................................................................. 39
Capitalization............................................................................................ 39SHAREHOLDERS...............................................................31
Capitalization..........................................................................31
Voting Rights............................................................................................. 39Rights...........................................................................31
Directors and Classes of Directors........................................................................ 40Directors......................................................32
Anti-Takeover Provisions.................................................................................. 40Provisions................................................................32
Preemptive Rights......................................................................................... 40
Assessment................................................................................................ 40Rights.......................................................................32
Assessment..............................................................................32
Conversion; Redemption; Sinking Fund...................................................................... 40Fund....................................................32
Liquidation Rights........................................................................................ 41Rights......................................................................32
Dividends and Other Distributions......................................................................... 41Distributions.......................................................33
Shareholder Meetings...................................................................................... 41
Indemnification........................................................................................... 41Meetings....................................................................33
Indemnification.........................................................................33
Director Exculpation...................................................................................... 42Exculpation....................................................................34
Dissenters' Rights........................................................................................ 42Rights......................................................................34
RESALE OF CITY HOLDING COMMON STOCK............................................................................. 42
EXPERTS......................................................................................................... 42STOCK..............................................................34
EXPERTS..........................................................................................34
LEGAL OPINIONS.................................................................................................. 43OPINIONS...................................................................................34
OTHER MATTERS................................................................................................... 43MATTERS....................................................................................35
ANNEX I--AgreementA--Amended and Restated Agreement and Plan of Reorganization
dated August 13, 1996; PlanANNEX B--Plan of Merger
ANNEX II--12 U.S.C.A.C--Opinion of Hovde Financial, Inc.
ANNEX D--12 C.F.R. ss. 215a552.14 relating to Dissenters' Rights
AVAILABLE INFORMATION
City Holding is subject to the reporting and informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Reports, proxy statements
and other information filed with the SEC can be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611-2511 or Seven World Trade Center (13th Floor), New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The SEC also maintains a Web site that contains reports, proxy
statements, information statements, and other information regarding registrants
that file electronically, including City Holding, with the SEC at
http:\\www.sec.gov. City Holding common stock is quoted on Nasdaq, and reports,
proxy statements, and other information concerning City Holding may be inspected
and copied at the offices of Nasdaq, 1735 K Street, N.W., Washington, D.C.
20006. As permitted by the Rules and Regulations of the SEC, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement on Form S-4, of which this Proxy Statement/Prospectus is
a part, and exhibits thereto (together with the amendments thereto, the
"Registration Statement"), which has been filed by City Holding with the SEC
under the Securities Act of 1933, as amended (the "1933 Act") with respect to
City Holding Common Stock and to which reference is hereby made.
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the offer
contained in this Proxy Statement/Prospectus, and if given or made, such
information or representation must not be relied upon as having been authorized
by City Holding or the Bank. This Proxy Statement/Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the securities to which it relates, nor does it constitute an offer to or
solicitation of any person in any jurisdiction to whom it would be unlawful to
make such an offer or solicitation. Neither the delivery of this Proxy
Statement/Prospectus nor the distribution of any of the securities to which this
Proxy Statement/Prospectus relates shall, at any time, imply that the
information herein is correct as of any time subsequent to the date hereof.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
RELATING TO CITY HOLDING THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
CITY HOLDING DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROMTO ROBERT A.
HENSON, CHIEF FINANCIAL OFFICER, CITY HOLDING COMPANY, 3601 MACCORKLE AVENUE,
S.E., CHARLESTON,25 GATEWATER ROAD, P.O.
BOX 7520, CROSS LANES, WEST VIRGINIA 25304,25313, (304) 925-6611.769-1102. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY ___________, 199_.MARCH 2, 1998.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by City Holding are incorporated by reference in
this Proxy Statement/Prospectus: (i) City Holding's Annual Report on Form 10-K
for the year ended December 31, 1995;1996; (ii) City Holding's Quarterly ReportReports on
Form 10-Q for the periodperiods ended March 31, 1997, June 30, 1997, and September 30,
1996;1997; (iii) City Holding's Current Report on Form 8-K, filed on January 14,
1997, and (iii)City Holding's Current Report on Form 8-K, filed on October 10, 1997;
and (iv) the description of City Holding Common Stock in City Holding's
registration statement on Form 8A filed under the Exchange Act with respect to
City Holding Common Stock, including all amendments and reports filed for the
purpose of updating such description.
All documents filed by City Holding pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Bank Shareholder Meeting are hereby incorporated by reference in this Proxy
Statement/Prospectus and shall be deemed a part hereof from the date of filing
of such documents. Any statement contained in any supplement hereto or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Proxy Statement/Prospectus to the extent that a statement contained
herein, in any supplement hereto or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement, this Proxy Statement/Prospectus or any supplement
hereto.
Also incorporated by reference herein is the Amended and Restated Agreement and
Plan of Reorganization among City Holding, Acquisition and the Bank, dated
August 13,
1996,February 2, 1998, which is attached to this Proxy Statement/Prospectus as Annex
I.
1A.
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ALL
MATERIAL FACTS REGARDING CITY HOLDING, THE BANK AND THE MATTERS TO BE CONSIDERED
AT THE BANK SHAREHOLDER MEETING AND IS QUALIFIED IN ALL RESPECTS BY THE
INFORMATION APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, THE ANNEXES HERETO AND THE DOCUMENTS REFERRED TO HEREIN.
SHAREHOLDERS ARE URGED TO CAREFULLY READ ALL SUCH INFORMATION.
Parties to the Bank Merger
City Holding. The main office of City Holding is located at 3601 MacCorkle
Avenue, S.E., Charleston,25 Gatewater Road,
P.O. Box 7520, Cross Lanes, West Virginia 25304,25313, telephone (304) 925-6611.769-1102.
City Holding, a West Virginia corporation headquartered in Charleston, commenced
operations in November 1983. On December 22, 1997, each of City Holding's West
Virginia banking subsidiaries was merged into and became divisions of City
Holding's principal subsidiary, The City National Bank of Charleston (City
National). In addition to City National, City Holding is the parent company of
City Financial Corporation, a full-service securities brokerage and investment
advisory company and City Mortgage Corporation, currently has nine banking
subsidiaries and three non-banking subsidiaries.inactive. All of the
subsidiaries are wholly-owned. In addition to City Holding's periodic filings
with the Commission, each of the Banking SubsidiariesSEC, City National is subject to certain regulatory guidelines at the
applicable federal and state level. As such, the banks areCity National is routinely examined
by these regulatory bodies and certain information is required to be submitted
to them each quarter. City Holding operates retail and consumer-oriented
community banks that emphasize personal service. At September 30, 1996,1997, City
Holding had total assets of $1,085 million,$1.34 billion, total deposits of $826$910 million and
total stockholders'shareholders' equity of $77$90 million.
City Holding's principal subsidiary bank is The City National, Bank of Charleston
("City National"), which was organized in
1957 and had $432 million in total
assets at September 30, 1996.1957. Through its main office, City National serves the Kanawha City section of
Charleston and municipalities and rural areas east of the city. City National
operates full service branch banks in downtown Charleston, eastern and western
Charleston, the South Hills district of Charleston, Marmet, St. Albans, Teays
Valley, Winfield, Eleanor and Cross Lanes. City National, including its
divisions, operates 43 banking offices throughout the state of West Virginia.
As a bank holding company, City Holding is permitted by the Bank Holding Company
Act of 1956 to own banks and engage in business which the Federal Reserve Board
has determined to be "so closely related to banking or managing or controlling
banks as to be a proper incident thereto." Examples of businesses the Federal
Reserve Board has permitted bank holding companies to engage in under this
provision are consumer finance, credit card, mortgage, commercial finance and
factoring businesses, providing investment advice and brokerage services, and
engaging in certain insurance agency activities. See "City Holding Company."
ONBCity Acquisition Subsidiary, N.A.,Sub, F.S.B. is owned by City Holding, and has no business
operations.operations and is being formed solely to effect the acquisition of the Bank.
The Bank. The main office of the Bank is located at 999 4th Avenue, Huntington,
West Virginia 25701,3422 Carson Street,
Torrance, California 90503, telephone (304) 525-7500.
The Old National(800) 961-6636.
Del Amo Savings Bank, of Huntington (the "Bank")FSB is a national banking
associationFederally chartered savings bank providing
deposit, loan and commercial banking services in Cabell
County and Waynethe South Bay area of Los
Angeles County. The Bank operates threetwo offices. At September 30, 1996,1997, the Bank
had assets of $53.840$113.3 million, deposits of $49.114$100.4 million, and shareholders'
equity of $4.059$6.7 million. The Bank serves approximately 2,6007,000 customers in its
market area. Its lending activities focus on meeting the needs of its market
area by offering residential mortgage loans, equity lines of credit, consumer
loans, automobile loans, and business loans to local individuals and businesses.
See "The Old National Bank of Huntington."Del Amo Savings Bank."
Shareholder Meeting
The Bank ShareholdersShareholder Meeting will be held on __________, __________ __, 1997,Monday, March 9, 1998, at __:__ _.m. Eastern10:00
a.m. Pacific Time at ____________________the Torrance Chamber of Commerce located at ______________________________,3400 Torrance
Blvd., Suite 100, Torrance, California, for the purpose of considering and
voting upon a proposal to approve the Agreement and a related Plan of Merger;
and such other business as may properly come before the meeting.
2
Vote Required; Record Date
Only Bank shareholders of record at the close of business on __________ __, 199_January 26, 1998
(the "Record Date"), are entitled to vote at the Bank Shareholder Meeting. The
affirmative vote of the holders of more than two-thirds of the shares
outstanding on such date is required to approve the Bank Merger. As of the Record
Date, there were 75,000533,096 shares of Bank Common Stock entitled to be voted, held
by approximately 145292 shareholders of record.
Directors of the Bank and theirits affiliates beneficially owned, as of the Record
Date, 45,830199,761 shares, or approximately 61.11%37.5%, of the 75,000533,096 outstanding shares
of Bank Common Stock. Directors of the Bank have agreed with City Holding to
recommend approval of the Bank Merger to shareholders of the Bank and to vote the
shares of Bank Common Stock beneficially owned by them and with respect to
which they have the power to vote, in favor of the Bank Merger.
See "Ownership by Certain Beneficial Owners of Bank Stock."
The Board of Directors of City Holding has approved the Bank Merger. Approval of the Bank
Merger by City Holding shareholders is not required by applicable law or
regulation. No officers or directors of City Holding own any shares of Bank
Common Stock.
The Bank Merger
Pursuant to the Agreement, at the Effective Time of the Bank Merger, as defined
herein under the heading "The Bank Merger -- Effective"--Effective Time of the Bank Merger," the Bank will merge into
Acquisition in accordance with the Plan of Merger. At the Effective Time of the
Bank Merger, each outstanding share of Bank Common Stock (other than shares held by
City Holding or Dissenting Shares)Shares, as defined below) will be converted into the
right to receive 5.83a fixed number of shares of City Holding Common Stock based on
the Exchange Ratio, as described below and subject to adjustment as set forth in
the Agreement, provided thatAgreement. See "The Merger - Determination of Exchange Ratio."
Determination of Exchange Ratio
In connection with the numberMerger, each share of Bank Common Stock outstanding
immediately prior to the Effective Time of the Merger (other than shares of Bank
Common Stock that become Dissenting Shares as defined in Section
2.3 of the Agreement and fractional shares settled in cash, does not exceed 9.9%
of the outstanding shares of Bank Common Stock.
The Exchange Ratio
Each share of Bank Common Stock issued and outstanding at the Effective Time of
the Bank Merger (as defined below) (other than shares held by City Holding, if any, and other than Dissenting Shares as
defined in Section 2.3 of the Agreement) shall,, by virtue of the Merger and without
any action byon the part of the holder thereof, shall be converted to ainto that
number of shares of City Holding Common Stock equal to the product of one
multiplied by the Exchange Ratio. As used in the Agreement:
(i) "Exchange Ratio" shall mean the quotient (rounded toof (x) the nearest one
one-hundredth) obtained by dividing (i)sum of (A) the
product obtained by multiplyingof 1.55 times the Net Book Value Per Share (as defined
herein) plus (B) the per share pro rata amount of the Bank's
out-of-pocket accountable fees, costs and expenses associated with
the Merger (up to a maximum in the aggregate of $200,000 and only
to the extent such costs have not been capitalized) (the "Merger
Expenses") divided by (y) the Fair Market Value Per City Holding
Share (as defined herein);
(ii) "Net Book Value Per Share" shall mean the net book value of the
Bank at the Measurement Date (as defined herein) divided by the
total number of shares of Bank Common Stock asoutstanding
immediately prior to the Effective Time of June 30, 1996 by 2.5 by (ii)
$23.325 (the "Citythe Merger;
(iii) "Fair Market Value Per City Holding Stock Price") (such quotient,Share" shall mean the "Exchange Ratio").
The consideration to be received by the holdersaverage
closing price of Bank Common Stock is
sometimes referred to herein as "Merger Consideration." The Exchange Ratio will
be adjusted to reflect any consolidation, split-up, other subdivisions or
combinationsa share of City Holding Common Stock any dividend payableas reported
on The Nasdaq National Market for the twenty trading days prior to
the Measurement Date; provided, that (A) if the Fair Market Value
Per City Holding Share as determined in the clause immediately
preceding this proviso is less than $32.00 and greater than or
equal to $30.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $32.00, (B) if the Fair Market Value Per
City Holding Share as determined in the clause immediately
preceding this proviso is greater than $43.00 and less than or
equal to $48.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00, (C) if the Fair Market Value Per
City Holding Share as determined in the clause immediately
preceding this proviso is greater than $48.00 and less than or
equal to $55.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00 increased by the amount by which
the actual Fair Market Value Per City Holding Share exceeds
$48.00, or (D) if the Fair Market Value Per City Holding Share as
determined in the clause immediately preceding this proviso is
greater than $55.00 or less than $30.00, the Bank and City Holding
may terminate the Agreement in accordance with Section 7.1(k) of
the Agreement; and
(iv) "Measurement Date" shall mean the last day of the month
immediately preceding the Closing Date, as defined in Section 6.1
of the Agreement.
Exchange of Bank Stock for City Holding Common Stock
After the Effective Time of the Merger, each holder of a certificate theretofore
representing outstanding shares of Bank Common Stock, upon surrender of such
certificate to The City National Bank of Charleston (which shall act as exchange
agent) accompanied by a Letter of Transmittal shall be entitled to receive in
exchange therefor a certificate or any capital reorganization involvingcertificates representing the reclassificationnumber of full
shares of City Holding Common Stock after August 13, 1996. The Exchange Ratiofor which shares of 5.83 has
notBank Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been adjusted to reflect the City Holding 10% stock dividend effective
November 1996.exchanged as provided (plus cash in lieu of any fractional share). See
"The Bank Merger -- DeterminationExchange of Exchange Ratio and
ExchangeBank Common Stock for City Holding Common Stock."
Holders of options granted under the Bank's 1990 Stock Option Plan must exercise
such options or deliver an irrevocable election to convert such options to the
Bank prior to March 9, 1998, or such options will terminate pursuant to the
terms of the underlying option agreements. See "The Merger -- Exchange of
Options Granted Under Bank's 1990 Stock Option Plan."
Effective Time of the Merger
The Merger is expected to be consummated on or about March 31, 1998. Subject to
the terms and conditions set forth herein, including receipt of all required
regulatory approvals, the Merger shall become effective at the date and time
specified in the Articles of Combination to be filed with the Office of Thrift
Supervision (the "OTS"). The Bank and City Holding each has the right, acting
unilaterally, to terminate the Agreement should the Merger not be completed by
June 30, 1998. See "The Merger -- Termination."
Recommendation of the Board of Directors of Bank; Reasons for the
Bank Merger
The Board of Directors of the Bank has determined that the Bank Merger is in the best
interests of the Bank and its shareholders. The Board was influenced by a number
of factors in arriving at this determination, though it did not assign any
specific or relative weight to these factors in its consideration. Among the
factors considered were:
(i) The Board of Directors of the Bank believes that the Exchange
Ratio of 2.5 times
book value at June 30, 1996 provides a fair price to the Bank's shareholders for their
shares of Bank Common Stock.
(ii) The Bankopinion of Hovde Financial, Inc. that the terms of the merger
are fair to the Bank's shareholders from a financial point of
view.
(iii) The exchange of shares pursuant to the Merger is anticipated to be
tax-free for federal income tax purposes for the shareholders of
Bank Common Stock (other than in respect to cash paid in lieu of
fractional shares or to dissenting shareholders).
3
(iii)(iv) City Holding Common Stock to be received by the Bank shareholders
is expected to afford greater market liquidity when compared to
the current minimal trading of the Bank's Common Stock.
(iv)(v) The Bank Merger willis expected to provide the Bank's customers access to a
broader range of financial services and products.
(v) Bank's(vi) The Board of Directors review of the Bank found the provisions of the
Agreement and related Plan of Merger was favorable.
(vi) The Bank Merger will allow Bank to continue its community bank philosophy.be fair and reasonable.
Based on these matters, and such other matters as the Board deemed relevant, the
Bank's Board of Directors unanimously adopted the Agreement and Plan of Merger
as being in the best interests of the Bank and its shareholders.
BANK'STHE BOARD OF DIRECTORS OF BANK RECOMMENDS THAT BANK SHAREHOLDERS VOTE FOR APPROVALIN FAVOR
OF THE PROPOSAL.
Effective TimeAGREEMENT AND THE MERGER.
Opinion of the Bank's Financial Advisor
The Bank has received the opinion of Hovde Financial, Inc. ("Hovde") that as of
November 20, 1997, the terms of the Merger are fair, from a financial point of
view, to the shareholders of the Bank. The full text of Hovde's opinion, dated
November 20, 1997, which describes the procedures followed, assumptions made,
limitations on the review taken, and other matters in connection with rendering
such opinion, is set forth in Annex C to this Proxy Statement/Prospectus and
should be read in its entirety by the Bank's shareholders. For additional
information regarding the opinion of Hovde, a discussion of the qualifications
of Hovde, the method of their selection and certain relationships between Hovde
and the Bank, see "The Merger -- Opinion of the Bank's Financial Advisor."
Business of the Bank Pending the Merger
The Bank Merger is expected to be consummated around January 31, 1997. SubjectPursuant to the terms of the Agreement, the Bank has agreed not to take certain
actions relating to the operation of its business pending consummation of the
Merger without extending prior notice to and reasonably cooperating with City
Holding, except as otherwise permitted by the Agreement. See "The Merger --
Business of the Bank Pending the Merger."
Conditions to Consummation of the Merger
Consummation of the Merger will be accomplished by the statutory merger of the
Bank into Acquisition. The Merger is contingent upon the approvals of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), the
OTS and the West Virginia Division of Banking (the "Division"). The Merger is
also subject to other usual conditions set forth herein, including receiptin the Agreement. See "The
Merger -- Conditions to Consummation of all required
regulatory approvals, the BankMerger."
Interests of Certain Persons in the Merger
shall become effective atCertain members of the time
ArticlesBank's management and the Bank's Board of Directors have
interests in the Merger relatingin addition to the Bank Merger are made effective (the
"Effective Timetheir interests as shareholders of the
Bank Merger") bygenerally. These include, among other things, certain employment
agreements, indemnification and directors' and officers' liability insurance for
the OfficeBank's directors and officers, and eligibility of the ComptrollerBank's employees for
certain City Holding employee benefits. See "The Merger -- Interests of Certain
Persons in the Merger."
Certain Federal Income Tax Consequences
The Merger is intended to be a tax-free "reorganization" as defined in Section
368(a) of the CurrencyInternal Revenue Code of 1986, as amended (the "OCC""Code"). The, but the
receipt of cash by a Bank andshareholder as a result of the exercise of dissenters'
rights or in lieu of a fractional share of City Holding each haveCommon Stock will be a
taxable transaction. A condition to consummation of the right, acting
unilaterally, to terminateMerger is the Agreement shouldreceipt by
City Holding and the Bank of an opinion from Hunton & Williams, counsel to City
Holding, as to the qualification of the Merger not be completed
by March 31, 1997.as a tax-free reorganization and
certain other federal income tax consequences of the Merger. See "The Bank Merger --
Termination.Certain Federal Income Tax Consequences."
Rights of Shareholders Electing to Exercise their
Dissenter Rights of Appraisal
Holders of Bank Common Stock entitled to vote on approval of the Agreement and
the related Plan of Merger have the right to dissent from the Bank Merger and, upon
consummation of the Bank Merger and the satisfaction of certain specified procedures,
to receive payment of the fair value of each such holder's shares of Bank Common
Stock in cash in accordance with 12 U.S.C.A.C.F.R. ss. 215a.552.14. The procedures to be
followed by a shareholder electing to perfect his or her right of appraisal are
summarized under "The Bank Merger -- Rights of Shareholders Electing to Exercise
Their Right of Appraisal" and a copy of 12 U.S.C.A.C.F.R. ss. 215a (b), (c) and (d)552.14 is set forth in
Annex IID to this Proxy Statement/Prospectus. FAILURE TO FOLLOW SUCH PROVISIONS
PRECISELY MAY RESULT IN LOSS OF SUCH APPRAISAL RIGHTS.
Conditions to Consummation
Consummation of the Bank Merger will be accomplished by the statutory merger of
the Bank into Acquisition. The Bank Merger is contingent upon the approvals of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the OCC and the West Virginia Division of Banking (the "Division"). The
Bank Merger has been approved by the Federal Reserve Board and the Division, and
preliminarily approved by the OCC. The Bank Merger is also subject to other
usual conditions. See "The Bank Merger -- Conditions to Consummation of the Bank
Merger."
Conduct of Business Pending the Bank Merger
Pursuant to the terms of the Agreement, the Bank has agreed not to take certain
actions relating to the operation of its business pending consummation of the
Bank Merger, without extending prior notice to and reasonably cooperating with
City Holding, except as otherwise permitted by the Agreement. See "The Bank
Merger -- Business of the Bank Pending the Bank Merger."
4
Interests of Certain Persons in the Bank Merger
Certain members of the Bank's management and the Bank Board have interests in
the Bank Merger in addition to their interests as shareholders of the Bank
generally. These include, among other things, the elections of William M.
Frazier and Leon K. Oxley to City Holding's Board of Directors, indemnification
and directors' and officers' liability insurance for Bank directors and
officers, payments to Messrs. Frazier and Oxley under a Covenant Not to Compete
and Consulting Agreement, and eligibility of Bank employees for certain City
Holding employee benefits. See "The Bank Merger -- Interests of Certain Persons
in the Bank Merger."
Resale of City Holding Common Stock
Shares of City Holding Common Stock received in the Bank Merger will be freely
transferable by the holders thereof, except for those shares held by those
holders who may be deemed to be "affiliates" (generally including directors,
certain executive officers and 10% or greater shareholders) of the Bank or City
Holding under applicable federal securities laws. See "Resale of City Holding
Common Stock."
Certain Federal Income Tax Consequences of the Bank Merger
The Bank Merger is intended to be a tax-free "reorganization" as defined in
Section 368(a) of the Internal Revenue Code of 1986 (the "Code"), but the
receipt of cash by a Bank shareholder as a result of the perfection of
dissenters' rights or in lieu of a fractional share of City Holding Common Stock
will be a taxable transaction. A condition to consummation of the Bank Merger is
the receipt by City Holding and the Bank of an opinion from Hunton & Williams,
counsel to City Holding, as to the qualification of the Bank Merger as a
tax-free reorganization and certain other federal income tax consequences of the
Bank Merger. See "The Bank Merger -- Certain Federal Income Tax Consequences."
Market Prices Prior to Announcement of the Bank Merger
The following is information regarding the last reported closing price per share
of City Holding Common Stock on the National Association of Securities Dealers,
Inc.The Nasdaq National Market System (the "NASDAQ/NMS") on May 6, 1996,20, 1997, the
date immediately preceding delivery of an indication of interest to the Bank on
May 7, 1996,21, 1997, which was superseded by the Agreementan agreement dated November 20, 1997,
which agreement was amended and restated on August 13, 1996.December 18, 1997, and February 2,
1998. See "Price Range of BankCity Holding Common Stock and Dividend Policy"Dividends" for
information concerning recent market prices of theCity Holding Common Stock. There
is no established market for Bank Common Stock.
Bank
Historical Equivalent
City Holding(a)(b) Bank Bank(b) Pro Forma(a)
------------------ ----Forma(c)
--------------- ------- ------------
Common Stock $23.00 $40.00 $134.09$31.75 $12.18 $18.88
(a) City Holding Common Stock is included in The Nasdaq National Market under
the symbol "CHCO."
(b) No active market exists for Bank Common Stock. Amount represents the net
book value per share of Bank Common Stock on May 20, 1997.
(c) The equivalent price for Bank Common Stock is determined by multiplying
the productBank's net nook value per share of multiplying$12.18 by 1.55, resulting in an
assumed Exchange Ratioexchange ratio of 5.83 shares of City Holding
Common Stock times $23.00.
(b) City Holding Common Stock is included in.5946, if the NASDAQ/NMS under the
symbol "CHCO."transaction were to have occurred
on May 20, 1997.
Comparative Per Share Data
The following table presents historical and pro forma per share data for City
Holding, and historical and equivalent pro forma per share data for the Bank.
The pro forma combined amounts give effect to an Exchange Ratioassumed exchange ratio of
5.830.4886 shares of City Holding Common Stock for each share of Bank Common Stock
(based on City Holding stock price of $23.325)$39.875 at September 30, 1997). The
equivalent pro forma Bank share amounts allow comparison of historical
information about one share of Bank Common Stock to the corresponding data about
what one share of Bank Common Stock will equate to in the combined corporation
and are computed by multiplying the pro forma combined amounts by an Exchange Ratioassumed
exchange ratio of 5.83.0.4886. The following table is
5
based on the assumption that
all issued and outstanding shares of Bank Common Stock are converted into shares
of City Holding Common Stock. The Bank Merger is
reflected under the pooling of interests method of accounting and pro forma
information is derived accordingly.
The per share data included in the following table should be read in conjunction
with the consolidated financial statements of City Holding incorporated by
reference herein and the financial statements of the Bank included herein and
the notes accompanying all such financial statements. The data presented below
are not necessarily indicative of the results of operations which would have
been obtained if the Bank Merger had been consummated in the past or which may
be obtainable in the future.
As ofAt or Forfor the
Nine Months Ended As ofAt or For Yearsfor the Year
September 30, Ended December 31,
1997 1996
1995 1995 1994 1993---- ----
Book Value Per Share at Period End:(4)
City Holding historical(6) $13.84 $12.68 $13.09 $11.66 $11.56historical $14.89 $14.21
Bank historical 54.13 54.15 53.22 48.27 46.8912.57 11.93
Pro forma combined per City Holding common share(1) 13.40 12.35 12.71 11.35 11.23share (1) 15.92 15.35
Equivalent pro forma per Bank common share 78.12 72.00 74.10 66.17 65.477.78 7.50
Cash Dividends Declared Per Share:(4)
City Holding historical(6) $0.46 $0.405 $0.56 $0.49 $0.46historical $0.54 $0.63
Bank historical(5)---- 1.30 1.25 1.20historical - -
Pro forma combined per City Holding common share(2) 0.46 0.405 0.56 0.49 0.46share (2) 0.54 0.63
Equivalent pro forma per Bank common share 2.70 2.36 3.29 2.86 2.700.26 0.31
Net Income Per Share:(4)
City Holding historical(6) $1.36 $1.11 $1.55 $1.44 $1.35historical $1.56 $1.81
Bank historical 1.63 3.97 4.07 3.95 4.880.64 0.04
Pro forma combined per City Holding common share(3) 1.27 1.07 1.47 1.37 1.30share (3) 1.55 1.74
Equivalent pro forma per Bank common share 7.40 6.24 8.57 7.99 7.580.76 0.85
- -----------------
(1) Pro forma combined book value per City Holding common share represents
combined common shareholders'City Holding's historical stockholder's equity amounts,at the respective dates
plus the additional equity that would be created as a result of the
proposed issuance of shares of City Holding Common Stock pursuant to the
Merger divided by pro forma
combined period-end commonthe sum of the outstanding shares outstanding.of City Holding
Common Stock at the respective dates plus the number of shares of City
Holding Common Stock that would be issued pursuant to the Merger.
(2) Pro forma combined dividends per City Holding common share represent
historical dividends declared by City Holding.
(3) Pro forma combined net income per City Holding common share represents
combined net income available to common shareholders, divided by pro
forma combined average common shares outstanding.
(4) City Holding's fiscal year ends December 31 and the Bank's fiscal year
ends December 31. TheCity Holding's and the Bank's book value per share isare
as of the dates presented, and net income and dividend data reflect
results for the periods presented.
(5) The Bank pays an annual regular and special dividend.
(6) All per share data have been restated to reflect 10% stock dividends
declared by City Holding effective November 1996, January 1995 and November 1995.
61996.
SELECTED FINANCIAL DATA
CITY HOLDING COMPANY AND THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTONFSB
The following City Holding consolidated financial data and Bank financial data
isare qualified in itstheir entirety by the information included in the documents included or
incorporated in this Proxy Statement/Prospectus by reference. Interim financial
results, in the opinion of City Holding and Bank management, reflect all
adjustments necessary for a fair presentation of the results of operations,
including adjustments related to completed acquisitions. All such adjustments
are of a normal nature. The results of operations for an interim period are not
necessarily indicative of results that may be expected for a full year or any
other interim period.
As ofAt or for the
Nine Months
Ended As ofAt or for the
September 30, Years endedYear Ended December 31,
-------------------- ---------------------------------------------------------------- ------------------------------------
1997 1996 19951996 1995 1994 1993 1992
1991
(Dollars in(in 000s, except per share data)
EARNINGS:
Interest Income:
City Holding $70,875 $64,081 $86,069 $75,125 $62,762 $55,301 $50,880
Bank 6,343 6,640 8,814 8,661 7,663 7,834 9,886
Interest Expense:
City Holding $32,084 $29,041 $39,064 $33,580 $25,168 $22,425 $22,184
Bank 3,879 4,209 5,563 5,710 4,607 4,823 6,255
Net Interest IncomeIncome:
City Holding Company$38,791 $35,040 $30,182$47,005 $41,545 $37,594 $32,876 $28,696
$24,551
Bank 1,322 1,028 1,393 1,271 1,280 1,231 1,0532,464 2,431 3,251 2,951 3,056 3,011 3,631
Provision (Benefit) for Loan Losses:
City Holding Company and$ 1,861 $ 943 $ 1,678 $ 1,104 $ 1,040 $ 1,434 $ 2,325
Bank ProForma 36,362 31,210 42,938 38,865 34,156 29,927 25,604
Provision for Loan Losses
City Holding Company 943 711 1,104 1,040 1,434 2,325 1,345
Bank 136 10 14 6 6 6 6
City Holding Company and Bank ProForma 1,079 721 1,118 1,046 1,440 2,331 1,35190 74 104 76 (18) 297 289
Net Interest Income after provisionProvision for loan lossesLoan Losses:
City Holding Company 34,097 29,471 40,441 36,554 31,442 26,371 23,206$36,930 $34,097 $45,327 $40,441 $36,554 $31,442 $26,371
Bank 1,186 1,018 1,379 1,265 1,274 1,225 1,0472,374 2,357 3,147 2,875 3,074 2,714 3,342
Noninterest Income:
City Holding Company and$17,029 $ 6,586 $ 11,123 $ 6,346 $ 5,249 $ 3,862 $ 2,328
Bank ProForma 35,283 30,489 41,820 37,819 32,716 27,596 24,253477 696 897 268 290 633 628
Noninterest IncomeExpense:
City Holding Company 6,586 4,635 6,346 5,249 3,862 2,328 2,294$39,348 $29,303 $40,982 $33,887 $30,116 $24,292 $18,889
Bank 178 78 116 96 86 57 522,260 3,200 4,008 2,977 3,118 2,951 3,033
Income (Loss) before Income Taxes:
City Holding Company and$14,611 $11,380 $15,468 $12,900 $11,687 $11,012 $ 9,810
Bank ProForma 6,764 4,713 6,462 5,345 3,948 2,385 2,346
Noninterest Expense591 (147) 36 166 246 396 937
Income Taxes (Benefit):
City Holding Company 29,303 24,887 33,887 30,116 24,292 18,889 17,854$5,122 $3,810 $5,338 $4,182 $3,546 $3,367 $2,838
Bank 1,174 752 1,099 980 939 827 769249 (61) 15 69 108 259 506
Net Income (Loss):
City Holding Company and$ 9,489 $ 7,570 $10,130 $ 8,718 $ 8,141 $ 7,645 $ 6,972
Bank ProForma 30,477 25,639 34,986 31,096 25,231 19,716 18,623342 (86) 21 97 138 137 431
Net Income before income taxes(Loss) Applicable to Common Shares:
City Holding Company 11,380 9,219 12,900 11,687 11,012 9,810 7,646$ 9,489 $ 7,570 $10,130 $ 8,718 $ 8,141 $ 7,645 $ 6,972
Bank 190 344 396 381 421 455 330
City Holding Company and Bank ProForma 11,570 9,563 13,296 12,068 11,433 10,265 7,976
Net Income
City Holding Company 7,570 6,308 8,718 8,141 7,645 6,972 5,203
Bank 122 298 305 296 366 334 257
City Holding Company and Bank ProForma 7,692 6,606 9,023 8,437 8,011 7,306 5,460
Net income applicable to common shares
City Holding Company 1.36 1.11 1.55 1.44 1.35 1.23 0.92
Bank 1.63 3.97 4.07 3.95 4.88 4.45 3.43
City Holding Company and Bank ProForma 1.27 1.07 1.47 1.37 1.30 1.18 0.89342 (86) 21 97 138 137 431
At or for the
Nine Months
Ended At or for the
September 30, Year Ended December 31,
------------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
(in 000s, except per share data)
PER COMMON SHARE DATA:(1)
Net Income (Loss) (primary):
City Holding Company$ 1.56 $ 1.36 1.11$ 1.81 $ 1.55 $ 1.44 $ 1.35 $ 1.23
0.92
Bank 1.63 3.97 4.07 3.95 4.88 4.45 3.43
City Holding Company and Bank ProForma 1.27 1.07 1.47 1.37 1.30 1.18 0.890.64 (0.16) 0.04 0.18 0.26 0.26 0.82
Net Income (Loss) (fully diluted):
City Holding Company$ 1.56 $ 1.36 1.11$ 1.81 $ 1.55 $ 1.44 $ 1.35 $ 1.23
0.92
Bank 1.63 3.97 4.07 3.95 4.88 4.45 3.43
City Holding Company and Bank ProForma 1.27 1.07 1.47 1.37 1.30 1.18 0.89
7
As of or for
Nine Months
Ended As of or for
September 30, Years ended December 31,
--------------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
(Dollars in 000s, except per share data)
0.64 (0.16) 0.04 0.18 0.26 0.26 0.82
Dividends declared:
City Holding CompanyHolding(2) $ 0.54 $ 0.46 $ 0.4050.63 $ 0.56 $ 0.49 $ 0.46 $ 0.41
$ 0.35
Bank 0.00 0.00 1.30 1.25 1.20 1.10 1.00-- -- -- -- -- -- --
Book Value Per Share:
City Holding Company and$14.89 $13.84 $14.21 $13.09 $11.66 $11.56 $10.73
Bank ProForma 0.46 0.405 0.56 0.49 0.46 0.41 0.35
Book value:12.57 11.73 11.93 11.89 11.71 11.45 11.19
Average Primary Shares Outstanding:
City Holding Company 13.84 12.68 13.09 11.66 11.56 10.73 9.85
Bank 54.13 54.15 53.22 48.27 46.89 43.22 39.54
City Holding Company and Bank ProForma 13.40 12.35 12.71 11.35 11.23 10.42 9.56
Average primary shares (thousands):
City Holding Company6,069 5,586 5,6725,586 5,642 5,676 5,664 5,685
5,661
Bank 75 75 75 75 75 75 75533 533 533 532 531 531 526
Average Fully Diluted Shares Outstanding:
City Holding Company and Bank ProForma 6,067 6,153 6,123 6,157 6,145 6,166 6,141
Average fully diluted shares (thousands):
City Holding Company6,092 5,586 5,6725,586 5,642 5,676 5,664 5,685
5,661
Bank 75 75 75 75 75 75 75
City Holding Company and Bank ProForma 6,067 6,153 6,123 6,157 6,145 6,166 6,141533 533 533 532 531 531 526
SELECTED PERIOD-END BALANCES:
Total AssetsAssets:
City Holding Company 1,085,215 1,025,817 1,040,969 $1,335,063 $1,085,215 $1,048,810 $1,040,969$895,785 816,225 701,862 575,559$816,225 $701,862
Bank 53,840 42,672 39,213 34,547 30,489 29,805 24,710113,329 115,843 111,835 117,772 116,538 111,730 113,694
Net Loans:
City Holding Company and$764,091 $675,052 $690,701 $650,195 $547,809 $462,424 $376,206
Bank ProForma 1,139,055 1,068,489 1,080,182 930,332 846,714 731,667 600,269
Loans (Net)98,028 101,315 98,452 106,357 108,868 95,892 87,563
Allowance for Loan Losses:
City Holding Company 681,888 646,374 650,195 547,809 462,424 376,206 298,378$8,246 $6,836 $7,281 $6,566 $6,477 $6,209 $5,730
Bank 25,741 15,963 17,765 11,632 9,414 10,283 10,287601 629 540 615 574 642 844
Nonperforming and Potential Problem Assets:
City Holding Company and$8,719 $5,706 $5,932 $4,353 $4,825 $4,788 $5,579
Bank ProForma 707,629 662,337 667,960 559,441 471,838 386,489 308,665
Allowance for loan losses1,213 1,641 1,262 689 1,033 2,582 941
Total Deposits:
City Holding Company 6,836 6,494 6,566 6,477 6,209 5,730 2,761$910,346 $825,574 $828,670 $797,415 $746,805 $709,958 $605,398
Bank 122 114 96 105 103 104 98100,370 99,551 98,482 102,189 104,109 104,429 105,894
Long-term Debt:
City Holding Company and$64,400 $25,750 $34,250 $20,000 $6,875 $5,875 $4,000
Bank ProForma 6,958 6,608 6,662 6,582 6,312 5,834 2,859
Nonperforming and potential problem Assets5,000 5,000 5,000 5,000 ---- ---- ----
Common Shareholders' Equity:
City Holding Company 5,706 5,078 4,353 4,825 4,788 5,579 3,992$90,392 $77,300 $79,373 $73,139 $66,299 $65,605 $60,858
Bank 41 181 26 0 0 197 1976,702 6,253 6,361 6,333 6,215 6,077 5,940
Total Shareholders' Equity:
City Holding Company and$90,392 $77,300 $79,373 $73,139 $66,299 $65,605 $60,858
Bank ProForma 5,747 5,259 4,379 4,825 4,788 5,776 4,189
Total Deposits
City Holding Company 825,574 794,347 797,415 746,805 709,958 605,398 493,937
Bank 49,114 38,045 34,593 29,947 26,770 26,213 21,542
City Holding Company and Bank ProForma 874,688 832,392 832,008 776,752 736,728 631,611 515,479
Long-term debt
City Holding Company 25,750 15,000 20,000 6,875 5,875 4,000 0
Bank 0 0 0 0 0 0 0
City Holding Company and Bank ProForma 25,750 15,000 20,000 6,875 5,875 4,000 0
Common shareholders' equity
City Holding Company 77,300 70,736 73,139 66,299 65,605 60,858 55,760
Bank 4,059 4,061 3,991 3,621 3,517 3,242 2,965
City Holding Company and Bank ProForma 81,359 74,797 77,130 69,920 69,122 64,100 58,725
Total shareholders' equity
City Holding Company 77,300 70,736 73,139 66,299 65,605 60,858 55,760
Bank 4,059 4,061 3,991 3,621 3,517 3,242 2,965
City Holding Company and Bank ProForma 81,359 74,797 77,130 69,920 69,122 64,100 58,725
AVERAGE BALANCES:
Total assets
City Holding Company 1,071,027 933,537 957,048 864,690 739,804 610,707 561,341
Bank 46,008 37,660 38,025 31,205 30,147 27,257 23,492
City Holding Company and Bank ProForma 1,117,035 971,197 995,073 895,895 769,951 637,964 584,8336,702 6,253 6,361 6,333 6,215 6,077 5,940
8
As ofAt or for the
Nine Months
Ended As ofAt or for the
September 30, Years endedYear Ended December 31,
-------------------- ----------------------------------------------------------------- ------------------------------------
1997 1996 19951996 1995 1994 1993 1992
1991
(Dollars in(in 000s, except per share data)
Loans (net of unearned income)AVERAGE BALANCES:
Total Assets:
City Holding Company$1,169,927 $1,071,027 $1,079,540 $957,048 $864,690 $739,804 $610,707
Bank 112,851 117,253 116,636 116,619 113,672 113,180 121,903
Net Loans:
City Holding $747,957 $657,212 $595,023$665,641 $608,551 $504,795 $413,645 $322,464
$285,643
Bank 22,443 13,301 14,167 10,202 10,098 10,535 10,04097,044 103,866 102,634 107,582 103,230 95,744 91,606
Total Deposits:
City Holding Company and$885,092 $809,715 $812,655 $771,303 $736,115 $639,480 $523,488
Bank ProForma 679,655 608,324 622,718 514,997 423,743 332,999 295,683
Total deposits99,966 101,069 100,459 103,481 103,168 105,248 114,058
Long-term Debt:
City Holding Company 809,715 760,683 771,303 736,115 639,480 523,488 479,984$39,845 $22,650 $24,666 $8,204 $6,252 $4,387 $508
Bank 41,331 33,311 33,491 27,404 25,492 23,878 20,3995,000 5,000 5,000 5,000 ---- ---- ----
Common Shareholders' Equity:
City Holding Company and$87,342 $75,771 $76,130 $69,463 $67,652 $63,511 $58,606
Bank ProForma 851,046 793,994 804,794 763,519 664,972 547,366 500,383
Long-term debt6,518 6,439 6,412 6,290 6,166 6,124 5,628
Total Shareholders' Equity:
City Holding Company 22,650 7,095 8,204 6,252 4,387 508 373$87,342 $75,771 $76,130 $69,463 $67,652 $63,511 $58,606
Bank 0 0 0 0 0 0 0
City Holding Company and Bank ProForma 22,650 7,095 8,204 6,252 4,387 508 373
Common shareholders' equity
City Holding Company 75,771 69,031 69,463 67,652 63,511 58,606 54,051
Bank 4,021 3,604 3,829 3,585 3,380 3,103 2,853
City Holding Company and Bank ProForma 79,792 72,635 73,292 71,237 66,891 61,709 56,904
Total shareholders' equity
City Holding Company 75,771 69,031 69,463 67,652 63,511 58,606 54,051
Bank 4,021 3,604 3,829 3,585 3,380 3,103 2,853
City Holding Company and Bank ProForma 79,792 72,635 73,292 71,237 66,891 61,709 56,9046,518 6,439 6,412 6,290 6,166 6,124 5,628
RATIOS:
Return on average assets(2)Average Assets:
City Holding Company1.08% 0.94% 0.90%0.94% 0.91% 0.94% 1.03% 1.14%
0.93%
Bank 0.30 (0.07) 0.02 0.08 0.12 0.12 0.35
1.05 0.80 0.95 1.21 1.23 1.09Return on Average Shareholders' Equity:
City Holding Company and14.49% 13.32% 13.31% 12.55% 12.03% 12.04% 11.90%
Bank ProForma 0.92 0.91 0.91 0.94 1.04 1.15 0.935.25 (1.34) 0.33 1.54 2.24 2.24 7.66
Return on average shareholders' equity(2)Average Common Shareholders' Equity:
City Holding Company 13.32 12.18 12.55 12.03 12.04 11.90 9.6314.49% 13.32% 13.31% 12.55% 12.03% 12.04% 11.90%
Bank 4.05 11.02 7.97 8.26 10.83 10.76 9.015.25 (1.34) 0.33 1.54 2.24 2.24 7.66
Nonperforming and Potential Problem
Assets to Net Loans at period end:
City Holding Company and1.14% 0.84% 0.86% 0.67% 0.88% 1.04% 1.48%
Bank ProForma 12.85 12.13 12.31 11.84 11.98 11.84 9.60
Return on average common shareholders' equity1.24 1.67 1.28 0.65 0.95 2.69 1.07
Net Charge-offs to Net Average Loans:
City Holding Company 13.32 12.18 12.55 12.03 12.04 11.90 9.630.15% 0.10% 0.14% 0.17% 0.15% 0.27% 0.32%
Bank 4.05 11.02 7.97 8.26 10.83 10.76 9.010.01 0.07 0.17 0.03 0.05 0.52 0.00
Allowance for Loan Losses to Net Loans at period end:
City Holding Company and1.08% 1.01% 1.05% 1.01% 1.18% 1.34% 1.52%
Bank ProForma 12.85 12.13 12.31 11.84 11.98 11.84 9.60
Nonperforming and potential problem
assets to loans at period end
City Holding Company 0.84 0.790.61 0.64 0.55 0.58 0.53 0.67 0.88 1.04 1.48 1.34
Bank 0.16 1.13 0.15 0.00 0.00 1.92 1.92
City Holding Company and Bank Proforma 0.81 0.79 0.66 0.86 1.01 1.49 1.36
Net charge-offs to average loans
City Holding Company 0.10 0.06 0.17 0.15 0.27 0.32 0.30
Bank 0.47 0.00 0.16 0.04 0.07 0.00 0.00
City Holding Company and Bank ProForma -- -- 0.17 0.15 -- -- --
Allowance for loan losses to loans at period end
City Holding Company 1.00 1.00 1.01 1.18 1.34 1.52 0.93
Bank 0.47 0.71 0.54 0.90 1.09 1.01 0.95
City Holding Company and Bank ProForma 0.98 1.00 1.00 1.18 1.34 1.51 0.930.96
9
As ofAt or for the
Nine Months
Ended As ofAt or for the
September 30, Years endedYear Ended December 31,
------------------- -------------------------------------------------------------------------
1997 1996 19951996 1995 1994 1993 1992
1991
(Dollars in(in 000s, except per share data)
Allowance for loan lossesLoan Losses to nonperformingNonperforming
and potential problem assets at period endPotential Problem Assets:
City Holding Company 119.80 127.88 150.84 134.24 129.68 102.71 69.1694.58% 119.80% 149.26% 150.84% 134.24% 129.68% 102.71%
Bank 297.56 62.98 369.23 0.00 0.00 52.79 49.7549.55 38.33 42.79 89.25 55.57 24.86 89.69
Average Shareholders' Equity to Average
Assets:
City Holding Company and7.47% 7.07% 7.05% 7.26% 7.82% 8.58% 9.60%
Bank ProForma 121.07 125.65 152.14 136.41 131.83 101.00 68.25
Average shareholders' equity to average
assets at period end
City Holding Company 7.07 7.39 7.26 7.82 8.58 9.60 9.63
Bank 8.74 9.57 10.07 11.49 11.21 11.38 12.14
City Holding Company and Bank ProForma 7.14 7.48 7.37 7.95 8.69 9.67 9.735.78 5.49 5.50 5.40 5.42 5.41 4.62
CAPITAL RATIOS AT PERIOD END:
Tier 1 risk-adjusted capitalRisk-adjusted Capital:
City Holding Company 9.32 9.19 8.87 11.03 -- -- --8.67% 9.32% 10.20% 8.87% 11.03% 11.39% 13.23%
Bank 15.14 23.24 14.70 17.13 -- -- --10.35 9.20 10.00 9.13 8.90 9.05 9.02
Total Risk-adjusted Capital:
City Holding Company and9.52% 10.21% 11.23% 9.75% 12.19% 12.64% 14.48%
Bank ProForma 9.52 9.53 -- -- -- -- --
Total risk-adjusted capital11.28 10.07 10.84 9.93 9.72 10.00 10.27
Tier 1 Leverage:
City Holding Company 10.21 10.12 9.75 12.19 -- -- --6.93% 6.61% 6.58% 6.45% 6.83% 6.66% 8.68%
Bank 15.59 23.90 15.06 17.63 -- -- --
City Holding Company and Bank ProForma 10.39 10.45 -- -- -- -- --
Tier 1 leverage
City Holding Company 6.61 6.65 6.45 6.83 -- -- --
Bank 8.10 10.10 10.82 11.21 -- -- --
City Holding Company and Bank ProForma 6.68 6.79 -- -- -- -- --5.91 5.40 5.69 5.39 5.33 5.44 5.22
NOTES TO SELECTED FINANCIAL DATA - CITY HOLDING COMPANY AND
THE OLD NATIONAL BANK OF HUNTINGTON--------------
(1) All per share data have been restated to reflect 10% stock dividends
declared by City Holding effective November, 1996, January 1995,and
November, 1995 and August, 1992.
(2) Cash dividends are based on historical results of City Holding and do
not include cash dividends of acquired subsidiaries prior to the dates
of consummation.
City Holding Company acquired 100% of the Common Stock of The Buffalo Bank of Eleanor (Buffalo) in
December 1992 for cash. In 1993, certain other purchase acquisitions were
consummated by City Holding. These acquisitions were accounted for using the
purchase method of accounting. Accordingly, the results of operations of the
purchased subsidiaries are included in the information presented above from the
date of acquisition forward, and prior year balance sheets have not been
restated for such transactions. The acquisitions of Home Bancorp, Inc. (1992),
Hinton Financial Corporation and subsidiary (1994) and First Merchants Bancorp,
Inc. and subsidiary (1995) were accounted for as poolings of interests and,
accordingly, the financial data of these subsidiaries are included in all
periods presented above, as if the acquisitions had occurred as of the beginning
of the earliest period presented. 10
THE OLD NATIONAL BANK OF HUNTINGTON
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONSThe acquisition of The Old National Bank of
Huntington, (the "Bank"), headquarteredconsummated in Huntington, West Virginia,January 1997, was organizedaccounted for as a national banking association in
1980 and began operations in 1981. The Bank engages in the general banking
business and provides retail and consumer oriented banking services primarily in
Cabell and Wayne Countiespooling of
West Virginia as well as the adjoining counties in
southwestern West Virginia, southern Ohio and eastern Kentucky. The Bank
operates from its main and branch offices located in Huntington, West Virginia
and a branch office located in Wayne, West Virginia. The two branch offices were
established and placed into operation during the fourth quarter of 1995.
The Bank's operating results are dependent primarily on net interest
income, the difference between interest income earned on loans, investment
securities, mortgage-backed and related securities, and the Bank's cost of funds
(interest paid to its depositors and interest paid for borrowed funds).
Operating results are also affected by the provision for credit (loan) losses
and noninterest income and expense items. Noninterest expenses principally
consist of employee salaries and benefits, occupancy and equipment expenses,
federal deposit insurance premiums and other administrative expenses. Factors
that significantly impact operating results include general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities.
The following discussion provides additional analysis of the Bank's
financial condition and the results of operations as of and for the years ended
December 31, 1995 and 1994. This discussion and analysis should be read in
conjunction with the Bank's audited financial statements and the notes thereto.
EARNINGS SUMMARY AND SELECTED FINANCIAL DATA
1995 1994
---- ----
INCOME STATEMENT DATA:
Interest income $ 2,654,510 $ 1,968,757
Interest expense 1,261,978 697,448
--------- ---------
Net interest income 1,392,532 1,271,309
Provision for credit losses 14,000 6,000
Net securities gains 3,585 12,098
Other income 112,971 83,623
Other expenses 1,099,300 980,358
--------- ---------
Income before income taxes 395,788 380,672
Income tax expense 90,619 84,216
--------- ---------
Net income $ 305,169 $ 296,456
========= =========
11
EARNINGS SUMMARY AND SELECTED FINANCIAL DATA (CONTINUED)
1995 1994
---- ----
PER COMMON SHARE DATA:
Net income per share $ 4.07 $ 3.95
Cash dividends per share 1.30 1.25
Weighted average shares outstanding 75,000 75,000
BALANCE SHEET DATA:
Average total assets $ 38,024,965 $ 31,205,082
Loans, net of unearned discount 17,764,719 11,631,616
Allowance for loan loss 96,152 104,862
Total deposits 34,593,070 29,946,921
Average stockholder's equity 3,828,644 3,585,124
KEY FINANCIAL RATIOS:
Return on average assets 0.80% 0.95%
Return on average equity 8.0% 8.3%
Average equity to average total assets 10.1% 11.5%
Book value per share $ 53 $ 48
Dividend payout ratio 31.9% 31.6%
RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE YEARS ENDED DECEMBER 31,
1995 AND 1994
Net income for 1995 was $305,169, a 3.0% increase from $296,456 earned in
1994. The increase resulted primarily from interest income from an increased
loan volume and service charges from new deposit customer relationships
generated at the main office and attributable to the opening of two new branch
offices in 1995.
Net interest income for 1995 improved $113,223, or 8.9% over 1994 levels.
Interest income increased 34.8% and interest expense increased 80.9%. The
increases resulted from new loan and deposit customer relationships generated at
the main office and at the two branch office locations.
Other income increased by $20,835, or 21.8%, from 1994 levels, which
resulted from additional service charges derived from new demand and savings
deposit customer account relationships.
Other expenses increased by $118,942, or 12.1%, from 1994, which resulted
from additional salaries and other expenses incurred with the opening of two
additional branch office locations.
Return on average assets decreased to 0.8% in 1995 compared with 0.9% in
1994. Average assets grew 21.9% in 1995 and 17.4% in 1994.
Return on average equity in 1995 likewise showed a decline to 8.0%
compared to 8.3% in 1994.
NET INTEREST INCOME
Net interest income is the amount by which interest generated from
interest earning assets exceeds the expenses associated with funding those
assets. Net interest income for 1995 totaled $1,392,532 compared to $1,271,309
in 1994. The increase in 1995 was primarily attributable to growth in the loan
portfolio which is the Bank's highest yielding asset. Average loans outstanding
grew to $14,167,401 in 1995 from $10,201,750 in 1994. Loan to deposit ratios
increased to approximately 41.8% in 1995 from approximately 36.8% in 1994, which
was accomplished by increasing the loan portfolio at a greater pace than
deposits.
12
Growth in net interest income was achieved as discussed above, despite
declines in the yield on interest-earning assets resulting from slightly greater
declines in interest yield compared to interest paid, as shown in the following
table.
Yield on interest - average earning assets 7.65% 7.04%
Interest paid - average earning assets 3.53 2.39
---- ----
Net yield on interest-earning assets 4.12% 4.65%
===== =====
INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES
The following table sets forth certain information relating to interest
earning assets and interest bearing liabilities and reflects the average yield
earned on assets and average cost or rates paid on liabilities for the years
ended December 31, 1995 and 1994.
1995 1994
-------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------
Earning assets:
Loans (1)
Commercial $ 2,843,634 $ 245,876 8.64% $ 1,682,152 $ 132,447 7.87%
Real estate 6,580,038 570,206 8.67% 5,379,895 466,583 8.67%
Consumer 4,743,729 497,418 10.49% 3,139,703 271,954 8.66%
---------- --------- ----- ---------- --------- ----
Total loans 14,167,401 1,313,500 9.27% 10,201,750 870,984 8.54%
Securities
Taxable 13,854,965 930,896 6.71% 11,872,313 765,389 6.45%
Tax-exempt 3,085,953 233,736 7.57% 3,258,457 250,892 7.70%
---------- --------- ---- ---------- --------- ----
Total securities 16,940,918 1,164,632 6.87% 15,130,770 1,016,281 6.72%
Federal funds sold 4,610,685 255,848 5.55% 3,840,918 166,795 4.34%
---------- --------- ---- ---------- --------- ----
Total earning assets 35,719,004 2,733,980 7.65% 29,173,438 2,054,060 7.04%
Cash and due from
banks 1,572,374 1,698,623
Bank premises and
equipment 376,185 68,778
Other assets 468,335 369,224
Less: allowance
for credit losses (110,933) (104,981)
---------- ----------
Total assets $ 38,024,965 $ 31,205,082
========== ============
Interest-bearing
liabilities:
Demand and savings
deposits $ 15,049,829 450,781 3.00% $ 17,146,095 461,801 2.69%
Time deposits 13,848,539 787,369 5.69% 5,906,472 232,289 3.93%
Repurchase agreements 522,012 23,828 4.56% 95,286 3,358 3.52%
---------- -------- ---- ---------- ------- ----
Total interest-bearing
liabilities 29,420,380 1,261,978 4.29% 23,147,853 697,448 3.01%
--------- ---- ------- ----
Demand deposits 4,592,885 4,351,403
Other liabilities 182,056 120,702
Stockholders' equity 3,829,644 3,585,124
---------- ----------
Total liabilities
and stockholders'
equity $ 38,024,965 $ 31,205,082
========== ==========
Net interest income $ 1,472,002 $ 1,356,612
========= =========
Net yield on earning
assets 4.12% 4.65%
==== ====
13
(1) - For purposes of this table, nonaccruing loans have been included in
average balances and loan fees, which are immaterial, have been included
in interest income.
(2) - Computed on a fully federal tax-equivalent basis assuming a tax rate of
34% in all years.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses represents additions charged against
earnings, less credit (loan) charge-offs net of recoveries, and is the amount
available to absorb losses on loans. The provision for credit losses charged to
earnings is the amount which, in the judgment of management, is necessary to
establish the allowance at a level that is adequate to absorb known and inherent
risks in the loan portfolio.
Allowance for credit losses in 1995 was $96,152 compared to $104,862 in
1994. Net charge-offs were $22,710 in 1995 and $4,639 in 1994. Refer to the
tables below for details of the amounts and nature of charge-offs and related
recoveries. Management's determination of the provision for credit losses is
based on several factors, including evaluation of the loan portfolio, current
domestic economic conditions, loan volumes, loan growth, loan portfolio
composition, levels of nonperforming loans, trends in past due loans, and
evaluation of various problem loans for loss potential. The provision of $14,000
in 1995 represents 0.10% of average loans as compared to a $6,000 or 0.06%
provision in 1994. The increased provision for 1995 is primarily due to higher
net charge-offs and higher loan volume.
The Bank intends to continue to provide for credit losses based on its
periodic review of the loan portfolio and the general market conditions.
14
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summaries the daily average loan balances at
December 31, 1995 and 1994; changes in the allowance for loan losses arising
from loans charged off and recoveries on loans previously charged off, by loan
category; and additions to the allowance which have been charged to operating
expenses.
1995 1994
---------- -------
Average total loans $ 14,167,401 $ 10,201,750
========== ==========
Balance of allowance for loan
losses at beginning of year $ 104,862 $ 103,007
Loans charged off:
Commercial loans 10,000 - 0 -
Consumer loans 13,010 4,945
---------- ----------
Total loans charged off 23,010 4,945
Recoveries of loans previously charged off:
Commercial loans - 0 - - 0 -
Consumer loans 300 800
-------- --------
Total recoveries 300 800
Net loans charged off 22,710 4,145
Additions to allowance for credit
losses charged to operating expense 14,000 6,000
-------- --------
Balance of allowance for loan losses
at end of period $ 96,152 $ 104,862
======== =========
Ratio of net charge-offs during the
year to average total loans 0.16% 0.04%
====== =======
PAST DUE AND NONPERFORMING LOANS
The following table reflects as of the years ended the aggregate
amounts of loans which are nonaccrual.
1995 1994
-------- ------
Nonaccrual loans $ 25,552 $ - 0 -
====== =====
If the nonaccrual loans had been
current throughout their terms
interest income recorded in income
would have been: $ 2,131 $ 393
Interest income recorded in income
only as received: 1,980 - 0 -
------ ------
Interest income foregone: $ 151 $ 393
======= ======
15
Interest accrual is discontinued when in the opinion of management it
appears that collection of principal or interest according to the contractual
terms may be doubtful. Upon the discontinuance, all unpaid accrued interest is
reversed. Interest collections on nonaccrual loans for which the collectibility
of principal is uncertain are applied to principal. Otherwise, such collections
are credited to income when received.
NONINTEREST INCOME
The following table summarizes noninterest income for 1995 and 1994:
1995 1994
-------- ------
Service charges on deposit accounts $ 29,441 $ 21,252
Other service charges and fees 55,985 38,561
Other income 27,545 23,810
------- -------
Total noninterest income $112,971 $ 83,623
======= =======
Service charges on deposit accounts and other service charges and fees
increased $25,613 in 1995 from $59,813 in 1994, which was attributable mainly to
a new service fee structure implemented by the Bank in early 1995 and, to a
lesser extent, to new deposit customer relationships and to the opening of two
new branch offices in 1995.
NONINTEREST EXPENSE
The following table summarizes noninterest expenses for 1995 and 1994:
1995 1994
---------- ----------
Salaries and employee benefits $ 468,444 $ 404,550
Occupancy expense 144,346 135,128
Equipment expense 38,076 30,002
Other expense 448,434 410,678
--------- ---------
Total noninterest expenses $ 1,099,300 $ 980,358
========== =========
Salaries and employee benefits increased $63,894 from 1994 to 1995,
which was attributable to adding additional staff for the two new branch offices
established and placed into service during 1995. Other noninterest expenses also
increased in 1995 due primarily to processing fees, advertising and promotion,
and stationary and supplies expenses, most of which was attributable to the two
additional branch offices.
FUNDING AND LIQUIDITY
The deposit base of the Bank has traditionally provided the major
source of funding. Deposits grew significantly (by 15.5%) in 1995, attributable
to the establishment of two new branch offices in addition to greater than
normal growth. Most of the deposit growth has been in the interest bearing
accounts, which results in a lesser contribution towards net interest income.
The increase of approximately 23.4% in noninterest bearing deposits from 1994 to
1995 was attributable to the establishment of the two new branch offices, and to
a lesser extent, normal seasonal fluctuations. The following tabulation reflects
the classifications of deposits for 1995 and 1994.
16
1995 1994
---------- -------
Noninterest bearing deposits:
Demand deposits $ 4,219,386 $ 3,419,635
Interest bearing deposits:
Demand deposits (including
NOW and money market accounts) 8,067,920 10,594,832
Savings deposits 4,755,264 6,684,184
Individual retirement accounts 2,195,818 1,785,866
Certificates of deposit $100,000 and over 4,326,751 1,587,695
Certificates of deposit under $100,000 11,027,931 5,874,709
---------- ----------
Total interest bearing deposits 30,373,684 26,527,286
---------- ----------
Total deposits $ 34,593,070 $ 29,946,921
========== ==========
FUNDING AND LIQUIDITY
Liquidity is the ability of a bank to meet the needs of its customers and its
financial commitments. The Bank ensures liquidity through pricing of earning
assets at market rates, developing a stable base of deposits and maintaining a
pool of assets which can readily be redeployed into other earning assets or used
to meet depositors' demands. Cash, federal funds sold, investment securities
available for sale and mortgage-backed and related securities available for sale
comprise 33.1% of total deposits at December 31, 1995 and 42.7% at December 31,
1994. The following table summarizes the liquidity calculations on December 31,
1995 and 1994.
1995 1994
---------- ----------
Cash and due from banks $ 3,109,413 $ 2,831,500
Federal funds sold 1,340,000 2,810,000
Investment securities available for sale:
U.S. Government and agencies 6,275,475 4,946,301
State and municipal 227,730 1,437,776
---------- ----------
Total investment securities available
for sale 6,503,205 6,384,077
Mortgage-backed and related securities
available for sale:
FNMA certificates 506,421 487,462
FHLMC certificates - 0 - 176,240
SLMA certificates - 0 - 100,187
---------- ----------
Total mortgage-backed and related
securities available for sale 506,421 763,889
---------- ----------
Total liquid assets $ 11,459,039 $ 12,789,466
========== ==========
Total deposits $ 34,593,070 $ 29,946,921
========== ==========
Liquid assets as a percentage of total
deposits 33.1% 42.7%
========= =========
17
IMPACT OF INFLATION AND CHANGING PRICES
The Bank's financial statements and notes thereto have been prepared in
accordance with generally accepted accounting principles (GAAP) which require
the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Bank's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Bank are monetary in
nature. As a result of inflation, interest rates have a greater impact on the
Bank's performance than do the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the
price of goods and services.
18
September 30, 1996 vs. September 30, 1995
Overview
Net income for the first three quarters of 1996 was $122,161, or $1.63
per primary share, compared with $297,915, or $3.97 per primary share for the
same period in 1995. This reflects a 58.99% decrease from the prior year. The
return on average assets were 0.35% and 1.05% for the first three quarters of
1996 and 1995, respectively. The return on average shareholders' equity for the
three periods were 4.05% at September 30, 1996 and 11.02% at September 30, 1995.
Most of the decrease in net income resulted from increased expenses for credit
losses, salaries, employee bonuses and benefits; and increased occupancy and
equipment costs associated with the two additional branch office locations
opened during the fourth quarter of 1995.
Statement of Income
Net Interest Income
Net interest income increased when comparing the first three quarters
of 1996 and 1995. Interest income saw an increase of 30.56% over the first three
quarters of 1995, while interest expense rose 32.73%. These fluctuations
resulted in a 28.62% increase in net interest income over 1995 numbers for the
first three quarters. The net interest margin increased from 2.88% at September
30, 1995 to 3.14% at September 30, 1996. Average earning assets from the first
three quarters of 1995 were $35.659 million, compared to $42.162 million for the
first three quarters of 1996, an increase of $6.503 million.
Provision for Loan Losses
Provision for loan losses for the first three quarters of 1996
increased $126,500, over the first three quarters in 1995. The provision for the
first three quarters of 1996 was $136,000, compared with $9,500 for the same
period in 1995. The increase resulted from higher net charge-offs and higher
loan volume. The allowance for loan losses is evaluated quarterly and was
considered to be adequate for this period in 1996.
Noninterest Income
Noninterest income for the first three quarters of 1996 increased
129.59%, or $100,765, over the first three quarters of 1995. The two chief
components of this fluctuation are due to increases in service and loan fee
income and a gain on the sale of other real estate owned.
Noninterest Expense
Noninterest expenses increased $422,757, or 56.24%, for the first three
quarters of 1996 in comparison to the same period in 1995. Salaries and employee
benefits expenses along with occupancy and equipment costs are the chief
components of this increase.
19
September 30, 1996 vs. December 31, 1995
Balance Sheet
Investment portfolio
The total securities portfolio declined 6.11% from $15.500 million at
year end 1995 to $14.553 million at the end of the first three quarters. The
decline was chieflyinterests. However, due to the sale and maturity of U.S. Treasury and Government
Agencies securities classified as available for sale. The securities portfolio
classified as held to maturity at September 30, 1996 remained fairly constant
from December 31, 1995.
Loans and Credit Quality
Average gross loans, net of unearned income, increased from $14.167
million at December 31, 1995 to $22.443 million at September 30, 1996, up
58.42%. This increased volume was chiefly due to opening of two additional
branch office locations in 1995.
During 1995, the Bank's ratio of net charge-offs to average loans was
.16%, compared to .47% for the first three quarters in 1996. At December 31,
1995, the allowance for loan losses to nonperforming assets was approximately
369.23%, compared with 297.56% at September 30, 1996. This declining percentage
is due to an increase in nonperforming assets of 57.69%, or $15,000.
Deposits
Total deposits at December 31, 1995 were $34.593 million, compared to
$49.114 million at September 30, 1996. This 41.98% increase in deposits was
chiefly in the interest bearing category which saw a 48.54% increase. The
noninterest bearing category decreased by 5.26%. This overall increase in
deposits is due to the opening of two branch office locations during the fourth
quarter of 1995.
In comparison of average deposit balances, we experienced a 22.98%
increase from year end 1995 to September 30, 1996. The breakdownrelative immateriality of the increases/(decreases) amount deposit categories were as follows: Time Deposits,
up 47.40%, Savings accounts, up 4.98%, Money Market accounts, up 20.30%, NOW
accounts, up 6.13%, and Demand Deposits, down 12.75%. These fluctuations were
chiefly due to new accounts attributed to the two additional branch office
locations and, to a lessor extent, changes in interest rates.
Shareholders' Equity
Total shareholders' equity, excluding unrealized gains on securities,
increased from $3.928 million to $4.049 million, or 3.08% from December 31, 1995
to September 30, 1996, respectively. Dividends per share for 1995 were $1.30 per
share. No dividends have been declared during the first two quarters of 1996.
The Agreement allows the Bank to declare and pay a dividend of $1.35 per share
prior to the Effective Timesize of the
Merger. Total capital to risk based assets
was 15.06% at December 31, 1995, compared to 15.59% at September 30, 1996.
Financial reporting in accordance with SFAS No. 115 requires an
adjustment to shareholders' equity for net unrealized gains/(losses) in the
"available-for-sale" securities portfolio. This adjustment at December 31, 1995
and September 30, 1996, was $63,530 and $9,857, respectively.
Effects of Inflation
Over the past few years, the rate of inflationacquisition, prior period financial data has not been relatively
mild. However, because interest rates and the level of loans and deposits
generally increase as the rate of inflation increases, the financial statements
reflect these effects of inflation.
20restated.
GENERAL INFORMATION
This Proxy Statement/Prospectus is furnished in connection with the solicitation
of proxies by the Board of Directors of the Bank (the "Bank Board"), to be voted
at the Bank Shareholder Meeting to be held at ____________________the Torrance Chamber of Commerce
located at ______________________________,3400 Torrance Blvd., Suite 100, Torrance, California, on __________, __________ __, 199_Monday,
March 9, 1998 at __:__ _.m.
Eastern10:00 a.m. Pacific Time and at any adjournment thereof. At the
Bank Shareholder Meeting, shareholders will consider and vote upon: (i) the
Agreement and the related Plan of Merger, pursuant to which the Bank will merge
into Acquisition and (ii) such other matters as may properly come before such
Special Meeting. Only shareholders of record of the Bank at the close of
business on __________ __,
199_January 26, 1998, are entitled to notice of and to vote at the Bank
Shareholder Meeting. This Proxy Statement/Prospectus is being mailed to all such
holders of record of Bank Common Stock on or about __________ __, 199_.February 6, 1998.
Holders of Bank Common Stock are entitled to one vote for each share standing in
such holder's name on the books of the Bank. The affirmative vote of the holders
of more than two-thirds of the outstanding shares entitled to vote is required
for approval of the BankAgreement and the Merger.
Under rules of the National Association of Securities Dealers, Inc., the
proposal to adopt the Agreement is considered a "non-discretionary item" whereby
brokerage firms may not vote in their discretion on behalf of their clients if
such clients have not furnished voting instructions. Abstentions and such broker
"non-votes" will be considered in determining the presence of a quorum at the
Special Meeting but will not be counted as a vote cast for a proposal. Because
the proposal to adopt the Agreement is required to be approved by the holders of
two-thirds of the outstanding shares of Bank Common Stock, abstentions and
broker "non-votes" will have
the same effect as a vote against this proposal.
The proxies solicited hereby, if properly signed and returned and not revoked
prior to their use, will be voted in accordance with the instructions given
thereon by the shareholders. If no instructions are so specified, the proxies
will be voted FOR the proposed BankAgreement and the Merger. Any shareholder giving a proxy
has the power to revoke it at any time before it is exercised by (i) filing
written notice of revocation addressed to Leon K. Oxley,Diana Bowers, Secretary, The Old NationalDel Amo
Savings Bank, of Huntington, 999 4th Avenue, Huntington, West Virginia 25701;FSB, 3422 Carson Street, Torrance, California 90503; (ii)
submitting a duly executed proxy bearing a later date; or (iii) appearing at the
Bank Shareholder Meeting and notifying the Secretary of his or her intention to
vote in person. Attendance at the Special Meeting will not, in and of itself,
constitute revocation of a proxy. Proxies solicited by this Proxy
Statement/Prospectus may be exercised only at the Bank Shareholder Meeting and
any adjournment of the Bank Shareholder Meeting and will not be used for any
other meeting.
The accompanying proxy is being solicited by the Bank Board. The cost of such
solicitation will be borne by the Bank. In addition to the use of the mails,
proxies may be solicited by personal interview, telephone or telegram by
directors, officers and employees of the Bank or City Holding without additional
compensation. Arrangements may also be made with brokerage houses and
custodians, nominees and fiduciaries for forwarding of solicitation material to
beneficial owners of stock held of record by such persons and obtaining proxies
from the beneficial owners of Bank Common Stock entitled to vote at the Special
Meeting, and the Bank will reimburse such persons for their reasonable expenses
incurred in doing so.
The Bank Board has no information that other matters will be brought before the
meeting.Bank Shareholder Meeting. If, however, other matters are presented, the
accompanying proxy will be voted in the discretion of the proxiesBoard's proxy holders
with respect to such matters.
As of the Record Date, directors and executive officers of the Bank and their
affiliates beneficially owned a total of 45,830199,761 shares (representing
61.11%approximately 37.5% of the outstanding shares of Bank Common Stock), and the
directors of City Holding owned no Bank Common Stock. The Bank directors have
agreed with City Holding to recommend that the Bank shareholders vote in favor
of the BankAgreement and the Merger and to vote shares beneficially owned by such
directors, and shares with respect to which they have the power to vote, in
favor of the BankAgreement and the Merger. See "Ownership of Certain Beneficial
Owners of Bank Stock."
21
For the reasons described below, the Bank Board has adopted the Agreement,
believes the Bank Merger is in the best interest of the Bank and its shareholders and
recommends that shareholders of the Bank vote FOR approval of the Agreement.Agreement and
the Merger. See "The Bank Merger" "--ReasonsMerger--Reasons for the Bank Merger."
The address of City Holding is 3601 MacCorkle Avenue, S.E., Charleston,25 Gatewater Road, P.O. Box 7520, Cross Lanes,
West Virginia 25304,25313, and its telephone number is (304) 925-6611.769-1102. The address of
the Bank is 999 4th Avenue, Huntington, West Virginia 257013422 Carson Street, Torrance, California 90503 and its telephone
number is (304) 525-7500.(800) 961-6636.
THE BANK MERGER
The detailed terms of the Bank Merger are contained in the Amended and Restated
Agreement and Plan of Reorganization, attached as Annex IA to this Proxy
Statement/Prospectus. The following discussion describes the more important
aspects of the Bank Merger and the terms of the Agreement. This description is not
complete and is qualified by reference to the Agreement which is incorporated by
reference herein.
Effective TimeDetermination of Exchange Ratio
In connection with the Merger, each share of Bank Merger
SubjectCommon Stock outstanding
immediately prior to the terms and conditions set forth herein, including receipt of all
required regulatory approvals, the Bank Merger shall become effective at the
time Articles of Merger relating to the Bank Merger are made effective by the
OCC (the "Effective Time of the Bank Merger"). The Effective Time of the Bank
Merger is expected to occur on or about January 31, 1997, or as soon thereafter
as is practicable. Either the Bank or City Holding may terminate the Agreement
if the Bank Merger has not been consummated by March 31, 1997.
Until the Effective Time of the Bank Merger Bank shareholders will retain their
rights as shareholders to vote on matters submitted to them by the Bank Board.
Determination of Exchange Ratio; Exchange of Bank Stock for City Holding Common
Stock
Each share(other than shares of Bank
Common Stock issued and outstanding at the Effective Time of
the Bank Merger (other than shares held by City Holding, or in Bank's treasuryif any, and other than Dissenting Shares as
defined in Section 2.3 of the Agreement)
shall,, by virtue of the Merger and without
any action byon the part of the holder thereof, shall be converted into 5.83that
number of shares of City Holding Common Stock (the "Exchange Ratio"). The Exchange Ratio
is equal to the product of one
multiplied by the Exchange Ratio. As used in the Agreement:
(i) "Exchange Ratio" shall mean the quotient (rounded toof (x) the nearest one one-hundredth) obtained by
dividing (i)sum of (A) the
product obtained by multiplyingof 1.55 times the Net Book Value Per Share (as defined
herein) plus (B) the per share pro rata amount of the Bank's
out-of-pocket accountable fees, costs and expenses associated with
the Merger (up to a maximum in the aggregate of $200,000 and only
to the extent such costs have not been capitalized) (the "Merger
Expenses") divided by (y) the Fair Market Value Per City Holding
Share (as defined herein);
(ii) "Net Book Value Per Share" shall mean the net book value of the
Bank at the Measurement Date (as defined herein) divided by the
total number of shares of Bank Common Stock at June 30, 1996 by 2.5 by (ii) $23.325 (the "Cityoutstanding
immediately prior to the Effective Time of the Merger;
(iii)"Fair Market Value Per City Holding Stock Price"). All such sharesShare" shall mean the average
closing price of a share of City Holding Common Stock as reported
on The Nasdaq National Market for the twenty trading days prior to
the Measurement Date; provided, that (A) if the Fair Market Value
Per City Holding Share as determined in the clause immediately
preceding this proviso is less than $32.00 and greater than or
equal to $30.00, the Fair Market Value Per City Holding Share
shall be validly
issued, fully paiddeemed to equal $32.00, (B) if the Fair Market Value Per
City Holding Share as determined in the clause immediately
preceding this proviso is greater than $43.00 and nonassessable.less than or
equal to $48.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00, (C) if the Fair Market Value Per
City Holding Share as determined in the clause immediately
preceding this proviso is greater than $48.00 and less than or
equal to $55.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00 increased by the amount by which
the actual Fair Market Value Per City Holding Share exceeds
$48.00, or (D) if the Fair Market Value Per City Holding Share as
determined in the clause immediately preceding this proviso is
greater than $55.00 or less than $30.00, the Bank or City Holding
may terminate the Agreement in accordance with Section 7.1(k) of
the Agreement; and
(iv) "Measurement Date" shall mean the last day of the month
immediately preceding the Closing Date, as defined in Section 6.1
of the Agreement.
The Exchange Ratio at the Effective Time of the Bank Merger shall be adjusted to
reflect any consolidation, split-up, other subdivisions or combinations of City
Holding Common Stock, any dividend payable in City Holding Common Stock, or any
capital reorganization involving the reclassification of City Holding Common
Stock subsequent to the date of the Agreement.
The Exchange Ratio may be expressed as the following formula:
Exchange Ratio = (1.55 x Net Book Value Per Share) plus pro rata Merger Expenses
----------------------------------------------------------------
Fair Market Value Per City Holding Share
Exchange of Bank Stock for City Holding Common Stock
After the Effective Time of the Bank Merger, each holder of a certificate theretofore
representing outstanding shares of Bank Common Stock, upon surrender of such
certificate to The City National Bank of Charleston (which shall act as exchange
agent) accompanied by a Letter of Transmittal shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of full
shares of City Holding Common Stock for which shares of Bank Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been exchanged as provided (plus cash in lieu of any fractional share).
Until so surrendered, each outstanding certificate which, prior to the Effective
Time of the Bank Merger, represented Bank Common Stock (other than Dissenting Shares
referred to in Section 2.3 of the Agreement) will be deemed to evidence the
right to receive the number of full shares of City Holding Common Stock into
which the shares of Bank Common Stock represented thereby may be converted, and,
after the Effective Time of the Bank Merger, will be deemed for all corporate
purposes of City Holding to evidence ownership of the number of full shares of
City Holding Common Stock into which the shares of Bank Common Stock represented
thereby were converted. Until such outstanding certificates formerly
22
representing Bank Common Stock are surrendered, no dividend payable to holders
of record of City Holding Common Stock for any period as of any date subsequent
to the Effective Time of the Bank Merger shall be paid to the holder of such
outstanding certificates in respect thereof. After the Effective Time of the
Bank Merger there shall be no further registry ofor transfer on the records of the Bank
of shares of Bank Common Stock. If a certificate representing such shares is
presented to the exchange agent, it shall be canceled and exchanged for a
certificate representing shares of City Holding Common Stock as herein provided.
City Holding will also issue a certificate in exchange for shares evidenced by
lost certificate(s) provided the record owner thereof provides City Holding with
such substantiation, indemnification and security as City Holding may reasonably
require.
Upon surrender of certificates of Bank Common Stock in exchange for City Holding
Common Stock, there shall be paid to the recordholder of the certificates of
City Holding Common Stock issued in exchange thereof (i) the amount of dividends
theretofore paid with respect to such full shares of City Holding Common Stock
as of any date subsequent to the Effective Time of the Bank Merger which have not yet
been paid to a public official pursuant to abandoned property laws and (ii) at
the appropriate payment date the amount of dividends with a record date after the Effective Time of the Bank Merger, but prior to
surrender and payment date subsequent to surrender. No interest shall be payable
with respect to such dividends upon surrender of outstanding certificates.
Exchange of Options Granted Under Bank's 1990 Stock Option Plan
Pursuant to the terms of the underlying option agreement, each outstanding
option to acquire a share of Bank Common Stock ("Del Amo Option") shall
terminate if not exercised prior to the Effective Time of the Merger.
Notwithstanding the foregoing, if the Bank shall receive an irrevocable letter
of instruction from an option holder in the form attached to the Agreement as
Exhibit B prior to the meeting of the shareholders of the Bank required by
Section 4.2 of the Agreement, then the Del Amo Options listed in such letter
shall be converted into either (i) an option to acquire that number of shares of
City Holding Common Stock equal to the product of (A) the number of shares of
Bank Common Stock subject to such option immediately prior to the Effective Time
multiplied by (B) the Exchange Ratio, at an exercise price per share equal to
the Del Amo Exercise Price (as defined herein) divided by the Exchange Ratio, or
(ii) the right to receive, upon surrender of such option to the Exchange Agent
accompanied by a Letter of Transmittal, with respect to each share of Bank
Common Stock subject to such option, the number of full shares of City Holding
Common Stock equal to the quotient of (A) the Option Spread (as defined below)
divided by (B) the Fair Market Value Per City Holding Share. As used herein,
"Del Amo Exercise Price" shall mean the exercise price of the respective Del Amo
Option immediately prior to the Effective Time of the Merger. As used herein,
the "Option Spread" shall be equal to the difference between (i) the sum of (A)
the product of the Net Book Value Per Share multiplied by 1.55 plus (B) the
Merger Expenses Per Share (as defined herein) and (ii) the exercise price per
share pursuant to such option. As used herein, "Merger Expenses Per Share" shall
be equal to the Merger Expenses divided by the total number of shares of Bank
Common Stock outstanding immediately prior to the Effective Time of the Merger.
Effective Time of the Merger
Subject to the terms and conditions set forth herein, including receipt of all
required regulatory approvals, the Merger shall become effective at the date and
time specified in the Articles of Combination to be filed with the Office of
Thrift Supervision (the "OTS"). The Effective Time of the Merger is expected to
occur on or about March 31, 1998, or as soon thereafter as is practicable.
Either the Bank or City Holding may terminate the Agreement if the Merger has
not been consummated by June 30, 1998.
Until the Effective Time of the Merger, Bank shareholders will retain their
rights as shareholders to vote on matters submitted to them by the Bank Board.
Recommendation of the Board of Directors of Bank; Reasons for the
Merger
The Board of Directors of the Bank has determined that the Merger is in the best
interests of the Bank and its shareholders. The Board was influenced by a number
of factors in arriving at this determination, though it did not assign any
specific or relative weight to these factors in its consideration. Among the
factors considered were:
(i) The Board of Directors of the Bank believes that the terms of
the merger are fair to the Bank's shareholders for their
shares of Bank Common Stock.
(ii) The opinion of Hovde Financial, Inc. that the Exchange Ratio
is fair to the Bank's shareholders from a financial point of
view.
(iii) The exchange of shares pursuant to the Merger is anticipated
to be tax-free for federal income tax purposes for the
shareholders of Bank Common Stock (other than in respect to
cash paid in lieu of fractional shares or to dissenting
shareholders).
(iv) City Holding Common Stock to be received by the Bank
shareholders is expected to afford greater market liquidity
when compared to the current minimal trading of the Bank's
Common Stock.
(v) The Merger is expected to provide the Bank's customers access
to a broader range of financial services and products.
(vi) The Board of Directors of the Bank found the provisions of the
Agreement and related Plan of Merger to be fair and
reasonable.
Based on these matters, and such other matters as the Board deemed relevant, the
Bank's Board of Directors unanimously adopted the Agreement and Plan of Merger
as being in the best interests of the Bank and its shareholders.
THE BOARD OF DIRECTORS OF BANK RECOMMENDS THAT BANK SHAREHOLDERS VOTE IN FAVOR
OF THE AGREEMENT AND THE MERGER.
Opinion of the Bank's Financial Advisor
At a meeting of the Bank's Board of Directors on November 20, 1997, Hovde
delivered its oral opinion that the consideration to be received by the holders
of Bank Common Stock pursuant to the Merger was fair to such shareholders from a
financial point of view, as of the date of such opinion. Hovde's oral opinion
was subsequently confirmed in writing, which opinion is attached hereto as Annex
C. Hovde subsequently rendered a more extensive written opinion dated as of the
date of this Proxy Statement/Prospectus (the "Hovde Opinion") to the Bank's
Board of Directors to the effect that the financial terms of the Merger as
defined in the Agreement are fair to the holders of Bank Stock from a financial
point of view. The Bank's Board of Directors imposed no limitations upon Hovde
with respect to the investigations made or procedures followed in rendering the
Hovde Opinion.
THE FULL TEXT OF HOVDE'S OPINION TO THE BANK'S BOARD OF DIRECTORS, DATED THE
DATE OF THIS PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED, AND LIMITATIONS OF THE REVIEW BY HOVDE, IS ATTACHED HERETO
AS APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF
HOVDE'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION, WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING
SUCH OPINION, HOVDE DOES NOT CLAIM THAT IT IS AN EXPERT WITH RESPECT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROXY STATEMENT/ PROSPECTUS IS PART WITHIN
THE MEANING OF THE TERM "EXPERTS" AS USED IN THE SECURITIES ACT OF 1933 AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER, OR THAT ITS OPINION CONSTITUTES A
REPORT OR VALUATION WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER, AND STATEMENTS TO
THAT EFFECT ARE INCLUDED IN THE TEXT OF HOVDE'S WRITTEN OPINION. HOVDE'S OPINION
IS ADDRESSED TO THE BANK'S BOARD OF DIRECTORS, COVERS ONLY THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED BY HOLDERS OF BANK STOCK FROM A FINANCIAL POINT OF
VIEW AS OF THE DATE OF THE OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY HOLDER OF BANK STOCK AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL
MEETING.
In connection with its opinion, Hovde, among other things: (i) reviewed certain
publicly available financial and other data with respect to the Bank and City
Holding, including the audited consolidated financial statements for the past
three (3) fiscal years ending December 31, 1996, 1995, and 1994, respectively,
and unaudited consolidated financial statements for the period ending September
30, 1997, and certain other relevant financial and operating data relating to
the Bank and City Holding made available to Hovde from published sources and, in
the case of the Bank, from the internal records of the Bank; (ii) reviewed a
draft of the Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, Bank Stock and City
Holding Stock; (iv) compared both the Bank and City Holding from a financial
point of view with certain other companies in the banking industry, which Hovde
deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of business combinations in the banking industry which Hovde
deemed to be comparable, in whole or in part, to the Merger; (vi) reviewed and
discussed with representatives of the management of the Bank certain information
of a business and financial nature regarding the Bank furnished to Hovde by
them; (vii) made inquiries regarding and discussed the Merger and the Merger
Agreement and other matters related thereto with the Bank's counsel; and (viii)
performed such other analyses and examinations as Hovde deemed appropriate.
Hovde took into account its assessment of general economic, market and financial
conditions and its experience in other transactions, as well as its experience
in securities valuation and its knowledge of the banking industry generally. The
Hovde Opinion was necessarily based upon conditions as they existed and could
only be evaluated on the date thereof and the information made available to
Hovde through the date thereof.
In conducting its review and in arriving at the Hovde Opinion, Hovde relied upon
and assumed the accuracy and completeness of the financial and other information
provided to it or publicly available and did not attempt independently to verify
the same. Hovde relied upon the management of the Bank and City Holding as to
the reasonableness of the financial and operating forecasts, projections and
projected operating cost savings. Hovde also assumed, without independent
verification, that the aggregate allowances for loan losses for the Bank and
City Holding were adequate to cover such losses. Hovde did not make or obtain
any evaluations or appraisals of the property of the Bank or City Holding, nor
did Hovde examine any individual loan credit files. The Hovde Opinion is limited
to the fairness, from a financial point of view, to the shareholders of the Bank
of the consideration to be received by the Bank's shareholders in the Merger,
which was determined by arm's length negotiations, and does not address the
Bank's underlying decision to proceed with the Merger.
In connection with rendering its opinion to the Bank's Board of Directors, Hovde
performed certain financial analyses, which are summarized below. The summary
set forth below does not purport to be a complete description of the
presentation by Hovde to the Bank's Board of Directors or of the analyses
performed by Hovde. Hovde believes that its analyses must be considered as a
whole and that selecting portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and the processes underlying the Hovde Opinion.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. In its analyses, Hovde made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond the control of the Bank and City Holding. Any estimates
contained in Hovde's analyses are not necessarily indicative of future results
or values, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities may
actually be sold.
Set forth below is a brief summary of the analyses performed by Hovde in
reaching the Hovde Opinion. Hovde assumed for purposes of its opinion that the
Merger will be accounted for as a purchase transaction under generally accepted
accounting principles. The analyses focused on core financial and operating
projections and statistics that are not specifically adjusted for nonrecurring
charges, unless otherwise stated. Unless otherwise noted in the analyses, Hovde
used the Exchange Ratio as defined in the Agreement to determine the level at
which Bank Stock would be exchanged if the Closing Date (as defined in the
Agreement) were the same as the day prior to the signing of the Agreement. The
Exchange Ratio formula was developed pursuant to extensive negotiations between
the Bank and City Holding. Hovde analyzed certain effects of the Merger assuming
various Exchange Ratios and concluded pursuant to the analysis of the range of
possible values of the Exchange Ratio that the financial terms of the Merger
remained fair to the holders of shares of Bank Stock from a financial point of
view.
Transaction Summary. Under the terms of the Transaction (as defined in
the Agreement) each shareholder of the Bank will receive fractional shares of
City Holding stock with a value equal to 1.55 times the Bank's book value (as of
the month end prior to the Closing Date). Based upon an estimated 533,096 common
shares outstanding with an estimated book value of $13.11 per share as of
February 28, 1998 (the projected Determination Date), the effective price per
share is equal to $20.32. The actual value per share to be received by the
Bank's shareholders may increase or decrease marginally as a result of the
Exchange Ratio and pricing formula more fully discussed in the Agreement. In
addition, option holders controlling 76,637 options with an average strike price
of $9.64 will receive cash, stock or options to acquire shares of City Holding.
The value of this consideration is equal to the spread between the effective
price per share ($20.32) and the exercise price of the options ($9.64). Hovde
estimated the total transaction value at $11.67 million.
Discounted Earnings Analysis. Hovde analyzed the results of a
discounted earnings analysis designed to compare the present value per share,
under certain assumptions, that could be attained if the Bank were to remain
independent through the year 2000. In performing the analysis, Hovde estimated
the future earnings per share of the Bank for each of the years of 1997, 1998,
1999 and 2000. The estimated earnings per share for each year were then
multiplied by an estimated price to earnings multiple for purchase transactions
using historical earnings per share comparables ranging from 16 times to 21
times actual or projected earnings. The results were then discounted to a
present value using a discount rate of 13%. This analysis indicated the Bank's
future value on a stand-alone bases ranged from $13.08 to $17.17 per share for
1997, $16.21 to $21.28 per share for 1998, $16.50 to $21.65 per share for 1999
and $16.79 to $22.04 per share for 2000. City Holding's offer of approximately
$20.32 per share compared favorably to the present value calculations derived in
this analysis.
Comparable Transaction Analysis. For purposes of facilitating a fair
comparison to comparable transactions, Hovde computed the effective price to
book of 1.67 times book value and price to earnings of 23.34 times earnings.
This level, which exceeds the 1.55 times book value stated in the Agreement
incorporates the impact of the estimated $836,105 in additional consideration
payable to the option holders. Hovde then reviewed and compared these results to
the thrift merger and acquisition transactions for California institutions
announced or closed through November 20, 1997. This analysis which is presented
below showed how the consideration paid to the Bank compared to the high,
median, average and low pricing multiples of other California thrift
transactions:
Deal Value Deal Value to Deal Value
To Book Tangible Book to Earnings
------------------------------------------
Bank 1.67 1.67 23.34
Comparables:
High 2.71 3.08 69.46
Median 1.67 1.69 14.67
Average 1.62 1.63 22.36
Low 0.89 0.89 9.38
Merger and Contribution Analysis. Hovde analyzed the contribution of
each of the Bank and City Holding to, among other things, total equity, assets,
deposits and loan loss provisions of the pro forma combined companies for the
period ending September 30, 1997, and projected net income for the calendar year
ending December 31, 1997. This analysis showed, among other things, that based
on pro forma combined balance sheets for the Bank and City Holding at September
30, 1997, the Bank would have contributed 6.90% of the total equity, 8.56% of
total assets, 6.79% of the total loan loss provisions and 15.10% of the total
deposits. The pro forma projected income statement for the period ending
December 31, 1997, showed that the Bank would contribute 3.46% of the net income
of the combined companies. Based on an exchange ratio as defined in the
Agreement and assuming a 100% stock transaction, holders of Bank Stock would own
approximately 4.06% (assuming a trading price for City Holding of $42.00 per
share) of the combined companies based on common shares outstanding at September
30, 1997.
Financial Advisory Fee. In consideration for the rendering of financial
advice and for the preparation and delivery of the Hovde Opinion, the Bank has
agreed to pay Hovde a fee of $60,000. In addition, the Bank has agreed to
reimburse Hovde for all reasonable out-of-pocket expenses associated with this
transaction.
Relationship with the Bank. Hovde is substantially owned and managed by
Eric D. Hovde and Steven D. Hovde, the managing members of Hancock Park
Acquisition, LLC, an Illinois limited liability company which serves as the
managing partner of Hancock Park Acquisition, L.P., a Delaware limited
partnership which owns approximately 17.15% of the outstanding common stock of
the Bank. Neither Eric nor Steven Hovde participated in the preparation or
delivery of the Hovde Opinion. The Bank's Board of Directors evaluated the
relationship between Hovde and Hancock in determining whether Hovde was
qualified to render the Hovde Opinion on an independent basis.
Business of the Bank Pending the Bank Merger
The Bank has agreed that prior to the Effective Time of the Bank Merger, it will
operate its business substantially as presently operated and in the ordinary
course, and, consistent with such operation, will use its best efforts to
preserve intact its present business organization and relationships with persons
having business dealings with it. The Agreement contains a description of
certain specified actions the Bank shall refrain from taking without prior
notice to City Holding in satisfying this undertaking.
The Bank also has agreed that unless and until the Agreement is terminated,
pursuant to its terms, neither the Bank nor any of its executive officers,
directors, representatives, agents or affiliates shall, directly or indirectly,
encourage, solicit or initiate discussions or negotiations (with any person
other than City Holding) concerning any merger, sale of substantial assets,
tender offer, sale of shares of stock or similar transaction involving the Bank
(collectively, a "Significant Transaction") or disclose, directly or indirectly,
any information not customarily disclosed to the public concerning the Bank,
afford to any other person access to the properties, books or records of the
Bank or otherwise assist any person preparing to make or who has made such an
offer, or enter into any agreement with any third party providing for a
Significant Transaction.
The Bank further has agreed that, prior to the Effective Time of the Bank Merger, it
will consult and reasonably cooperate with City Holding regarding (i) loan
portfolio management, including management and work-out of nonperforming assets,
and credit review and approval procedures, (ii) securities portfolio and funds
management, including management of interest rate risk; and (iii) expense
management, all with the objective of achieving appropriate operating synergies
and appropriate accruals prior to the Effective Time of the Bank Merger.
Conditions to Consummation of the Bank Merger
Consummation of the Bank Merger is conditioned upon the approval of the holders of
more than two-thirds of the outstanding Bank Common Stock entitled to vote at
the Bank Shareholder Meeting. The BankConsummation of the Merger has been approvedis also conditioned on
approval by the Federal Reserve Board and the Division, and preliminarily approvedpreliminary approval
by the OCC.OTS. The obligations of the Bank and City Holding to consummate the Bank
Merger are further conditioned upon the satisfaction of terms and conditions
contained in the Agreement usual for transactions of this type, including
continued accuracy of representations and warranties made by the Bank and City
Holding, the absence of material adverse change in the Bank's and City Holding's
businesses and the receipt of legal and accounting opinions, and the transaction being accounted for as a
"pooling of interests".opinions. See Article V of the Agreement
(Annex I)A).
Termination
The Agreement will be terminated, and the Bank Merger abandoned, if shareholders of
the Bank do not approve the Bank Merger. Notwithstanding such approval by such
shareholders, the Agreement also may be terminated at any time prior to the
Effective Time of the Bank Merger by mutual consent, upon breach of the Agreement, if
the Bank Merger is not effective by March 31, 1997,June 30, 1998, and upon the occurrence of certain
other events specified in the Agreement. See Article VII of the Agreement (Annex
I)A).
23
Accounting Treatment
City Holding and Bank have agreed to use their best efforts towill cause the Bank Merger to be accounted for as a "poolingunder the purchase method of
interests" and this accounting
treatment is a condition toaccounting. Accordingly, City Holding's obligation to complete the Bank
Merger. It is City Holding's intentionHolding will not to restate financial statements and
other financial information for periods prior to the Bank Merger to include the
assets and liabilities and results of operations of Bank because the transaction
is not expected to be material to City Holding.Bank.
Operations After the Bank Merger
After consummation of the Bank Merger, City Holding will generally continue generally to
conduct the business presently conducted by the Bank.
Interests of Certain Persons in the Bank Merger
Certain membersdirectors of the Bank and members of the Bank's management set forth
below may be deemed to have interests in the Bank Merger in addition to their
interests as shareholders of the Bank generally. In each case, the Bank Board or the Bank
was aware of their potential interests, and considered them, among other
matters, in approving the Agreement and the transactions contemplated thereby.
Senior Management. Certain members of Bank senior management will enter into
employment contracts with the Bank regarding their employment subsequent to the
Merger. Nicholas Barakonski, Diana Bowers, and Jasna Penich intend to sign
contracts which require the Bank to guarantee: (1) that their respective duties
and titles will remain substantially equivalent to their duties and titles prior
to the Merger, (2) that each will receive fringe benefits commensurate with
their duties and titles, and (3) that if the employee is terminated without
cause, the employee will receive a severance payment equal to the employees'
most recent annual salary. The contracts have original expiration dates three
years from the date of the Effective Time of the Merger and are renewable, at
the option of the employee and the Bank, for one year periods thereafter. During
the renewal periods, if any, the contract can be terminated without penalty, at
any time upon 90 days prior written notice.
Indemnification; Liability Insurance. After the Effective Time of the Bank Merger,
City Holding has agreed to provide indemnification to the directors and officers
of the Bank and director's and officer's liability insurance following the
Closing Date to the same extent as it provides indemnification to directors and
officers of City Holding and its subsidiaries.
City Holding Board of Directors. City Holding has agreed to elect William M.
Frazier, Chairman of the Board, President and a director of the Bank, and Leon
K. Oxley, Secretary and a director of the Bank, as members of City Holding's
Board of Directors. Messrs. Frazier and Oxley's eligibility for and election at
City Holding's next following Annual Meeting of Shareholders will be governed by
City Holding's Bylaws. Additionally, Messrs. Frazier and Oxley have entered into
Covenant Not to Compete and Consulting Agreements with City Holding. Pursuant to
the terms of these agreements, each will be paid $50,000 per year for seven
years for consulting services and in consideration of their agreement not to
provide banking services (other than legal services) to banking institutions
(except City Holding) within a 50 miles radius of Huntington, West Virginia.
Employee Benefits. Following the Bank Merger, employees who continue to be employees
of Acquisitionthe Bank will be eligible for City Holding's benefit plans based on their
length of service, compensation, job classification and position with the Bank.
City Holding will recognize all such employees' service with the Bank for
eligibility to participate, for early retirement and for vesting under City
Holding's benefit plans.
Other than as set forth above, no director or executive officer of the Bank or
City Holding has any direct or indirect material interest in the Bank Merger, except
in the case of directors and executive officers of the Bank and the Bank insofar as ownership
of Bank Common Stock might be deemed such an interest.
Effect on the Bank Employee Benefits Plans
All employees of the Bank immediately prior to the Effective Time of the Bank Merger
("Transferred Employees") will be covered by City Holding's employee benefit
plans as to which they are eligible based on their length of service,
compensation, job classification, and position with the Bank. City Holding's
benefits plans will recognize for purposes of eligibility to participate and for
early retirement and for vesting, all Transferred Employees' service with the
Bank, subject to applicable break in service rules. The Bank's employee benefit
plans are expected to be merged intoterminated at the Effective Time of the Merger.
As of the Effective Time of the Merger, employees of the Bank who become
employees of City Holding will be entitled to participate in City Holding's
plans.
24
Except as described in Schedule V401(k) plan and employee stock ownership plan to the extent they are eligible
based on their length of service, compensation, job classification and position,
and the Agreement,Bank's existing 401(k) plan and will be terminated as of the Effective
Time of the Bank Merger employees of Bank who become employees of Acquisition as the
Surviving Bank will be entitled to immediate coverage under City Holding
Employee Plans without any waiting period.
The effect on the Bank employees' benefits plans remains subject to certain
variables, and City Holding retains the option to maintain separate plans, if
necessary.Merger.
Certain Federal Income Tax Consequences
City Holding and the Bank have received an opinion of Hunton & Williams, counsel
to City Holding, to the effect that for federal income tax purposes the Bank
Merger
will be a reorganization under Section 368(a) of the Code, and, consequently,
(i) none of City Holding, Acquisition or the Bank will recognize any taxable
gain or loss upon consummation of the Bank Merger (but income may be recognized as a
result of (a) the termination of the bad-debt reserve maintained by the Bank for
federal income tax purposes and (b) other possible changes in tax accounting
methods), and (ii) the Bank Merger will result in the tax consequences summarized
below for the Bank shareholders who receive City Holding Common Stock in
exchange for Bank Common Stock pursuant to the Bank Merger. Receipt of substantially
the same opinion of Hunton & Williams as of the Effective DateTime of the Merger is
a condition to consummation of the Bank Merger. The opinion of Hunton & Williams is
based on, and the opinion to be given as of the Effective Date will be based on,
certain customary assumptions and representations regarding, among other things,
the lack of previous dealings between the Bank and City Holding, the existing
and future ownership of Bank Common Stock and City Holding Common Stock, and the
future business plans for City Holding.
The following summary does not discuss all potentially relevant federal income
tax matters, consequences to any shareholders subject to special tax treatment
(for example, tax-exempt organizations and foreign persons), or consequences to
shareholders who acquired their Bank Common Stock through the exercise of
employee stock options or otherwise as compensation.
Exchange of Bank Common Stock for City Holding Common Stock
A holder of shares of Bank Common Stock who receives solely City Holding Common
Stock in exchange for all of his or her shares of Bank Common Stock will not
recognize any gain or loss on the exchange. If a shareholder receives City
Holding Common Stock and cash in lieu of a fractional share of City Holding
Common Stock, the shareholder will recognize taxable gain or loss solely with
respect to such fractional share as if the fractional share had been received
and then redeemed for the cash. A shareholder who exchanges his or her shares of
Bank Common Stock for City Holding Common Stock will have an aggregate tax basis
in the shares of City Holding Common Stock (including any fractional share
interest) received in the Bank Merger equal to his or her aggregate tax basis in the
shares of Bank Common Stock exchanged therefor. A shareholder's holding period
for shares of City Holding Common Stock (including any fractional share
interest) received in the Bank Merger will include his or her holding period for the
shares of Bank Common Stock exchanged therefor if they are held as a capital
asset at the Effective Time of the Bank Merger.
Shareholders Electing to Exercise TheirDissenter's Right of Appraisal
The receipt of cash for shares of Bank Common Stock pursuant to the exercise of
the right to an appraisaldissenter's rights will be a taxable transaction. Any shareholder considering
the exercise of such rightrights should consult his or her tax advisor about the tax
consequences of receiving cash for his or her shares.
THE PRECEDING DISCUSSION SUMMARIZES FOR GENERAL INFORMATION THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE BANK MERGER TO THE BANK SHAREHOLDERS. THE TAX CONSEQUENCES
TO ANY PARTICULAR SHAREHOLDER MAY DEPEND ON THE SHAREHOLDER'S CIRCUMSTANCES. THE
BANK SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES.
25
Rights of Shareholders Electing to Exercise theirDissenter's Right of Appraisal
Holders of Bank Common Stock entitled to vote on the approval of the Agreement
and the related Plan of Merger will be entitled to have the fair value of each
such holder's shares of Bank Common Stock immediately prior to consummation of
the Bank Merger paid to such holder in cash, together with interest, if any, by
complying with the provisions of 12 U.S.C.A.C.F.R. ss. 215a.552.14. Section 215a552.14 gives any
shareholder of a nationalFederal savings bank the right to dissent from the merger of
such savings bank into another national bankdepository institution if he or she votes against
such merger orand has given notice in writing to the nationalsavings bank prior to the
meeting of shareholders at which the merger is considered that he or she
dissents from the plan of merger. Failure to vote against the merger or to give
written notice of dissent constitutes waiver of dissenter's rights. The shareholder is entitled to receive, in cash,Within 10
days after the valueeffective date of the shares held by him when the merger is consummated upon written
request tocombination, the resulting national bank at any time before 30 days after
consummationinstitution
shall make a written offer to each shareholder who has given notice of the merger, such notice to be accompanied by his or
her stock
certificates. The valuedemand for appraisal and payment. Within 60 days of the dissenting shares is to be determined aseffective date of
the date on whichcombination, each shareholder demanding appraisal and payment shall submit
to the shareholders' meeting is held by a committeetransfer agent his or her certificates of three persons,
one selected by unanimous votestock for notation thereon that
appraisal and payment have been demanded. Failure to so submit stock
certificates for such notation constitutes waiver of dissenting shareholders, one by the directors
of the resulting national bank, and the third by the two so chosen. The
valuation agreed upon by any two of the three appraisers shall govern, but ifdissenter's rights. If the
value so fixedoffered is not satisfactory to any dissenting shareholder, he or she may
within fivesixty days after being notified of such appraised value appealthe effective date of the combination petition the OTS,
with a copy by certified mail to the Comptroller of the Currency, whoresulting institution, which shall cause a
reappraisal to be made, which will be final and binding. If for any reason, within 90 days of the consummation
of the merger, one or more appraisers has not been selected, or the appraisers
fail to determine the value of the shares, the Comptroller, upon written request
of any interested party, shall cause an appraisal to be made which shall be
final and binding. The Comptroller'sOTS' expenses in
making any reappraisal or
appraisal, as the case maywill be are to be paidapportioned in an equitable manner by the resulting national bank.OTS.
THE FOREGOING IS ONLY A SUMMARY OF THE RIGHTS OF A DISSENTING HOLDER OF SHARES
OF BANK COMMON STOCK. ANY HOLDER OF BANK COMMON STOCK WHO INTENDS TO DISSENT
FROM THE BANK MERGER SHOULD CAREFULLY REVIEW THE TEXT OF SUBSECTIONS (B), (C) AND (D) OF
12 U.S.C.A. SS. 215AC.F.R. ss. 552.14 SET
FORTH IN ANNEX IID TO THIS PROXY STATEMENT/PROSPECTUS AND SHOULD ALSO CONSULT WITH
SUCH HOLDER'S LAWYER.LEGAL COUNSEL. THE FAILURE OF A HOLDER OF BANK COMMON STOCK TO
FOLLOW PRECISELY THE PROCEDURES SUMMARIZED ABOVE, AND SET FORTH IN ANNEX II,D, MAY
RESULT IN LOSS OF DISSENTERS' RIGHTS. NO FURTHER NOTICE
OF THE EVENTS GIVING RISE TO DISSENTER'S RIGHTS OR ANY STEPS ASSOCIATED
THEREWITH WILL BE FURNISHED TO HOLDERS OF BANK COMMON STOCK, EXCEPT AS INDICATED
ABOVE OR OTHERWISE REQUIRED BY LAW.
In general, any dissenting shareholder who perfects such holder's right to be
paid the fair value of such holder's Bank Common Stock in cash will recognize
taxable gain or loss for federal income tax purposes upon receipt of such cash.
See "-- Certain Federal Income Tax Consequences."
THE BOARD OF DIRECTORS OF THE BANK BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE
BANKAGREEMENT AND THE MERGER.
26
CITY HOLDING COMPANY
City Holding, Company ("City Holding"), a West Virginia corporation headquartered in Charleston, commenced
operations in November 1983. On December 22, 1997, each of City Holding currently has
nineHolding's West
Virginia banking subsidiaries was merged into and three non-banking subsidiaries. Allbecame divisions of the
subsidiaries are wholly-owned. At December 31, 1995, City
Holding had total
assets of $1 billion, total deposits of $797 million and total stockholders'
equity of $73 million. The banking subsidiaries includeHolding's principal subsidiary, The City National Bank of Charleston (City
National). At September 30, 1997, City Holding had total assets of $1.34
billion, total deposits of $910 million and total shareholders' equity of $90
million. City National principal subsidiary bank), Theand its banking divisions, including Peoples National
Bank, of
Point Pleasant, First State Bank & Trust, The Bank of Ripley, Home National Bank of Sutton
(Home National)("Home National"), Blue Ridge Bank, Peoples State Bank, The First National Bank
of Hinton (Hinton) and("Hinton"), Merchants National Bank (Merchants)("Merchants"), whichand the Old
National Bank of Huntington ("Old National"), currently operate 3643 banking
offices in the state of West Virginia. Certain
assets and liabilities of The Buffalo Bank of Eleanor (now Peoples State Bank)
were purchased by City National in 1995. This transaction had no impact on the
consolidated results of City Holding. In addition to City Holding's periodic
filings with the SEC, each of its subsidiary banks areis subject to certain regulatory
guidelines at the applicable federal and state level. As such, the banks are
routinely examined by these regulatory bodies and certain information is
required to be submitted to them each quarter. City Holding operates retail and
consumer-oriented community banks that emphasize personal service.
During 1993,In addition to City National and its divisions, City Holding formed two non-banking subsidiaries. City Mortgage
Corporation was approved byis the Federal Reserve Bankparent
company of Richmond to operate as a
full service mortgage banking company in December 1993. Headquartered in a
suburb of Pittsburgh, Pennsylvania, this company originates, services and sells
long-term fixed-rate mortgage loans. City Financial Corporation, was approved by
the Federal Reserve Bank of Richmond in November 1993 and by the National
Association of Securities Dealers in February 1994, to serve as a full service securities brokerage and
investment advisory company.company, and City Mortgage Corporation, currently inactive.
City Financial Corporation is headquartered in Charleston, West Virginia, with
its office located in City National's main location. BothCertain assets and
liabilities of these companiesCity Mortgage Corporation were formed undersold to an independent third party
in July 1997. As a result, this subsidiary has not had significant operations
since the date of the sale.
Created in August 1996, City Mortgage Services, a division of City Holding, is
an originator and servicer of junior lien and other mortgage loan products. As
of September 30, 1997, City Mortgage Services maintained a servicing portfolio
of approximately $1.13 billion of mortgage loans.
In October 1997, City Holding, through City National, acquired First Allegiance
Financial Corporation ("First Allegiance"). First Allegiance, headquartered in
Irvine, California, originates junior lien mortgage loans. City Holding intends
to either securitize or sell to independent third parties the loans produced by
First Allegiance.
In December 1997, City Holding, through City National, announced the acquisition
of its fourth non-banking subsidiary, RMI Ltd. ("RMI"). RMI offers a full range
of insurance products and services, including employee benefit programs, key
person programs, benefits consulting services, property and casualty insurance,
retirement plans and deferred compensation plans to select corporate,
association and individual clients.
These acquisitions are indicative of City Holding's strategy to diversify and
expand into evolving areas within the financial services industry. Such a
strategy positions City Holding to generate fee income in order to lessenpursue fee-based revenues thereby reducing
City Holding's reliance on net interest margin and to enableenables City Holding to
offerprovide a full array of financial servicesservice products to its customers. Hinton Financial Corporation, City Holding's third
non-banking subsidiary, owns all of the capital stock of Hinton and does not
conduct any other business activities.
City Holding continually seeks strategic acquisition opportunities for small to
medium-sized banks. City Holding's latest acquisitions include Hinton Financial
Corporationbanks and subsidiary, acquired in late 1994, followed by First Merchants
Bancorp, Inc. and subsidiary in mid 1995.other financial service entities. City Holding's
acquisition policy has permitted subsidiary banks to operate as separate
entitiesbusiness units with their historical names and boards of directors. City Holding
believes that this policy maintains community loyalty to the subsidiary banks and improves
operating performance while providing the services and efficiencies of a larger
holding company.
27
PRICE RANGE OF CITY HOLDING COMMON STOCK AND DIVIDENDS
City Holding Common Stock is included on The Nasdaq National Market under the
symbol CHCO. The following table sets forth the cash dividends paid per share
and information regarding the market prices per share of City Holding's Common
Stock for the periods indicated. The price ranges are based on transactions as
reported on The Nasdaq National Market. At September 30, 1996,December 31, 1997, there were 2,027
stockholders2,198
shareholders of record.
Cash Market Price Range
Dividends ---------------------------------------
Per Share Low High
--------- --- ----
1996
- ----1997
Fourth Quarter $0.190 $39.875 $42.325
Third Quarter $.155 $19.77 $22.950.180 32.250 43.250
Second Quarter $.155 $20.00 $23.410.180 30.000 34.500
First Quarter $.155 $20.91 $24.09
1995
- ----0.180 25.750 34.750
1996
Fourth Quarter $.155 $20.45 $22.73$0.170 $21.000 $26.250
Third Quarter .14 20.66 23.140.155 19.770 22.950
Second Quarter .13 21.49 23.960.155 20.000 23.410
First Quarter .13 21.49 24.79
1994
- ----
Fourth Quarter $.13 $22.32 $26.300.155 20.910 24.090
See the City Holding Audited Consolidated Financial Statements for a discussion
of restrictions on subsidiary dividends. All per share data have been restated
to reflect 10% stock dividends effective in November 1996, January 1995 and
November 1995. Cash dividends represent amounts declared by City Holding and do
not include cash dividends of acquired subsidiaries prior to the dates of
acquisition.
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTONFSB
General
The Old NationalDel Amo Savings Bank, of HuntingtonFSB is a national banking associationFederal savings bank providing deposit, loan and
commercial banking services in Cabell CountyTorrance and Wayne County.Lomita, California. The Bank
operates threetwo offices. At September 30, 1996,1997, the Bank had assets of $53.840$113.3
million, deposits of $49.114$100.4 million, and shareholdersshareholders' equity of $4.059$6.7 million.
The Bank serves approximately 2,6007,000 customers in its market area. Its lending
activities focus on meeting the needs of its market area by offering residential
mortgage loans, equity lines of credit, consumer loans, automobile loans, and
business loans to local individuals and businesses.
The Bank reinvests deposits raised in its market area with loans that meet the
residential mortgage, personal and business financial needs of the community.
The Bank has achieved a "satisfactory" rating from the OCC for its community
reinvestment activities.
The Bank is subject to examination and comprehensive regulationsregulation by the OCCOTS and
the FDIC, and to regulationsregulation of the Federal Reserve Board relating to reserves
required to be maintained against deposits and certain other matters.
28
MARKET FOR AND DIVIDENDS PAID ON BANK COMMON STOCK
There is no established public market for Bankthe Bank's Common Stock. Bank's management
is aware of transactions in Bank Common Stock which occurred duringIn 1994, 1995
and thus far in 1996 at $40.00 per share. In 1994 and 1995,the Bank paid annualno cash dividends aggregating $1.25 and $1.30.dividends. The Bank is permittedprohibited by the
Agreement to
declare and pay a cash dividend aggregating $1.35 per share in 1996.from paying any dividend.
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS OF BANK STOCK
The following table sets forth certain information regarding the beneficial
ownership of Bank Common Stock as of September 30, 19961997, by each of the Bank's
directors and by all directors and executive officers of the Bank as a group.
Shares Beneficially Owned
As of September 30, 1996 [1]
Number of Shares
Name Beneficially Owned (1) Percent
- ---- ------------------ -------
W. B. Andrews 4,125 [3] 5.50%
Lucian R. Carter 4,261 [4] 5.68%E.J. Chris Sorensen 67,409 12.64%
Seymour S. Bilowit 39,120 7.34%
Nicholas Barakonski 38,000 7.13%
Jean H. Babbitt 33,420 6.27%
Diana Bowers 14,300 2.68%
J. Walker Owens 6,362 1.19%
Jasna Penich 1,050 *
William M. Frazier 13,065 [5] 17.42%
W. Michael Frazier 4,185 [6] 5.58%
Frank L. Gaddy 2,350 [9] 3.13%
W. Kenneth Grant 1,250 1.67%
John J. Klim, Jr. 8,240 [7] 10.99%
Ezra A. Midkiff, Jr. 950 [10]Clayton 100 *
Leon K. Oxley 10,935 [8] 14.58%
Robert M. Davidson 2,699 3.60%-------- ----------
All directors and executive 199,761 37.47%
officers as a group (10(8 persons) represent 61.11 percent of stock [2] 45,830 61.11%=======
- -------------------
* Represents less than 1%.
[1](1) For the purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to "beneficially own" any shares
of Bank Common Stock if he or she has or shares, (a) voting power, which
includes the power to vote or direct the voting of the shares; or (b)
investment power, which includes the power to dispose or direct the
disposition of the shares. A person is deemed to have beneficial ownership
of any shares of Bank Common Stock which may be acquired within 60 days
pursuant to the exercise of stock options. Unless otherwise indicated, a
director has sole voting power and sole investment power with respect to
the indicated shares. Shares of Common Stock which may be acquired within
60 days of the Record Date are deemed to be outstanding shares of Bank
Common Stock beneficially owned by such person(s) but are not deemed to be
outstanding for the purposes of computing the percentage of Bank Common
Stock owned by any other person or group.
[2] Does not include 1,750 shares owned by Francisco Valentine and 1,000
shares owned by Clenton Meadows, Sr. Both of these individuals are
members of the Bank's advisory board and do not have voting rights.
29
[3] Includes 500 shares owned by the D. E. Wagoner Trust, which Mr. Andrews
is co-trustee with Mr. William Frazier.
[4] Includes 268 shares owned by Mr. Carter's wife and 250 shares owned by
Carter & Company. Mr. Carter is the sole owner of Carter & Company. Also
includes 2,333 shares owned by the Carter & Company Employee Profit
Sharing Trust administered by Mr. Carter as sole trustee.
[5] Includes 700 shares owned by Mr. Frazier's wife, 500 shares owned by the
D. E. Wagoner Trust, which Mr. Frazier is co-trustee with Mr. Andrews,
1,000 shares owned by the Leretto Smith Trust, which Mr. Frazier is
co-trustee, and 5,750 shares owned by the Frazier & Oxley, L.C. Employee
Profit Sharing Trust, which Mr. Frazier is co-trustee with Mr. Oxley.
[6] Includes 600 shares owned by Mr. Frazier's wife.
[7] Includes 7,575 shares owned by TSB & Company, Trustee of an Individual
Retirement Account that Mr. Klim is the owner and beneficiary.
[8] Includes 1,000 shares owned by the Oxley Grandchildren Trust, which Mr.
Oxley is the sole trustee, and 5,750 shares owned by the Frazier & Oxley,
L.C. Employee Profit Sharing Trust, which Mr. Oxley is co-trustee with
Mr. William Frazier.
[9] Includes 1,000 shares owned by Mr. Gaddy's wife.
[10] Includes 450 shares owned by Wilson Welding Company, which is controlled
by Mr. Midkiff.
The following table sets forth information as to Bank Common Stock beneficially
owned, as of September 30, 1996,1997, by the only persons or entities known to the
Bank to be the beneficial owners of more than 5% of Bank Common Stock.
Amount
Number of Shares
Name and Address of Beneficially Owned as of Percent of
Beneficial Owner September 30, 1997 Outstanding Shares
- ---------------- ------------------ ------------------
Hancock Park Acquisition, L.P.(1) 91,950 17.25%
1629 Colonial Parkway
Inveriness, IL 60067
E.J. Chris Sorensen 67,409 12.64%
27826 Conestoga Drive
Rolling Hills Estates,
CA 90274
Thien Koan Ng & Affiliates 50,287 9.43%
c/o Thien Koan Ng
145 Pasadena Avenue
South Pasadena, CA 91030
Cede & Co. 40,660 7.63%
Box 20
Bowling Green Station
New York, NY 10004
Seymour S. Bilowit 39,120 7.34%
38085 Maracaibo Circle West
Palm Springs, CA 92264
Nicholas Barakonski 38,000 7.13%
3500 Coy Drive
Sherman Oaks, CA 91423
Jean H. Babbitt 33,420 6.27%
15 Caballeros Road
Rolling Hills, CA 90274
All directors and executive officers
as a group (8 persons) 199,761 37.47%
- --------------------------
(1) Eric D. Hovde and Nature of Perfent of
Name and Address of Beneficial OwnershipSteven D. Hovde serve as of Outstanding
Beneficial Owner September 30, 1996 [1] Shares
- ------------------- -------------------------- ----------
Lucian R. Carter 4,261 [2] 5.68%
W. Michael Frazier 4,185 [3] 5.58%
W.B. Andrews 4,125 [4] 5.50%
John J. Klim, Jr. 8,240 [5] 10.99%
Leon K. Oxley 10,935 [6] 14.58%
William M. Frazier 13,065 [7] 17.42%
All directors and executive officers
as a group (10 persons) 45,830 [8][9] 61.11%
[1] Except as indicated otherwise, based on information furnished by the
respective individuals or entity. Under applicable regulations, shares
are deemed to be beneficially owned by a person if he or she directly or
indirectly has or shares the power to vote or dispose of the shares,
whether or not he or she has any economic interest in the shares. Unless
otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
[2] Includes 268 shares owned by Mr. Carter's wife and 250 shares owned by
Carter & Company. Mr. Carter is the sole owner of Carter & Company. Also
includes 2,333 shares owned by the Carter & Company Employee Profit
Sharing Trust administered by Mr. Carter as sole trustee.
[3] Includes 600 shares owned by Mr. Frazier's wife.
30
[4] Includes 500 shares owned by the D.E. Wagoner Trust, which Mr. Andrews is
co-trustee with Mr. William Frazier.
[5] Includes 7,575 shares owned by TSB & Company, Trustee of an Individual
Retirement Account that Mr. Klim is the owner and beneficiary.
[6] Includes 1,000 shares owned by the Oxley Grandchildren Trust, which Mr.
Oxley is the sole trustee, and 5,750 shares owned by the Frazier & Oxley,
L.C. Employee Profit Sharing Trust, which Mr. Oxley is co- trustee with
Mr. William Frazier.
[7] Includes 700 shares owned by Mr. Frazier's wife, 500 shares owned by the
D.E. Wagoner Trust, which Mr. Frazier is co-trustee with Mr. Andrews,
1,000 shares owned by the Leretto Smith Trust, which Mr. Frazier is
co-trustee, and 5,750 shares owned by the Frazier & Oxley, L.C. Employee
Profit Sharing Trust, which Mr. Frazier is co-trustee with Mr. Oxley.
[8] Does not include 1,750 shares owned by Francisco Valentine and 1,000
shares owned by Clenton Meadows, Sr. Both of these individuals aremanaging members of the
limited liability company that is the managing partner of Hancock Park
Acquisition, L.P. and own substantially all of Hovde, the Bank's advisory board and do not have voting rights.
[9] The 500 shares owned byfinancial
advisor. See "The Merger--Opinion of the D.E. Wagoner Trust and 5,750 shares owned by
the Frazier & Oxley, L.C. Employee Profit Sharing Trust are counted once.Bank's Financial Advisor."
REGULATION AND SUPERVISION
Bank holding companies and banks operate in a highly regulated environment and
are regularly examined by federal and state regulators. The following
description briefly discusses certain provisions of federal and state laws and
certain regulations and the potential impact of such provisions on City Holding
and the Banks.City National. These federal and state laws and regulations have been
enacted for the protection of depositors in national and state banks and not for
the protection of shareholders of bank holding companies such as City Holding.
References to "Banks" means the current subsidiary banks of City Holding.
Bank Holding Companies
As a bank holding company registered under the Bank Holding Company Act of 1956,
as amended (the "BHCA"), City Holding is subject to regulation by the Federal
Reserve Board. The Federal Reserve Board has jurisdiction under the BHCA to
approve any bank or nonbank acquisition, merger or consolidation proposed by a
bank holding company. The BHCA generally limits the activities of a bank holding
company and its subsidiaries to that of banking, managing or controlling banks,
or any other activity which is so closely related to banking or to managing or
controlling banks as to be a proper incident thereto.
Federal law permits bank holding companies from any state to acquire banks and
bank holding companies located in any other state. Effective June 1, 1997, the
law will allowallowed interstate bank mergers, subject to earlier "opt-in" or "opt-out"
action by individual states. The law currently allows interstate branch
acquisitions and de novo branching if permitted by the host state. West Virginia
has adopted early "opt-in" legislation that allows interstate bank mergers.
These laws also permit interstate branch acquisitions and de novo branching in
West Virginia by out-of-state banks if reciprocal treatment is accorded West
Virginia banks in the state of the acquiror.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event the depository institution becomes in danger of default or in default. For
example, under a policy of the Federal Reserve Board with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where 31
it might
not do so otherwise. In addition, the "cross-guarantee" provisions of federal
law require insured depository institutions under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated by either the
Savings Association Insurance Fund ("SAIF") or the Bank Insurance
Fund ("BIF") as a result of the default of a commonly controlled insured
depository institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default. The FDIC may
decline to enforce the cross- guarantee provisions if it determines that a
waiver is in the best interest of the SAIF or the BIF or both.BIF. The FDIC's claim for reimbursement is
superior to claims of shareholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts received
from the liquidation or other resolution of any insured depository institution
by any receiver must be distributed (after payment of secured claims) to pay the
deposit liabilities of the institution prior to payment of any other general or
unsecured senior liability, subordinated liability, general creditor or
shareholder. This provision would give depositors a preference over general and
subordinated creditors and shareholders in the event a receiver is appointed to
distribute the assets of any of the Banks.City National.
The BHCA also prohibits a bank holding company, with certain exceptions, from
acquiring more than 5% of the voting shares of any company that is not a bank
and from engaging in any business other than banking or managing or controlling
banks. Under the BHCA, the Federal Reserve Board is authorized to approve the
ownership of shares by a bank holding company in any company the activities of
which the Federal Reserve Board has determined to be so closely related to
banking or to managing or controlling banks as to be a proper incident thereto.
The Federal Reserve Board has by regulation determined that certain activities
are closely related to banking within the meaning of the BHCA. These activities
include: operating a mortgage company, finance company, credit card company or
factoring company; performing certain data processing operations; providing
investment and financial advice; and acting as an insurance agent for certain
types of credit-related insurance.
City Holding is registered under the bank holding company laws of West Virginia.
Accordingly, City Holding and the BanksCity National are subject to further regulation
and supervision by the Division.
Capital Requirements
The Federal Reserve Board and the FDIC havehas issued substantially similar risk-based and leverage capital guidelines
applicable to United States banking organizations.organizations it supervises. In addition, those regulatory agenciesthe Federal
Reserve Board may from time to time require that a banking organization maintain
capital above the minimum levels because of its financial condition or actual or
anticipated growth. Under the risk-based capital requirements, of these federal bank regulatory agencies, City Holding and the Banks areis
required to maintain a minimum ratio of total capital to risk- weighted assets
of at least 8%. At least half of the total capital is required to be "Tier 1
capital", which consists principally of common and certain qualifying preferred
shareholders'stockholders' equity, less certain intangibles and other adjustments. The
remainder "Tier 2 capital" consists of a limited amount of subordinated and
other qualifying debt (including certain hybrid capital instruments) and a
limited amount of the general loan loss allowance. The Tier 1 and total capital
to risk- weightedrisk-weighted asset ratios of City Holding as of September 30, 19961997 were
9.32%8.67% and 10.21% respectively, exceeding the minimums required.9.52% respectively.
In addition, each of the federal regulatory agencies has established a minimum leverage capital ratio (Tier 1 capital to average
tangible assets). These must be maintained. The guidelines provide for a minimum ratio
of 3% for banks and bank holding companies that meet certain specified criteria,
including that they have the highest regulatory examination rating and are not
contemplating significant growth or expansion. All other institutions are
expected to maintain a leverage ratio of at least 100 to 200 basis points above
the minimum. The Tier 1 capital leverage ratio of City Holding as of September
30, 1996,1997, was 6.61%6.93%. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
32
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
requires each federal banking agency to revise its risk-based capital standards
to ensure that those standards take adequate account of interest rate risk,
concentration of credit risk and the risks of nontraditional activities, as well
as reflect the actual performance and expected risk of loss on multi-family
mortgages. Rules have been promulgated with respect to concentration of credit
risk and the risks of non-traditional activities, and also as to the risk of
loss on multi-family mortgages. A proposed rule with respect to interest rate
risk is still under consideration. The proposal would allow institutions to use
internal risk models to measure interest rate risk (if the models are acceptable
to examiners) and would require additional capital of institutions identified as
having excess interest rate risk. City Holding does not expect any of these
rules, either individually or in the aggregate, to have a material impact on its
capital requirements.
Limits on Dividends and Other Payments
City Holding is a legal entity separate and distinct from City National and its
Banks.banking operations. Most of City Holding's revenues result from dividends paid
to City Holding by the Banks.City National. The right of City Holding and shareholders of
City Holding, to participate in any distribution of the assets or earnings of
any BanksCity National through the payment of such dividends or otherwise is necessarily
subject to the prior claims of creditors of such Banks,City National and its separate
banking divisions, except to the extent that claims of City Holding in its
capacity as a creditor may be recognized. Moreover, there are various legal
limitations applicable to the payment of dividends to City Holding as well as
the payment of dividends by City Holding to its shareholders. Under federal law,
the BanksCity National may not, subject to certain limited exceptions, make loans or
extensions of credit to, or investments in the securities of, or take securities
of City Holding as collateral for loans to any borrower. The Banks areCity National is also
subject to collateral security requirements for any loans or extensions of
credit permitted by such exceptions.
The Banks areCity National is subject to various statutory restrictions on theirits ability to pay
dividends to City Holding. Under applicable regulations, at September 30, 1996,
the Banks1997,
City National could have paid aggregate dividends to City Holding of $16.5$5.8
million without obtaining prior approval of theirits respective regulators. The
payment of dividends by City Holding and the BanksCity National may also be limited by
other factors, such as requirements to maintain adequate capital above
regulatory guidelines. The various regulators supervising the BanksCity National and its
banking operations have authority to prohibit any
Banksbank under their jurisdiction from
engaging in an unsafe or unsound practice in conducting its business. The
payment of dividends, depending upon the financial condition of the Bank in question,City National
and its banking operations, could be deemed to constitute such an unsafe or
unsound practice. The Federal Reserve Board and the OCCOffice of the Comptroller of
Currency ("OCC") have indicated their view that it generally would be an unsafe
and unsound practice to pay dividends except out of current operating earnings.
The Federal Reserve Board has stated that, as a matter of prudent banking, a
bank or bank holding company should not maintain its existing rate of cash
dividends on common stock unless (1) the organization's net income available to
common shareholders over the past year has been sufficient to fund fully the
dividends and (2) the prospective rate of earnings retention appears consistent
with the organization's capital needs, asset quality, and overall financial
condition. Moreover, the Federal Reserve Board has indicated that bank holding
companies should serve as a source of managerial and financial strength to their
subsidiary banks. Accordingly, the Federal Reserve Board has stated that a bank
holding company should not maintain a level of cash dividends to its
shareholders that places undue pressure on the capital of bank subsidiaries, or
that can be funded only through additional borrowings or other arrangements that
may undermine the bank holding company's ability to serve as a source of
strength.
The ability of the BanksCity National to pay dividends in the future is, and is expected
to continue to be, influenced by regulatory policies and by capital guidelines.
The bank regulatory agencies have broad discretion in developing and applying
policies and guidelines, in monitoring compliance with existing policies and
guidelines, and in determining whether to modify such policies and guidelines.
FIRREA
Under the enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act ("FIRREA") a depository institution insured by the FDIC can be
held liable for any loss incurred by, or reasonably expected to be incurred by,
the FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and
33
"in danger of default" is defined generally as the existence of certain
conditions indicating that a "default" is likely to occur in the absence of
regulatory assistance. Liability of any Bank under this cross-guarantee position
could have a material adverse effect on the financial condition of any other
Bank and City Holding.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") became effective. FDICIA substantially revised the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and revised several other federal banking statutes.
Banks
City National
Bank of Charleston, The HomeCity National Bank of Sutton, Merchants
National Bank and the First National Bank of Hinton areis a national banking associations,association, and areis subject to supervision
and regulation by the OCC the
Federal Reserve Board and the FDIC. The Peoples Bank of Point Pleasant, First
State Bank & Trust and Blue Ridge Bank are supervised and regulated by the West
Virginia Board of Banking and Financial Institutions and the FDIC. The Bank of
Ripley and Peoples State Bank are supervised and regulated by the West Virginia
Board of Banking and Financial Institutions, the FDIC and the Federal Reserve
Board. The various laws and regulations
administered by the regulatory agencies affect corporate practices, such as
payment of dividends, incurring debt and acquisition of financial institutions
and other companies, and affect business practices, such as payment of interest
on deposits, the charging of interest on loans, types of business conducted and
location of offices.
FDIC Insurance Assessments
The Banks are subject to FDIC deposit insurance assessments. Effective in the
fourth quarter of 1995, each of the Banks were assessed FDIC deposit insurance
premiums of approximately $2,000 per annum. Between the fourth quarter of 1995Governmental Policies and January 1993, FDIC deposit insurance premium rates range from $.23 to $.31
per $100 of depositsother Safety and depend on both the institution's capital adequacy and a
supervisory judgment of overall risk posed by the institution. Prior to January
1993, FDIC insurance premiums were charged at a flat rate. Because of decreases
in the reserves of the Bank Insurance Fund due to the increased number of bank
failures in recent years, it is possible that insurance assessments will
increase and that there may be special additional assessments. Additional
assessments could have an adverse impact on City Holding's results of
operations.
Governmental PoliciesSoundness Regulations
The operations of City Holding and its BanksCity National are affected not only by
general economic conditions, but also by the policies of various regulatory
authorities. In particular, the Federal Reserve Board regulates money and credit
and interest rates in order to influence general economic conditions. These
policies have a significant influence on overall growth and distribution of bank
loans, investments and deposits and affect interest rates charged on loans or
paid for time and savings deposits. Federal Reserve monetary policies have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future.
Among other things, FDICIA requires the federal banking regulators to take
prompt corrective action with respect to depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.
The Federal Reserve Board has adopted regulations establishing relevant capital
measures and relevant capital levels for banks. The relevant capital measures
are the total risk-adjusted capital ratio, Tier 1 risk-adjusted capital ratio
and the leverage ratio. Under the regulations, a bank is considered (i) well
capitalized if it has a total capital ratio of ten percent or greater, a Tier 1
capital ratio of six percent or greater and a leverage ratio of five percent or
greater and is not subject to any order or written directive by such regulator
to meet and maintain a specific capital level for any capital measure, (ii)
adequately capitalized if it has a total capital ratio of eight percent or
greater, a Tier 1 capital ratio of four percent or greater and a leverage ratio
of four percent or greater (three percent in certain
34
circumstances) and is not well capitalized, (iii) undercapitalized if it has a
total capital ratio of less than eight percent, a Tier 1 capital ratio of less
than four percent or a leverage ratio of less than four percent (three percent
in certain circumstances), (iv) significantly undercapitalized if it has a total
capital ratio of less than six percent, a Tier 1 capital ratio of less than
three percent or a leverage ratio of less than three percent, and (v) critically
undercapitalized if its tangible equity is equal to or less than two percent of
average quarterly tangible assets. As of December 31, 1995, each of the Banks
had capital levels that qualify them as being well capitalized under such
regulations.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve Board, effective December 19,
1993. In addition, undercapitalized depository institutions are subject to
growth limitations and are required to submit capital restoration plans. In
order to obtain acceptance of a capital restoration plan, a depository
institution's holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository institution's assets at the time it
becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan. Furthermore, in the event of a
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. The federal banking agencies may
not accept a capital plan without determining, among other things, that the plan
is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
Under FDICIA, a depository institution that is not well capitalized is generally
prohibited from accepting brokered deposits and offering interest rates on
deposits higher than the prevailing rate in its market. In addition, pass
through insurance coverage may not be available for certain employee benefit
accounts.
Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository institution may
make with insured funds are from time to time introduced in Congress. City
Holding cannot determine the ultimate effect that FDICIA and the implementing
regulations adopted thereunder, or any other potential legislation, if enacted,
would have upon its financial condition or operations.
Other Safety and Soundness Regulations
The federal banking agencies have broad powers under current federal law to take
prompt corrective action to resolve problems of insured depository institutions.
The extent of these powers depends upon whether the institutions in question are
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized," as such terms are defined
under uniform regulations defining such capital levels issued by each of the
federal banking agencies.
DESCRIPTION OF CAPITAL STOCK OF CITY HOLDING
City Holding's Articles of Incorporation authorize 20,000,000 shares of Common
Stock, par value $2.50, and 500,000 shares of Preferred Stock, par value $25,
including a series of 100,000 shares of Junior Participating Cumulative
Preferred Stock, Series A. As of September 30, 1996, 5,080,443December 31, 1997, 6,416,179 shares of Common
Stock and no shares of Preferred Stock were outstanding and entitled to vote. At
such date, City Holding had 2,0272,198 shareholders of record.
Authority is given in the Articles of Incorporation to the Board of Directors to
issue shares of City Holding's Common Stock and Preferred Stock from time to
time for such consideration as the Board may deem advisable.
35
The characteristics of City Holding's capital stock are summarized below.
Common Stock
Dividend Rights. Common shareholders are entitled to dividends to the extent
funds are legally available and the Board of Directors declares payment. City
Holding's ability to pay dividends is largely contingent upon the abilities of
the BanksCity National to pay dividends, and is subject to various statutory limits.
Voting Rights and Cumulative Voting. In all elections of directors, each holder
of City Holding Common Stock has the right to cast one vote for each share of
stock owned by him or her and entitled to vote for as many persons as there are
directors to be elected, or he or she may cumulate such votes and give one
candidate as many votes as the number of directors to be elected multiplied by
the number of
his or her shares of stock shall equal; or he or she may distribute
such votes on the same principle among as many candidates and in such manner as
he or she desires. On any other question to be determined by a vote of shares at
any meeting of shareholders, each shareholder is entitled to one vote for each
share of stock owned by him or her and entitled to vote.
Liquidation Rights. Upon liquidation, after payment to all creditors and holders
of Preferred Stock, the remaining assets of City Holding would be distributed to
the holders of City Holding Common Stock pro rata.
Preemptive Rights. Holders of City Holding Common Stock have no preemptive
rights with respect to future issues
of Common Stock.
Calls and Assessments. All City Holding Common Stock outstanding is fully paid
and nonassessable.
Preferred Stock
The Board of Directors has the authority, without any vote or action by the
shareholders, to issue Preferred Stock in one or more series and to fix the
designations, preferences, rights, qualifications, limitations and restrictions
thereof, including the voting rights, dividend rights, dividend rate, conversion
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series. Issuance of Preferred Stock by the Board of Directors of City
Holding could be utilized to render more difficult, or discourage, an attempt to
gain control of City Holding. There are no shares of Preferred Stock
outstanding, and there are no agreements or understandings for the designation
of any series of Preferred Stock or the issuance of shares, except pursuant to
the Preferred Stock Purchase Rights Plan summarized below.
Preferred Stock Purchase Rights Plan; Change of Control
Pursuant to a Preferred Stock Purchase Rights Plan and a related Amended and
Restated Rights Agreement between City Holding and Fifth Third Bank, as Rights
Agent, each outstanding share of City Holding Common Stock carries with it one
Preferred Stock Purchase Right (a "Right"). In general, the number of Rights
outstanding will equal the number of shares of City Holding Common Stock
outstanding from time to time. The Rights will expire on April 9, 2001, unless
previously exercised or redeemed at the option of the Board of Directors. Each
share of City Holding Common Stock offered hereby has one Right attached.
Generally, under the terms of the Rights Plan, the Rights will be exercisable
only if a person or group acquires 10% or more of City Holding Common Stock or
announces a tender offer, the consummation of which would result in ownership by
a person or group of 10% or more of City Holding Common Stock. Each Right will
entitle its holder to buy one one-thousandth of a share of Junior Participating
Cumulative Preferred Stock, Series A, par value $25, at an exercise price of
$53, subject to adjustment. If a person or group acquires 20% or more of the
outstanding City Holding Common Stock, each Right will entitle its holder (other
than such person or members of such group) to purchase, at the then-current
exercise price, City Holding Common Stock having a market value equal to twice
the exercise price. If City Holding is acquired in a merger or other business
combination or if 50% or more of City 36
Holding's assets or earning power is sold
or transferred, each Right will entitle its holder to purchase, at the
then-current exercise price, common stock of the acquiror having a value equal
to twice the exercise price.
City Holding's Articles of Incorporation provide that the Board of Directors
consist of three classes with staggered terms for directors. City Holding has
also adopted a by-law requiring advance notice from a shareholder to nominate a
director. The effect of these measures and the Rights Plan could be to render
more difficult or to discourage an attempt to gain control of City Holding by
means of a merger, tender offer, proxy contest or otherwise, even if supported
by holders of a majority of the voting securities of City Holding, and thereby
protect the current management.
Reports to Shareholders
City Holding furnishes its shareholders with annual reports, including audited
financial statements, and with three quarterly reports.
Transfer Agent
The transfer agent for City Holding Common Stock is The City National Bank of
Charleston.
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time of the Bank Merger, shareholders of the Bank will become
shareholders of City Holding, and their rights as shareholders will be
determined by the City Holding Articles of Incorporation and City Holding Bylaws
and applicable law. The following is a summary of the material differences in
the rights of shareholders of City Holding and the Bank. This summary does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the governing law and the Articles of Incorporation or Articles of
AssociationFederal
Stock Charter and Bylaws of each entity.
Capitalization
City Holding. City Holding's authorized capital is described under "Description
of City Holding Capital Stock".
Bank. The Bank is authorized to issue 75,000800,000 shares of Bank Common Stock, $10.00$2.50
par value of which 75,000533,096 shares were issued and outstanding as of the Record
Date.
Voting Rights
City Holding. In all elections of directors, each holder of City Holding Common
Stock has the right to cast one vote for each share of stock owned by him or her
and is entitled to vote for as many persons as there are directors to be
elected, or he or she may cumulate such votes and give one candidate as many
votes as the number of directors to be elected multiplied by the number of his or
her shares of stock shall equal; or he or she may distribute such votes on the
same principle among as many candidates and in such manner as he or she desires.
On any other issue to be determined
by a vote of shares at any meeting of shareholders, each
shareholder is entitled to one vote for each share of stock owned by him and entitled to vote.or her.
The vote of a majority of shares represented at a meeting and entitled to vote
is required to approve most actions requiring shareholder approval, except that
amendments to the Articles of Incorporation and certain fundamental actions such
as mergers, consolidations and sales of substantially all assets outside the
ordinary course of business must be approved by vote of a majority of shares
entitled to vote thereon.
Bank. In all elections of directors, each holder of Bank Common Stock has the
right to cast one vote for each share of stock owned by him or her and is
entitled to vote for as many persons as there are directors to be elected, or he
or she may cumulate such votes and give one candidate as many votes as the
number of directors to be elected multiplied by the number his or her shares of
stock shall equal; or he or she may distribute such votes on the same principle
among as many candidates and in such manner as he or she desires. The approval
of a majority of the Bank's Board of Directors is generally
37
required under
federal law on any plan of merger, consolidation or sale of substantially all of
the assets of the Bank. The approval of shareholders holding more than
two-thirds (2/3) of all votes entitled to be cast is required for a merger,
consolidation or sale of substantially all of the assets of the Bank.
Directors and Classes of Directors
City Holding. The City Holding Board of Directors presently comprises 1619
members. Pursuant to the Agreement, following the Effective Date of the Bank
Merger, City Holding will increase the number of members of the City Holding
Board by two and will appoint two persons currently serving as directors of Bank
to fill the resulting vacancies. The Board of Directors is classified into three classes, with one class
to be elected each year to a three-year term.
Bank. The Bank Board of Directors presently comprises 10 members and 2 membersis comprised of its advisory board. Advisory board members do not have voting rights.seven members. The Board of
Directors is classified into three classes, with one class to be elected each
year to a three-year term.
Anti-Takeover Provisions
City Holding. City Holding's Board of Directors has adopted a Rights Plan and
City Holding's Articles of Incorporation provide that the Board of Directors
consist of three classes with staggered terms for members of the Board of
Directors. City Holding has also adopted a by-law requiring advance notice from
a shareholder to nominate a director.
City Holding has not adopted other conventional anti-takeover provisions such
as, for example, a fair-price charter amendment, a super-majority vote charter
amendment, or an anti-greenmail charter amendment, and has no current plans to
submit to its shareholders further proposals with a possible "anti-takeover"
effect. In addition, West Virginia law does not contain any provisions
protecting a West Virginia corporation against hostile takeovers, such as a fair
price statute or a control share acquisition statute.
Bank. The Bank's Articles and Bylaws require advance notice from a shareholder
to nominate a director. Otherwise, neither the Bank's Articles nor Bylaws
contain any provisions that may be deemed to have any anti-takeover effect.None.
Preemptive Rights
City Holding. The shareholders of City Holding do not have preemptive rights.
Thus, if additional shares of City Holding Common Stock were issued, holders of
such stock, to the extent that they did not participate in such additional
issuance of shares, would own proportionately smaller interests in a larger
amount of outstanding capital stock.
Bank. The Bank's Articles contain a provision granting shareholders preemptive
rights. Thus, if additional shares of Bank Common Stock were issued, holders of
such stock would be given the right to purchase shares to maintain their
proportionate interests.None.
Assessment
City Holding. All outstanding shares of City Holding Common Stock are, and those
to be issued pursuant to the Agreement will be, fully paid and nonassessable.
Bank. All outstanding shares of Bank Common Stock are fully paid and
nonassessable.
Conversion; Redemption; Sinking Fund
38
Neither City Holding Common Stock nor Bank Common Stock is convertible,
redeemable or entitled to any sinking fund.
Liquidation Rights
City Holding. Upon liquidation, after payment to all creditors and holders of
Preferred Stock, the remaining assets of City Holding would be distributed to
the holders of City Holding Common Stock pro rata.
Bank. Upon liquidation, after payment to all creditors, the remaining assets of
the Bank would be distributed to the holders of Bank Common Stock on a pro rata
basis.
Dividends and Other Distributions
City Holding. Holders of City Holding Common Stock are entitled to dividends to
the extent funds are legally available and the Board of Directors declares
payment. City Holding's ability to pay dividends is largely contingent upon the
abilities of its subsidiaries to pay dividends, and is subject to various
statutory limits.
Bank. Federal law permits the declaration of dividends by the Board of Directors
of the Bank from the net profits of the Bank with a number of limitations. No
dividends or other distributions may be paid which would impair the capital of
the Bank. The approval of the Comptroller of the CurrencyOTS is required if dividends for a year exceed
certain calculations involving the accumulation of net profits. In addition, unless the Bank's surplus equals or exceeds the capital of
Bank, 10% of net profits each year must be transferred to surplus before
dividends may be paid.
Shareholder Meetings
City Holding. City Holding's Bylaws provide that special meetings of the
shareholders may be called at any time by the Board of Directors or by the
President and Secretary, or by any three or more shareholders holding together
at least 10% of the capital stock of City Holding.
Bank. Bank's Bylaws provide that special meetings of the shareholders may be
called at any time by the Board of Directors or by any threethe President and Secretary
or more
shareholders holding togetherby holders of at least 25%10% of the capital stock of Bank. Neither
Bank's Articles of Association nor Bylaws contain requirements that must be
followed for a shareholder to otherwise submit a proposal to a vote for the
shareholders, except for the nominations of directors. See "Comparative Rights
of Shareholder -- Anti-Takeover Provisions -- Bank" herein.outstanding Capital Stock.
Indemnification
City Holding. Section 31-1-9 of the West Virginia Code provides in part that
each West Virginia corporation shall have power to indemnify any director,
officer, employee or agent or former director, officer, employee or agent
against expenses actually and reasonably incurred by him or her in connection
with the defense of any claim, action, suit or proceeding against him or her by
reason of being or having been such director, officer, employee or agent other
than an action by or in the right of the corporation if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interest of the corporation. With respect to an action by or in the
right of the corporation the director, officer, employee or agent or former
director, officer, employee or agent may be indemnified if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interest of the corporation, except in relation to matters as to
which he or she shall be finally adjudged in such action, suit or proceeding
against him or her by reason of being or having been such director, officer,
employee or agent to be liable for negligence or misconduct in the performance
of duty; and to make any other or further indemnity to any such persons that may
be authorized by the articles of incorporation or any by-law madeapproved by the
shareholders or any resolution adopted, before or after the event, by the
shareholders. The By-laws of City Holding contain provisions pursuant to the
foregoing section of the West Virginia Code indemnifying the directors,
officers, employees and
39
agents of City Holding in certain cases against expenses
and liabilities under judgments and reimbursements of amounts paid in
settlement.
City Holding has purchased directors and officers' liability insurance policies.
Within the limits of their coverage, the policies insure (i) the directors and
officers of City Holding against certain losses, to the extent such losses are
not indemnified by City Holding, and (ii) City Holding, to the extent it
indemnifies such directors and officers for losses as permitted under the laws
of West Virginia.
Bank. Federal law permits indemnification of directors of the Bank for certain
actions taken on behalf of, or at the request of, the Bank. Indemnification may
not be permitted for fines or penalties imposed by bank regulatory authorities.
The Bank's Articles of Association provideFederal Stock Charter provides for indemnification of directors or
officers. The Bank has purchased directors' and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (i) the
directors and officers of the Bank against certain losses, to the extent such
losses are not indemnified by the Bank, and (ii) the Bank, to the extent it
indemnifies its officers and directors for losses as permitted under its Articles of AssociationFederal
Stock Charter and applicable law.
Director Exculpation
City Holding. The West Virginia Code does not provide for limitation of
directors' monetary liability or director exculpation.
Bank. Federal law does not provide for limitation of directors' monetary
liability or director exculpation.
Dissenters' Rights
City Holding. The West Virginia Code permits shareholders of a West Virginia
corporation to dissent from, and obtain payment of the "fair value" of their
shares in connection with, any plan of merger or consolidation to which the
corporation is a party and any sale or exchange of all or substantially all of
the property and assets of the corporation not made in the usual and regular
course of its business.
Bank. Provisions of Title 12 of the United States Code of Federal Regulations give
shareholders of a nationalFederal savings bank the right to dissent from, and obtain
payment of the "fair value" of their shares in mergers and consolidations. For a
description of dissenter's rights the Bank's shareholders have in connection
with a Bank Merger, see "The
Bank Merger -- Rights of Shareholders Electing to Exercise
Their Right of Appraisal".
RESALE OF CITY HOLDING COMMON STOCK
City Holding Common Stock issuable in the Bank Merger has been registered under the
1933 Act, thereby allowing such shares to be traded freely and without
restriction by those holders of Bank Common Stock who receive such shares
following consummation of the Merger and who are not deemed to be "affiliates"
(as defined under the 1933 Act, but generally including directors, certain
executive officers and 10% or more shareholders) of the Bank or City Holding.
Each holder of Bank Common Stock who is deemed by the Bank to be an affiliate of
it has entered into an agreement with City Holding prior to the Effective Date
of the
Bank Merger providing, among other things, that (A) such affiliate
acknowledges and agrees to support and vote such shares of Bank Common Stock
beneficially owned by him or her to ratify and confirm the Agreement and the Bank
Merger, (B) such affiliate acknowledges and agrees beginning 30 days prior to
the Effective Date of the Bank Merger, that he or she will not sell, pledge, transfer
or otherwise dispose of shares of Bank Common Stock or City Holding Common Stock
except in compliance with the applicable provisions of the 1933 Act and rules
and regulations thereunder, and until such time as financial results covering at least 30 days of
combined operations of City Holding and Bank have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, and (C) the certificates representing said shares
may bear a legend referring to the foregoing restrictions. This Proxy
Statement/Prospectus does not cover any resales of City Holding Common Stock
received by affiliates or non-affiliates of the Bank.
EXPERTS
The consolidated financial statements of City Holding and Subsidiaries
for the
year ended December 31, 1995 and 1994, and related statements of income, changes
in stockholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1995, incorporated in this Proxy Statement/Prospectus by reference toin City
40
Holding's Annual Report on Form 10-K for the
year ended December 31, 19951996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon also incorporated by reference therein
and incorporated herein by reference. Such consolidated financial statements have been so incorporated herein in reliance on their reportare
incorporated herein by reference in reliance upon such report given on theirupon the
authority of such firm as experts in accounting and auditing.
The financial statements of The Old NationalDel Amo Savings Bank, FSB as of Huntington included in this
Proxy Statement/ProspectusDecember 31, 1996
and 1995, and for the years then ended have been included herein and in the
registration statement in reliance upon the report of Trainer, Wright & Paterno, C.P.A.s,KPMG Peat Marwick LLP,
independent auditors, incorporatedappearing elsewhere herein, by
reference, given on theirand upon the authority of said
firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the City Holding Common Stock to be issued in the Bank Merger, and
certain other matters, will be passed on for City Holding by Steptoe & Johnson,
Charleston, West Virginia and Hunton & Williams, Richmond, Virginia.
Certain legal matters will be passed on for the Bank by Woods, RogersAdams, McAndrews, Matson
& Hazlegrove,
P.L.C., Roanoke, Virginia.Landsberg, Santa Monica, California.
A condition to consummation of the Merger is the delivery to City Holding and
the Bank by Hunton & Williams of an opinion concerning certain federal income
tax consequences of the Bank Merger. See "The Bank Merger -- Certain Federal Income Tax
Consequences."
OTHER MATTERS
As of the date of this Prospectus/Proxy Statement, the Bank Board does not know
of any other matters to be presented for action at the Bank Shareholder Meeting
other than procedural matters incident to the conduct of the meeting. If any
other matters not now known are properly brought before the Bank Shareholder
Meeting, the persons named in the accompanying proxy will vote such proxy in
accordance with the determination of a majority of the Bank Board.
__________ __, 1996February 6, 1998 By Order of the Board of Directors,
Leon K. OxleyDiana Bowers
Secretary
41
INDEX TO
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTONFSB FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 19951996 AND 19941995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 19961997 AND SEPTEMBER 30, 1995
Page
Independent Auditor's Report..............................................F-2
Statements of Condition For the Years
Ended December 31, 1995 and 1994..........................................F-3
Statements of Income for the Years Ended
December 31, 1995 and 1994................................................F-4
Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1995 and 1994................................F-6
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994................................................F-7
Notes to Financial Statements.............................................F-9
Statements of Condition at September 30, 1996
(Unaudited) and December 31, 1995.........................................F-22
Statements of Income for the Nine Months
Ended September 30, 1996 and September 30, 1995
(Unaudited)...............................................................F-23
Statements of Cash Flow for the Nine Months Ended September 30, 1996 and
September 30, 1995
(Unaudited)...............................................................F-25
F-1
Page
Independent Auditors' Report....................................................................................F-2
Statements of Financial Condition for the Years
Ended December 31, 1996 and 1995................................................................................F-3
Statements of Earnings for the Years Ended
December 31, 1996 and 1995......................................................................................F-4
Statements of Stockholders' Equity for
the Years Ended December 31, 1996 and 1995......................................................................F-5
Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995......................................................................................F-6
Notes to Financial Statements...................................................................................F-8
Unaudited Statements of Financial Condition at September 30, 1997
and December 31, 1996..........................................................................................F-21
Unaudited Statements of Earnings for the Nine Months
Ended September 30, 1997 and 1996..............................................................................F-22
Unaudited Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996..............................................................................F-23
Unaudited Notes to Financial Statements........................................................................F-24
Management's Discussion and Analysis of Financial Condition and Results of Operations..........................F-25
INDEPENDENT AUDITOR'SAUDITORS' REPORT
Board of Directors
The Old NationalDel Amo Savings Bank, of Huntington
Huntington, West VirginiaFSB:
We have audited the accompanying statements of financial condition of The Old NationalDel Amo
Savings Bank, of HuntingtonFSB (Bank) as of December 31, 19951996 and 1994,1995, and the related
statements of income, changes in shareholders'earnings, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Old
NationalDel Amo Savings Bank, of HuntingtonFSB as of
December 31, 19951996 and 1994,1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the Bank
changed its method of accounting for certain investments in debt and equity
securities in 1994 to conform with StatementKPMG Peat Marwick LLP
Los Angeles, California
March 7, 1997
DEL AMO SAVINGS BANK, FSB
Statements of Financial Accounting Standards
No. 115.
/s/ TRAINER, WRIGHT & PATERNO
Huntington, West Virginia
April 12, 1996
F-2
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CONDITION
DECEMBER 31, 1995 AND 1994Condition
December 31,
------------
1996 1995 1994
---- ----
ASSETSAssets
Cash and due from bankscash equivalents (note 1)................................. $ 3,109,4136,137,400 $ 2,831,500
Federal funds sold (cash equivalent) 1,340,000 2,810,000
Investment securities
Held to maturities (fair value2,120,900
Certificates of $8,674,708
in 1995 and $8,703,369 in 1994) 8,491,067 9,114,681
Availabledeposit (note 2)................................... 600,000 1,598,000
Loans receivable held for sale at the lower
of cost or fair value 6,503,205 6,354,077
Mortgage-backed(note 3)................................... 3,703,700 4,818,000
Loans receivable held for investment, net (notes 3 and related securities
Held to maturities (fair value of $-0-8).......... 98,451,800 106,357,400
Real estate owned, net (REO) (note 4).............................. 462,100 403,300
Accrued interest receivable........................................ 559,500 660,700
Investment in 1995 and $472,373 in 1994) -0- 499,796
Available for sale,Federal Home Loan Bank stock, at fair value 506,421 763,889
Loans 17,764,719 11,631,616
Less allowance for credit losses (96,152) (104,862)
---------- ----------
Net loans 17,668,567 11,526,754
Propertiescost (note 5)....... 963,500 901,300
Premises and equipment, 857,726 79,388
Other real estate owned 242,894 56,894
Deferred income tax benefit 33,072 103,134
Accrued income and other assets 460,865 406,418
---------- ----------
TOTAL ASSETS $ 39,213,230 $ 34,546,531
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 4,219,386 $ 3,419,635
Savings and NOW deposits 12,823,184 17,276,474
Time deposits $100,000 and over 4,326,751 1,587,695
Other time deposits 13,223,749 7,663,117
---------- ---------
Total Deposits 34,593,070 29,946,921
Securities sold under agreements to
repurchase 378,886 728,156
Accruednet (note 6)............................... 514,300 613,800
Income taxes receivable (note 9)................................... 364,600 231,100
Prepaid expenses and other liabilities 249,908 250,613
---------- ----------
TOTAL LIABILITIES 35,221,864 30,925,690
---------- ----------
SHAREHOLDERS' EQUITYassets.................................. 77,800 67,600
------------- -------------
$ 111,834,700 $ 117,772,100
============= =============
Liabilities and Stockholders' Equity
Deposits (note 7).................................................. 98,482,200 102,189,400
FHLB advances (note 8)............................................. 6,000,000 8,000,000
Deferred income taxes (note 9)..................................... 886,900 1,083,400
Accrued interest payable and accrued expenses...................... 12,900 82,100
Advance payments by borrowers for taxes and insurance.............. 92,200 84,200
------------- -------------
105,474,200 111,439,100
------------ -------------
Commitments (notes 3 and 13)
Stockholders' Equity (notes 9, 10, 11 and 12)
Common stock - $10of $2.50 par value 75,000
shares authorized,value. Authorized 800,000 shares:
issued and outstanding 750,000 750,000
Capital surplus 750,000 750,000533,163 and 532,503 at
December 31, 1996 and 1995 respectively.......................... 1,332,900 1,331,300
Additional paid-in capital......................................... 1,424,900 1,420,200
Retained earnings 2,427,836 2,220,167
Less: Net unrealized loss on
available for sale securities 63,530 (99,326)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,991,366 3,620,841
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDER' EQUITY(subject to restrictions)........................ 3,602,700 3,581,500
------------- -------------
6,360,500 6,333,000
------------- -------------
$ 39,213,230111,834,700 $ 34,546,531
========== ==========117,772,100
============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-3See accompanying notes to financial statements.
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994FSB
Statements of Earnings
Year ended
December 31,
------------
1996 1995 1994
---- ----
INTEREST INCOME
Interest and fees on loans $ 1,313,500 $ 870,984Income:
Interest on investment securities:
Taxable 690,176 585,839
Exempt from federal income tax 154,266 165,589loans................................................ $ 8,507,500 $ 8,370,200
Interest on federal funds sold 255,848 166,795investments.......................................... 306,800 291,000
----------- -----------
8,814,300 8,661,200
Interest Expense:
Interest on mortgage backed and
related securities 239,177 177,755deposits (note 7).................................... 5,027,900 5,333,000
Interest on FHLB borrowings...................................... 535,300 377,400
------------- -----------
5,563,200 5,710,400
Net interest income......................................... 3,251,100 2,950,800
Provision for loan losses (note 3)................................. 104,000 76,000
Net interest income after provision for loan losses......... 3,147,100 2,874,800
Other income:
Loan and other bonds 1,543 1,795
--------- ---------
TOTAL INTEREST INCOME 2,654,510 1,968,757
--------- ---------
INTEREST EXPENSE
Interestfees.............................................. 112,000 72,800
Loan servicing fees.............................................. 22,900 26,800
Gain on demand and savings deposits 450,781 461,801
Interest on certificatessale of deposits
over $100,000 145,908 30,682
Interest on other time deposits 641,461 201,607
Interest on federal funds purchased
and securities sold under agreements
to repurchase 23,828 3,358
--------- -------
TOTAL INTEREST EXPENSE 1,261,978 697,448
--------- -------
NET INTEREST INCOME 1,392,532 1,271,309
PROVISION FOR CREDIT LOSSES (14,000) (6,000)
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 1,378,532 1,265,309
--------- ---------
OTHER INCOME
Service charges on deposit accounts 29,441 21,252loans held for sale.............................. 740,400 130,900
Other............................................................ 22,000 37,300
----------- -----------
897,300 267,800
----------- -----------
Other service charges and fees 55,985 38,561
Net investment and mortgage backed
securities gains 3,585 12,098
Other income 27,545 23,810
-------- --------
TOTAL OTHER INCOME 116,556 95,721
-------- --------
OTHER EXPENSESexpenses:
Salaries and employee benefits 468,444 404,550
Occupancybenefits................................... 1,615,600 1,400,900
SAIF recapitalization assessment................................. 673,400 -
Premises and occupancy expense 144,346 135,128
Equipment expense 38,076 29,202(note 13)......................... 503,800 489,500
SAIF insurance premiums.......................................... 258,900 298,000
Professional services............................................ 176,000 162,200
Data processing.................................................. 152,900 143,400
Advertising and promotion........................................ 135,100 99,000
REO operations, net (note 4)..................................... 59,900 (10,600)
Other expense 448,434 410,678
Loss on writedown of property -0- 800
--------- --------
TOTAL OTHER EXPENSES 1,099,300 980,358
--------- --------general and administrative................................... 432,600 394,300
----------- -----------
4,008,200 2,976,700
----------- -----------
Earnings before income taxes.................................. 36,200 165,900
Income taxes (note 9).............................................. 15,000 69,100
----------- -----------
Net earnings.................................................. $ 21,200 $ 96,800
=========== ===========
Earnings per share (note 1)........................................ $ 0.04 $ 0.18
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-4See accompanying notes to financial statements.
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON
STATEMENTS OF INCOME (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994FSB
Statements of Stockholders' Equity
Retained
Additional earnings
Common paid-in (subject to
stock capital restrictions) Total
------- ----------- ------------- -------
Balance at December 31, 1994.....................$ 1,326,400 $ 1,403,700 $ 3,484,700 $ 6,214,800
Exercise of Stock Options........................ 2,100 4,600 - 6,700
Stock issued to 401KSOP Plan..................... 2,800 11,900 - 14,700
Net earnings for the year
ended December 31, 1995....................... - - 96,800 96,800
----------- ----------- ----------- -----------
Balance at December 31, 1995..................... 1,331,300 1,420,200 3,581,500 6,333,000
Stock issued to 401KSOP Plan..................... 1,600 4,700 - 6,300
Net earnings for the year
ended December 31, 1996....................... - - 21,200 21,200
------------- ------------- ----------- -----------
Balance at December 31, 1996.....................$ 1,332,900 $ 1,424,900 $ 3,602,700 $ 6,360,500
=========== =========== =========== ===========
See accompanying notes to financial statements.
DEL AMO SAVINGS BANK, FSB
Statements of Cash Flows
Year ended
December 31,
--------------
Cash flows from operating activities: 1996 1995 1994
---- ----
INCOME BEFORE INCOME TAXESNet earnings........................................................... $ 395,78821,200 $ 380,672
INCOME TAX EXPENSE 90,619 84,216
------- -------
NET INCOME $ 305,169 $ 296,456
======= =======
NET INCOME PER SHARE OF COMMON
STOCK $ 4.07 $ 3.95
==== ====
AVERAGE SHARES OUTSTANDING 75,000 75,000
====== ======96,800
------------ -------------
Adjustments to reconcile net earnings to net cash provided (used) by operating
activities:
Depreciation and amortization...................................... 122,800 127,400
Provision for loan losses.......................................... 104,000 76,000
Provision (reductions credited) for losses on REO.................. 13,000 (25,000)
Loans originated and held for sale................................. (99,167,300) (16,732,100)
Proceeds from sale of loans held for sale.......................... 101,022,000 12,045,000
Amortization of deferred loan fees................................. (32,500) (51,000)
Net loss (gain) on sale of REO..................................... 6,400 (2,900)
Gain on sale of loans held for sale................................ (740,400) (130,900)
Federal Home Loan Bank stock dividend received..................... (53,800) (44,100)
Loss on disposal of assets......................................... 800 -
Decrease (increase) in accrued interest receivable................. 101,200 (80,700)
(Increase) decrease in prepaid expenses and other assets........... (10,200) 245,300
(Decrease) increase in accrued interest payable and
accrued expenses................................................ (69,200) 31,800
Increase (decrease) in advance payments by borrowers
for taxes and insurance......................................... 8,000 (7,500)
Provision for deferred income taxes................................ (196,500) 11,300
Increase in income taxes receivable................................ (133,500) (231,100)
Stock issued to 401KSOP plan....................................... 6,300 14,700
------------ -------------
Total adjustments............................................... 981,100 (4,753,800)
------------ -------------
Net cash provided (used) by operating activities................ 1,002,300 (4,657,000)
------------ -------------
Cash flows from investing activities:
Decrease in certificates of deposit.................................. 998,000 470,800
Proceeds from sale of REO............................................ 630,400 791,700
Loans originated..................................................... (5,757,200) (5,863,700)
Principal payments on loans.......................................... 12,882,700 8,214,700
Purchase of Federal Home Loan Bank stock............................. (8,400) (94,500)
Investment in premises and equipment................................. (24,100) (70,200)
------------ -------------
Net cash provided by investing activities......................... 8,721,400 3,448,800
------------ -------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-5
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net
Unrealized
(Loss) Available Total
Common Capital Retained for Sale Shareholders'
Stock Surplus Earnings Securities Equity
------- ------- ------- ----------- ----------
BALANCE, DECEMBERYear ended
December 31,
1993 $ 75,000 $ 750,000 $ 2,017,461 $ -0- $ 3,517,461
Net income for 1994 -0- -0- 296,456 -0- 296,456------------
Cash dividends paid - $.70 per share -0- -0- (56,250) -0- (56,250)
Cash dividends paid - $.50 per share -0- -0- (37,500) -0- (37,500)
Net unrealized (loss) on available
for sale securities -0- -0- -0- (99,326) (99,326)
------- ------- ------- --------- ----------
BALANCE, DECEMBER 31, 1994 750,000 750,000 2,220,167 (99,326) 3,620,841
Net income forflows from financing activities: 1996 1995 -0- -0- 305,169 -0- 305,169
Cash dividends paid - $.80 per share -0- -0- (60,000) -0- (60,000)
Cash dividends paid - $.50 per share -0- -0- (37,500) -0- (37,500)
Net unrealized (loss) on available for
sale securities -0- -0- -0- 162,856 162,856
------- ------ ------- -------- -------
BALANCE, DECEMBER 31, 1995 $ 750,000 $ 750,000 $ 2,427,836 $ 63,530 $ 3,991,366
======= ======= ========= ====== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-6
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:Increase (decrease) in demand deposits and savings accounts.......... $ 767,700 $ (2,954,100)
Proceeds from issuance of certificates of deposit.................... 109,478,600 96,393,000
Payments on maturing certificates of deposit......................... (113,953,500) (95,358,500)
(Payments) proceeds from FHLB advances............................... (2,000,000) 3,000,000
Proceeds from exercise of stock options.............................. - 6,700
------------ -------------
Net income $ 305,169 $ 296,456
Adjustments to reconcile net income to net
cash (used) provided by operatingfinancing activities................... (5,707,200) 1,087,100
------------ -------------
Net increase (decrease) in cash and cash equivalents............... 4,016,500 (121,100)
Cash and cash equivalents at beginning of year....................... 2,120,900 2,242,000
------------ -------------
Cash and cash equivalents at end of year............................. $ 6,137,400 $ 2,120,900
============ =============
Supplemental disclosures of cash flow information:
Interest paid (including interest credited) during the year............ $ 5,565,600 $ 5,710,600
Cash paid during the year for income taxes............................. 345,000 186,500
============ =============
Supplemental disclosures of noncash investing activities:
Depreciation 29,765 26,226
Provision for credit losses 14,000 6,000
Loss on foreclosures of property -0- 800
Accretion of deferred loan origination fees (16,487) (13,926)
Premium amortization and discount accretion, net (2,905) (2,622)
Realized (gains) from investments and
mortgage-backed securities - net (3,585) (12,096)
Changes in assets and liabilities which provided
(used) cash exclusive of changes shown
separately:
Deferred income tax benefit 70,062 18,337
Accrued income and other assets (54,447) (45,121)
Accrued expenses and other liabilities (104,826) 68,562
---------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 236,746 342,616
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment
securities - held in maturity 744,924 2,289,925
Proceeds from sales and maturities of investment
securities - available for sale 2,695,879 1,048,040
Purchase of investment securities - heldAdditions to maturity (122,868) (2,281,179)
Purchase of investment securities - available for sale (2,608,029) (3,671,602)
Proceeds from sales and maturities of mortgage
backed and related securities - held to maturity 503,311 -0-
Proceeds from sales and maturities of mortgage backed
and related securities - available for sale 292,000 608,221
Purchase of mortgage backed and related securities-
held to maturity -0- (300,252)
Purchase of mortgage backed and related securities -
available for sale -0- -0-
Net (increase) decrease in loans (6,325,326) (2,208,005)
Purchases of properties and equipment (808,103) (31,000)
------------ -----------
NET CASH (USED IN) INVESTING
ACTIVITIES (5,628,212) (4,545,852)
------------ -----------REO....................................................... $ 880,500 $ 169,300
============ =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-7See accompanying notes to financial statements.
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1995 1994
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Demand, savings and
NOW deposit accounts $ (3,653,539) $ (782,126)
Time deposits 8,299,688 3,958,852
Securities sold under agreementsFSB
Notes to purchase (349,270) 709,335
Dividends paid (97,500) (93,750)
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 4,199,379 3,792,311
---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,192,087) (410,925)
----------- ----------
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 5,641,500 6,052,425
----------- ----------
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $ 4,449,413 $ 5,641,500
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash received during the year for:
Interest $ 2,618,825 $ 1,946,969
========= =========
Cash paid during the year for:
Interest $ 1,207,847 $ 658,401
========= =========
Income taxes $ 53,025 $ 105,329
========== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Transfer between loans and other
real estate owned-net $ 186,000 $ -0-
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-8
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFinancial Statements
(1) Summary of Significant Accounting Policies
The financial statements of The Old National Bank of Huntington have
been prepared in conformityfollowing items, together with generally accepted accounting
principles and conform with practices within the banking industry.
The more significant accounting policies are summarized below.
(a) Investment and Mortgage-Backed Securities
Effective January 1, 1994, the Bank adopted the provisions of
Statement of Financial Accounting Standards No. 115 -
Accounting for Certain Debt and Equity Securities (SFAS 115).
In accordance with this statement securities are classified
as held-to-maturity, available-for-sale or trading.
Securities classified as held-to-maturity are stated at cost
adjusted for amortization of premiums and accretion of
discounts. The Bank has the positive intent and ability to
hold these securities to maturity. Securities classified as
available-for-sale may be sold in response to changes in
interest rates, liquidity needs and for other purposes.
Available-for-sale securities are carried at fair value and
include all debt and equity securities not classified as
held-to-maturity or trading. Trading securities are those held principally for the purpose of selling in the near
future and are carried at fair value. The Bank does not
currently have any trading securities.
Unrealized holding gains and losses for trading securities
are included in earnings. Unrealized holding gains and losses
for available-for-sale securities are excluded from earnings
and reported, net of any income tax effect, as a separate
component of shareholders' equity. Realized gains and losses
for securities classified as either available-for-sale or
held-to-maturity are reported in earnings based on the
adjusted cost of the specific security sold.
Prior to adoption of SFAS 115, all investment securities were
stated at cost, adjusted for amortization of premiums and
accretion of discounts, similar to the held-to-maturity
category under the provisions of SFAS 115.
F-9
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Loans
Loans are stated at the principal amount outstanding.
Deferred loan fees and the allowance for loan losses are
shown as reductions of loans. Loan origination fees and
certain direct origination costs are being deferred and
amortized as an adjustment of the related loan's yield, over
the contractual life of the loan. Interest income on loans is
computed based on the outstanding loan balance. Interest
accrual is discontinued when in the opinion of management it
appears that collection of principal or interest according to
contractual terms may be doubtful. Upon the discontinuance,
all unpaid accrued interest is reversed. Interest collections
on nonaccrual loans for which the collectibility of principal
is uncertain are applied to principal. Otherwise, such
collections are credited to income when received.
The allowance for loan losses is increased by provisions for
loan losses charged to operating expense and reduced by loans
charged off, net of recoveries. The level of the allowance
and the provision are determined based on management's
evaluation of the loan portfolio, current and anticipated
economic conditions, and other relevant factors. The
allowance for loan losses is available to absorb future loan
losses.
While management believes it has established the allowance
for loan losses in accordance with generally accepted
accounting principles and has taken into account the views of
its regulators and the current economic environment, there
can be no assurance that in the future the Bank's regulators
or its economic environment will not require further
increases and decreases in the allowance.
(c) Properties and Equipment
Properties and equipment are stated at cost, less accumulated
depreciation. The provision for deprecation is computed
principally by the straight-line methods. Maintenance and
repairs are charged to expense as incurred. Renewals and
betterments which materially increase the value of the
property are capitalized.
(d) Other Real Estate Owned
Other real estate owned primarily represents properties
acquired by the Bank through customer loan defaults. The real
estate is stated at an amount equal to lesser of the loan
balance prior to foreclosure, plus certain cost incurred for
improvements to the property, or fair value less estimated
selling costs of the property.
(e) Income Taxes
The asset and liability approach is used to calculate
deferred income taxes. Under this method, deferred tax assets
and labilities are recognized on temporary differences
between the financial statement and tax bases of assets and
liabilities using applicable enacted tax rates.
F-10
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Net Income Per Share of Common Stock
Net income per share of common stock is computed by dividing
net income by the weighted average number of shares of common
stock outstanding during the period.
(g) Off Balance Sheet Financial Instruments
In the ordinary course of business the Bank has entered into
off balance sheet financial instruments consisting of
commitments to extend credit, for commercial real estate,
construction and land development, other unused commitments,
and commercial letters of credit and similar letters of
credit. Such financial instruments are recordednotes elsewhere in the financial
statements, when they become payable.
(h) Cashcomprise the significant accounting policies of Del Amo Savings
Bank, FSB (Bank) used in preparing the accompanying financial statements.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
The Bank maintains two full-service savings branches and Cash Equivalents
Forone loan office in
Southern California. The Bank's primary business consists of attracting retail
deposits from the purpose of presentationgeneral public and originating loans secured by mortgages on
residential real estate. Additionally, the Bank sells whole loans, with
servicing released, in the statementsecondary market.
Basis of cash
flows, cash and cash equivalents are defined as those amounts
included in the balance sheet captioned cash and due from
banks and federal funds sold.
(i) Use of EstimatesFinancial Statement Presentation
The preparation of the Bank's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amountamounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amountsoperations of revenues and expenses
during the reporting period.Bank for the
periods presented. Actual results couldmay differ from those estimates.
(j) Reclassification
Certain prior yearestimates calculated by
management.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses and
the valuation of REO.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand accounts with other
financial institutions, and overnight deposits.
Certificates of Deposit
Certificates of deposit are held to maturity and recorded at cost. These
investments are carried at cost because the Bank has the intent and ability to
hold them until maturity.
Loans Receivable Held for Investment and Held for Sale
Loans receivable held for investment are recorded at cost, net of deferred loan
fees and costs and the allowance for loan losses. Loan origination fees, net of
direct loan origination costs, are deferred and credited to income using the
interest method over the contractual life of the loan. For loans placed on non
accrual status, the amortization of net deferred loan fees and costs is
discontinued.
Loans receivable held for sale are recorded at the lower of cost or fair value.
A valuation allowance is established if the fair value of such loans is less
than their cost and operations are charged or credited for valuation
adjustments. Loan origination fees, net of direct loan origination costs, are
deferred and recognized as income when the loans are sold. Realized gains and
losses from the sale of loans receivable are computed under the specific
identification method.
(1) Summary of Significant Accounting Policies (cont.)
Impaired Loans
Loans are evaluated for impairment as part of the Bank's internal asset review
process. All of the Bank's loans are subject to the review for impairment. A
loan is impaired, when based on current information and events, a creditor will
be unable to collect all amounts contractually due according to the terms of the
loan agreement. When a loan is determined to be impaired, a valuation allowance
is established based upon the difference between the Bank's investment in the
loan and the fair value of the collateral securing the loan.
Subsequent collection of cash may be applied as reduction to the principal
balance or recorded as income, depending upon management's assessment of the
ultimate collectibility of the loan. Interest income on impaired loans is
recognized only to the extent that cash payments are received.
Allowance for Loan Losses
In addition to the specific valuation allowances on impaired loans, the
allowance for loan losses includes general valuation allowances provided for
estimated inherent losses in the loan portfolio which have not been reclassifiedspecifically
identified.
Management believes that the allowance for loan losses is adequate. While
management uses available information to conformestimate the 1995allowance, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, certain regulatory agencies, as part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgments about information available to them at the time of their
examination.
Allowance for Delinquent Interest
Accrued interest on loans that are contractually 90 days or more past due is
reversed and charged against income. Income is subsequently recognized only to
the extent cash payments are received and such loans are restored to an accrual
status only if the borrower has demonstrated the ability to make future payments
of principal and interest.
Gain or Loss on Sale of Loans
The Bank sells whole loans, servicing released, and recognizes a gain or loss to
the extent that the sale proceeds of the loans sold exceed or are less than the
book value at the time of sale.
REO
REO is recorded on an individual asset basis at fair value, based on the current
appraised value, minus estimated cost to sell at the date of foreclosure, and is
adjusted for any subsequent decline in fair value through recording of valuation
allowances. Income recognition on the sale of REO is dependent upon the
transaction meeting certain criteria relating to the nature of the property sold
and terms of the sale.
Premises and Equipment
Office premises and equipment are stated at cost, less accumulated depreciation
and amortization. The Bank's policy is to depreciate office furniture and
equipment on the straight line basis over the estimated useful lives of the
various assets, which range from two to ten years. Leasehold improvements are
amortized over the shorter of the life of the improvement or the life of the
lease.
(1) Summary of Significant Accounting Policies (cont.)
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement presentation.
F-11
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 - INVESTMENT SECURITIES
The
carrying amounts of investment securities as shownexisting assets and liabilities and their respective tax
bases. A valuation allowance, if necessary, is then established to reduce that
deferred tax asset to the level at which it is more likely than not that the tax
benefits will be realized. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the balance sheetsyears in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Stock Compensation Plan
Prior to January 1, 1996, the Bank accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25 "Accounting for Stock Issued to Employees", and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Bank adopted Statement of Financial Accounting Standards
(SFAS) No. 123 "Accounting for Stock-Based Compensation", which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and their approximate market values at
December 31 were as follows:
Held to maturity securities:
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
--------- --------- ------- ----------
December 31, 1995:
U.S. Government and agency
securities $ 5,592,696 $ 104,280 $ -0- $ 5,696,976
State and municipal securities 2,853,371 79,361 -0- 2,932,732
Other securities 45,000 -0- -0- 45,000
--------- --------- ------- ----------
TOTAL $ 8,491,067 $ 183,641 $ -0- $ 8,674,708
========= ======= ======= =========
Available for sale securities:
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
--------- -------- ------- ---------
December 31, 1995:
U.S. Government and agency
securities $ 6,190,349 $ 85,126 $ -0- $ 6,275,475
State and municipal securities 215,000 12,730 -0- 227,730
--------- -------- ------- ---------
TOTAL $ 6,405,349 $ 97,856 $ -0- $ 6,503,205
========= ======= ======= =========
Held to maturity securities:
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
--------- -------- ------- ---------
December 31, 1994:
U.S. Government and agency
securities $ 5,693,538 $ 1,988 $(308,681) $ 5,386,845
State and municipal securities 3,278,659 16,280 (122,505) 3,172,434
Other securities 142,484 1,606 -0- 144,090
--------- ------- ----------- ---------
TOTAL $ 9,114,681 $ 19,874 $(431,186) $ 8,703,369
========= ======= ========= =========
Available for sale securities:
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
--------- ------- -------- ---------
December 31, 1994:
U.S. Government and agency
securities $ 4,977,585 $ 4,774 $ (66,058) $ 4,916,301
Other securities 1,502,750 1,003 (65,977) 1,437,776
--------- ------- -------- ---------
TOTAL $ 6,480,335 $ 5,777 $(132,035) $ 6,354,077
========= ====== ========= =========
F-12
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
Assets, principally securities carried at approximately $4,722,007provide
pro forma net earnings and $702,270 at December 31,pro forma earnings per share disclosures for employee
stock option grants made in 1995 and 1994 with a market value of
$4,886,697 and $714,094 at December 31, 1995 and 1994 were pledged
to secure public deposits and for other purposes required or
permitted by law. Includedfuture years as if the fair-value-based
method defined in other securities are marketable equity
securities with an original cost of $45,000 and a market value of
$45,000 at December 31, 1995 and December 31, 1994.
The maturities of investment securities at December 31, 1995 were as
follows:
Held to maturity securities:
Carrying Market
Amount Value
----------- -----------
Due in one year or less $ 80,000 $ 80,000
Due from one to five years 6,164,844 6,275,411
Due from five to ten years 1,776,247 1,833,862
Due after ten years 424,976 440,435
Marketable equity securities 45,000 45,000
--------- ---------
TOTAL $ 8,491,067 $ 8,645,708
========= =========
Available for sale securities:
Carrying Market
Amount Value
----------- ------------
Due in one year or less $ 3,098,001 $ 3,119,228
Due from one to five years 3,105,080 3,182,524
Due from five to ten years 202,300 201,453
Due after ten years -0- -0-
----------- -----------
TOTAL $ 6,405,381 $ 6,503,205
========= =========
Gross realized gains and gross realized
losses on sales of securities were:
1995 1994
------ -----
Gross realized gains:
U.S. government and agency securities $ 324 $ 1,188
State and municipal securities 2,000 3,546
----- -----
TOTAL $ 2,324 $ 4,734
===== =====
Gross realized losses:
U.S. government and agency securities $ (14,486) $ -0-
State and municipal securities (133) -0-
Other securities -0- (137)
--------- -------
TOTAL $ (14,619) $ (137)
======== =====
F-13
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 3 - MORTGAGE BACKED AND RELATED SECURITIES
The carrying values and estimated market values of mortgage backed
and related securities at December 31, 1995 and 1994 are summarized
as follows:
Held to maturity securities:
No mortgage backed and related securities were classified as held to
maturity at December 31, 1995.
Available for sale securities:
December 31, 1995
-------------------------------------------------------------------------
Unrealized Estimated
Principal Unamortized Unearned Carrying Gains Market
Balance Premiums Discounts Value (Losses) Value
-------- ----------- --------- -------- ---------- ---------
FNMA certificates $ 500,000 $ 128 $ -0- $ 500,128 $ 6,293 $ 506,421
======= === ===== ======= ===== =======
Held to maturity securities:
December 31, 1994
-------------------------------------------------------------------------
Unrealized Estimated
Principal Unamortized Unearned Carrying Gains Market
Balance Premiums Discounts Value (Losses) Value
-------- ----------- --------- -------- ---------- ---------
FNMA certificates $ 500,000 $ 410 $ (614) $ 499,796 $ (27,423) $ 472,373
======= === ====== ======= ======== =======
Available for sale securities:
December 31, 1994
-------------------------------------------------------------------------
Unrealized Estimated
Principal Unamortized Unearned Carrying Gains Market
Balance Premiums Discounts Value (Losses) Value
-------- ----------- --------- -------- ---------- ---------
FNMA certificates $ 500,000 $ 389 $ -0- $ 500,389 $ (12,927) $ 487,462
FHLMC certificates 200,000 -0- -0- 200,000 (23,760) 176,240
SLMA certificates 100,000 71 -0- 100,071 116 100,187
------- --- ---- ------- -------- -------
TOTAL $ 800,000 $ 460 $ -0- $ 800,460 $ (36,571) $ 763,889
======= === ==== ======= ======== =======
Gross realized gains and gross realized losses on sales of mortgage
backed and related securities were:
1995 1994
---- ----
Gross realized gains:
FNMA certificates $ 23,880 $ 7,500
Gross realized losses:
FHLMC certificates $ (8,000) $ -0-
======= =====
F-14
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 - LOANS
The components of loans in the balance sheets were as follows:
1995 1994
---- ----
Commercial $ 3,456,508 $ 2,053,726
Residential real estate mortgages 7,457,796 6,030,335
Consumer 6,850,415 3,547,555
---------- ----------
$ 17,764,719 $ 11,631,616
========== ==========
Loans on which the accrual of interestSFAS No. 123 has been discontinued
amountedapplied. The Bank has elected to
$25,552continue to apply the provisions of APB Opinion No. 25 and $-0- at December 31, 1995to provide the pro
forma disclosure provisions of SFAS No. 123.
Earnings Per Share
Earnings per share calculations are based upon the weighted average number of
common shares and 1994,
respectively. Interest income that would have been accrued on
non-accrual loans anddilutive common stock equivalents outstanding during the
interest income actually recognizedperiod. The weighted average shares outstanding for the years ended December 31,
1996 and 1995 were 533,011 and 531,698, respectively.
Current Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities". This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a financial components approach that focuses
on control. The statement distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996 and is to be applied prospectively. The
statement supersedes SFAS No. 122, though the general concepts of SFAS No. 122
are retained in the new pronouncement. The Bank does not believe that its
adoption will have a material adverse impact upon its financial condition or
results of operations.
(2) Certificates of Deposit
The weighted average interest rate on certificates of deposit was 5.50% at
December 31, 1996 and 5.72% at December 31, 1995.
Accrued interest receivable on certificates of deposit amounted to $2,000 and
$3,500 at December 31, 1996 and 1995, respectively.
(3) Loans Receivable
Loans receivable held for investment are summarized below:as follows:
December 31,
-------------------
1996 1995
-------------- ---------------
Conventional loans secured by deeds of trust
Residential, 1-4 units............................................... $ 72,855,600 $ 76,258,200
Residential, 5+ units................................................ 10,221,200 11,038,600
Commercial and industrial............................................ 15,307,100 19,115,500
Land................................................................. 77,600 203,400
Home improvement..................................................... 274,300 294,600
------------ -------------
Total loans secured by real estate............................... 98,735,800 106,910,300
Loans on savings accounts............................................ 356,100 194,700
------------ -------------
99,091,900 107,105,000
Less:
Deferred loan fees................................................... 75,700 107,900
Deferred gain on sale of REO......................................... 24,400 24,700
Allowance for loan losses............................................ 540,000 615,000
------------ -------------
Loans receivable held for investment, net................................ $ 98,451,800 $ 106,357,400
============ =============
The weighted average interest rate on loans receivable held for investment was
7.89% at December 31, 1996 and 7.93% at December 31, 1995.
At December 31, 1996 and 1995, 1994
---- ----
Interestaccrued interest receivable amounted to $542,600
and $645,300, respectively, and non-accrual loans amounted to $800,200 and
$286,300, respectively. The effect of non-accrual loans on interest income that would have been recorded $ 2,131 $ 393
Interest income recognized 1,980 -0-
------ -------
Interest income foregone $ 151 $ 393
====== =======
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES
An analysiswas a
reduction of $33,100 for 1996 and $9,700 for 1995.
Loans serviced for others totaled $8,111,100 and $9,656,600 at December 31, 1996
and 1995, respectively. At December 31, 1996, the Bank had $3,703,700 of
outstanding commitments to sell fixed and adjustable real estate loans, with a
fair value of $3,727,000.
All of the changeBank's lending activity is within the state of California and
primarily in Southern California.
The commercial and industrial loans are seasoned loans with no new originations
since early 1989.
Loans outstanding to directors and officers of the Bank amounted to $137,000 and
$865,000 at December 31, 1996 and 1995, respectively. These loans were made at
the then current market terms.
The activity in the allowance for creditloan losses is summarized as follows:
1995 1994
---- ----
BALANCE AT JANUARY 1 $ 104,862 $ 103,007
Credits charged off (23,010) (4,945)
Recoveries 300 800
-------- -------
Net credits charged off (22,710) (4,145)
Provision for credit losses 14,000 6,000
------- -------
BALANCE, DECEMBER 31 $ 96,152 $ 104,862
====== =======
F-15
December 31,
---------------------------
1996 1995
--------------- ---------------
Balance at beginning of year......................................... $ 615,000 $ 574,000
Provision for loan losses............................................ 104,000 76,000
Charge-offs.......................................................... (179,000) (35,000)
------------ -------------
Balance at end of year............................................... $ 540,000 $ 615,000
============ =============
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6 - PROPERTIES AND EQUIPMENT
Components of properties(3) Loan Receivable (Cont.)
Impaired Loans
The Bank's impaired loans totaled $800,200 and equipment included in the balance sheets$226,300 at December 31, 1996 and
1995, respectively, and for the years then ended the average investment in
impaired loans was $740,400 and $100,000, respectively. Interest income on such
loans totaled $43,200 in 1996 and $11,600 in 1995 and 1994 were as follows:
1995 1994
---- ----
Cost:
Furniture and equipment $ 383,955 $ 137,592
Leasehold improvements 177,987 146,267
Automobiles 47,501 47,501
Land 200,749 9,000
Branch Building 343,271 5,000
--------- --------
TOTAL COST 1,153,463 345,360
Less accumulated depreciation (295,737) (265,972)
--------- ---------
NET BOOK VALUE $ 857,726 $ 79,388
======== ========was recognized using the
cash-basis method of accounting.
The charge to operations for amortization and depreciation was
$29,765 for 1995 and $26,226 for 1994.
NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase generally mature
within one to ten days from the transaction date. Securities sold
under agreements to repurchase were $378,886 and $728,156entire balance of impaired loans at December 31, 1996 and 1995, had no
related allowance for loan losses.
(4) REO
REO is summarized as follows:
December 31,
---------------------------
1996 1995
--------------- ---------------
Residential, 1-4 unit................................................ $ 475,100 $ 129,300
Commercial........................................................... - 274,000
------------ -------------
475,100 403,300
Allowance for losses................................................. (13,000) -
------------ -------------
REO, net............................................................. $ 462,100 $ 403,300
============ =============
The activity in the allowance for REO is summarized as follows:
December 31,
-------------------------
1996 1995
--------------- ----------------
Balance at beginning of year......................................... $ - $ 35,000
Provision (reductions credited) for losses........................... 13,000 (25,000)
Charge-offs, net of recovery......................................... - (10,000)
------------ -------------
Balance at end of year............................................... $ 13,000 $ -
============ =============
REO operations, net consisted of the following:
Year ended
December 31,
--------------------------
1996 1995
--------------- ----------------
Operating expenses, net of operating income.......................... $ 23,800 $ 8,300
Loss (gain) on sale of REO........................................... 6,400 (2,900)
Valuation write downs................................................ 16,700 9,000
Provision (reductions credited) for losses........................... 13,000 (25,000)
------------ -------------
REO operations, net.................................................. $ 59,900 $ (10,600)
============ =============
(5) Investment in Federal Home Loan Bank Stock
As a member of the Federal Home Loan Bank of San Francisco (FHLB), the Bank is
required to maintain a specified investment in shares of FHLB stock in an amount
at least equal to the greater of 1% of the aggregate principal amount of its
residential mortgage loans at the end of each year or 5% of its outstanding
borrowings from the Federal Home Loan Bank of San Francisco. At December 31,
1996 and 1995, the Bank owned 9,635 and 9,013 shares, respectively, of the
FHLB's $100 par value capital stock in satisfaction of this requirement.
(6) Premises and Equipment, Net
Premises and equipment are summarized as follows:
December 31,
--------------------------
1996 1995
--------------- ---------------
Leasehold improvements............................................... $ 717,000 $ 748,500
Building, furniture and equipment.................................... 1,502,300 1,523,300
------------ -------------
Total cost...................................................... 2,219,300 2,271,800
Less accumulated depreciation and amortization....................... 1,705,000 1,658,000
------------ -------------
Premises and equipment, net.......................................... $ 514,300 $ 613,800
============ =============
(7) Deposits
A comparative summary of savings accounts follows:
Weighted December 31,
Average ----------------
Interest Rate 1996 1995
------------- ---- ----
Regular passbook...................................... 1.86% $ 3,245,100 $ 2,998,600
Money market passbook................................. 2.19 3,043,500 3,386,800
Checking accounts..................................... 0.95 8,996,800 8,132,300
---- ------------ -------------
1.39 15,285,400 14,517,700
Fixed rate certificate accounts:
32-89 days....................................... 3.22 670,900 684,600
90-179 days...................................... 3.56 1,072,600 2,015,400
6-11 months...................................... 4.69 8,853,300 18,925,400
12-23 months..................................... 5.33 14,393,700 18,117,700
24-59 months..................................... 5.98 6,336,300 8,402,700
60-89 months..................................... 6.17 14,176,100 14,931,900
Negotiable certificates of $50,000 to $100,000... 5.38 23,636,500 14,026,800
Negotiable certificates of $100,000 and greater.. 5.86 14,057,400 10,567,200
---- ------------ -------------
Total certificate accounts....................... 5.52 83,196,800 87,671,700
---- ------------ -------------
4.88% $ 98,482,200 $ 102,189,400
==== ============ =============
The weighted average interest rate on deposits was 5.23% at December 31, 1995.
(7) Deposits (cont.)
Interest expense on deposits by type is as follows:
Year ended
December 31,
------------------
1996 1995
--------------- ----------------
Regular passbook......................................................... $ 54,900 $ 65,700
Money market passbook.................................................... 69,500 95,200
Checking accounts........................................................ 84,700 105,100
Certificate accounts..................................................... 4,818,800 5,067,000
------------ -------------
Total interest expense on deposits....................................... $ 5,027,900 $ 5,333,000
============ =============
A summary of certificate accounts by maturity is as follows:
Year ending December 31,
------------------------
1997 $ 63,789,800
1998 8,115,200
1999 6,570,000
2000 2,566,300
2001 2,147,900
Thereafter 7,600
------------
$ 83,196,800
==============
(8) Federal Home Loan Bank Advances
A summary of Federal Home Loan Bank advances by maturity is as follows:
Balance Interest Rate
12/31/96 Maturity Date 12/31/96
-------- ------------- -------------
$ 1,000,000 01/06/1997 5.46%
2,000,000 06/01/2000 6.58%
1,500,000 06/01/2005 6.94%
1,500,000 06/01/2015 7.14%
----------
$ 6,000,000
=============
The collateral for the advances consists of real estate loans in the amount of
$28,256,400. The Bank had $8,000,000 in FHLB advances outstanding as of December
31, 1995.
At December 31, 1996, the Bank had an unused line of credit available with the
Federal Home Loan Bank of San Francisco in the amount of $21,958,700.
(9) Income Taxes
Income taxes (benefit) consisted of the following:
December 31, 1996 December 31, 1995
----------------- -----------------
Current Deferred Total Current Deferred Total
------- -------- ----- ------- -------- -----
Federal $ 144,000 $ (124,300) $ 19,700 Federal $ 278,100 $ (228,300) $ 49,800
State 67,500 (72,200) (4,700) State 89,100 (69,800) 19,300
-------- --------- -------- --------- ---------- --------
$ 211,500 $ (196,500) $ 15,000 $ 367,200 $ (298,100) $ 69,100
======== ========= ======== ========= ========== ========
Income taxes differed from the amounts computed by applying the U.S. Federal
income tax rate of 34 percent to pretax income as a result of the following:
December 31,
------------
1996 % 1995 %
---- - ---- -
Federal income taxes at statutory rate............... $ 12,300 34 $ 56,400 34
California franchise tax, net of Federal
tax benefit........................................ 2,700 7 12,700 8
Change in California franchise tax rate,
net of Federal tax benefit......................... (5,800) (18) - -
Other, net........................................... 5,800 18 - -
-------- --- --------- ---
$ 15,000 41 $ 69,100 42
======== === ========= ===
Until passage of legislation in 1996, savings and loan associations that met
certain definitional tests as prescribed by the Internal Revenue Code ("Code")
were allowed a bad debt deduction, when computing federal income taxes,
equivalent to 8% of taxable income, subject to a minimum tax for preference
items. Alternatively, a deduction based upon actual experience losses of the
Bank could be taken if it resulted in a greater deduction. Both houses of
Congress passed legislation in 1996 that repealed the tax rules formerly
applicable to bad debt reserves of thrift institutions for taxable years
beginning after December 31, 1995. Pursuant to the legislation, the Bank was
required to change its tax method of accounting for bad debts from the reserve
method formerly permitted to the "specific charge-off" method under which tax
deductions are permissible for bad debts only as and to the extent that the
loans become wholly or partially worthless. At December 31, 1996, the Bank had a
$71,900 tax bad debt reserve that was accumulated using the provisions of the
tax law prior to the 1996 changes that is subject to recapture in whole or in
part in future years upon the occurrence of certain events, such as a
distribution to shareholders in excess of the Bank's current and accumulated
earnings and profits, a redemption of shares, or upon a partial or complete
liquidation of the Bank.
(9) Income Taxes (Cont.)
At December 31, 1996 and 1995, the Bank had current income taxes receivable of
$364,600 and $231,100, respectively.
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred liabilities at December 31, 1996 and 1995
(certain amounts for 1995 have been reclassified to reflect 1995 tax returns as
filed) are presented below:
December 31,
------------
1996 1995
---- ----
Assets:
Loan loss allowances............... $ 190,200 $ 195,500
California franchise taxes......... 22,900 12,900
REO deferred gain.................. 15,400 10,200
---------- ----------
Total.......................... 228,500 218,600
Liabilities:
Loan fees.......................... 904,800 1,103,000
FHLB stock dividends............... 194,800 174,000
Depreciation....................... 15,800 25,000
---------- ----------
Total.......................... 1,115,400 1,302,000
Net deferred tax liability......... $ 886,900 $ 1,083,400
========== ==========
Federal............................ 643,400 767,700
State.............................. 243,500 315,700
---------- ----------
Total.......................... $ 886,900 $ 1,083,400
========== ==========
(10) Stockholders' Equity and Regulatory Capital
Capital Requirements
The Bank is subject to the Financial Institutions Reform Recovery and
Enforcement Act of 1989 (FIRREA) and the capital regulations of the Office of
Thrift Supervision (OTS) promulgated thereunder. The regulations require
institutions to have a minimum regulatory tangible capital equal to 1.5% of
total assets, a minimum 3.0% leverage (core) capital ratio and an 8.0%
risk-based capital ratio as of December 31, 1996.
At December 31, 1996, the Bank was "well capitalized" under the prompt
corrective action ("PCA") regulations adopted by the OTS pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). To be
categorized as "well capitalized" the Bank must maintain minimum core capital,
Tier 1 risk-based capital, and risk-based capital ratios as set forth in the
table below.
(10) Stockholders' Equity and Regulatory Capital (Cont.)
The following table presents the Bank's regulatory capital position under both
FIRREA and FDICIA at December 31, 1996:
Tier 1
Tangible Core Risk-based Risk-based
Capital Capital Capital Capital
-------- ------- ---------- ----------
(Dollars in thousands)
Actual capital
Amount................................... $ 6,361 $ 6,361 $ 6,361 $ 6,901
Ratio.................................... 5.69% 5.69% 10.00% 10.84%
Minimum required capital (FIRREA):
Amount................................... $ 1,677 $ 3,355 N/A $ 5,090
Ratio.................................... 1.50% 3.00% N/A 8.00%
PCA "well capitalized" capital:
Amount................................... N/A $ 5,592 $ 3,818 $ 6,363
Ratio.................................... N/A 5.00% 6.00% 10.00%
The Bank's capital amounts and classification are subject to review by federal
regulators about components, risk-weighting and other factors. There are no
conditions or events since December 31, 1996 that management believes have
changed the institution's category.
The payment of dividends by the Bank is subject to regulation by the OTS. The
OTS has promulgated a regulation that measures a savings institution's ability
to make capital distributions which include the payment of dividends, according
to the institution's capital position. The rule establishes "safe harbor"
amounts of capital distributions that institutions make after providing notice
to the OTS, but without needing prior approval. Institutions can distribute
amounts in excess of the safe harbor only with the prior approval of the OTS.
The OTS has proposed a new regulation that would amend the existing regulations
to permit capital distributions without prior notice to the OTS provided that,
following the distribution, the institution would remain at least adequately
capitalized. The OTS retains the authority to prohibit any capital distribution
otherwise authorized under the regulation if the OTS determines that
distributions would constitute an unsafe and unsound practice.
The following is a reconciliation between GAAP capital and FIRREA regulatory
capital at December 31, 1996:
Tangible Core Risk-based
Capital Capital Capital
-------- ------- ----------
Total stockholders' equity....................... $ 6,360,500 $ 6,360,500 $ 6,360,500
General loan valuation allowance................. -- -- 540,000
------------ ------------ ----------
Regulatory capital reported to the OTS........... 6,360,500 6,360,500 6,900,500
Minimum regulatory capital requirement........... 1,677,000 3,355,000 5,090,000
--------- --------- ---------
Excess regulatory capital........................ $ 4,683,500 $ 3,005,500 $ 1,810,500
========= ========= =========
(11) Stock Option Plan
During 1990, the Bank established the 1990 Stock Option Plan (Plan), which is
administered by a committee appointed by the Board of Directors.
(11) Stock Option Plan (Cont.)
The Plan provides for the granting of options to purchase shares of common stock
at an option price per share equal to the appraised value of the stock adjusted
for the minority interest. The number of shares to be authorized for issuance
under the Plan is 98,394 shares. In general, options may be granted for a period
of up to five years at any time before the expiration of the Plan. The
recipients' right to exercise the options would vest at a rate of 25% per year,
beginning on the first anniversary date of the date of grant.
A summary of the status of the Bank's fixed stock option plan as of December 31,
1996 and 1995 and 1994.
NOTE 8 - INCOME TAXES
Income taxchanges during the years ended on those dates is presented
below:
1996 1995
------------------------------ -------------------------
Weighted-Average Weighted-Average
Exercise Exercise
Fixed Options Shares Price Shares Price
------------- ------ ------- ------ -------
Outstanding at beginning of year........... 10,250 $ 9.48 53,423 $ 8.40
Granted.................................... 72,487 9.62 -- --
Exercised.................................. -- -- 825 8.08
Forfeited.................................. 4,450 9.00 42,348 8.15
------ ------
Outstanding at end of year................. 78,287 $ 9.63 10,250 $ 9.48
====== ======
The following table summarizes information about fixed stock options outstanding
at December 31, 1996:
Options Outstanding Options Exercisable
------------------- -------------------
Number Weighted-Avg. Number
Exercise Outstanding Remaining Weighted-Avg. Exercisable Weighted-Avg.
Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
- -------- ----------- ---------------- -------------- ----------- --------------
$ 9.42 2,250 0.96 $ 9.42 2,250 $ 9.42
10.11 3,650 1.97 10.11 2,737 10.11
9.62 42,898 4.15 9.62 -- --
9.62 18,289 4.89 9.62 -- --
9.62 11,200 4.97 9.62 -- --
------
78,287 4.25 $ 9.63 4,987 $ 9.80
====== =====
The per share weighted average fair value of stock options granted during 1996
was $3.27 on the date of grant assuming a weighted average risk-free interest
rate of 5.69% and an expected life of 5 years.
The Bank applies APB Opinion No. 25 in accounting for its Plan, and accordingly,
no compensation cost has been recognized for its stock options in the financial
statements. Had the Bank determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Bank's net earnings
and earnings per share for 1996 would have been reduced to $11,900 and $.02,
respectively. Net earnings for 1995 would not have been affected as there were
no options granted in 1995.
Pro forma net earnings reflects only options granted in 1996. Therefore, the
full impact of calculating compensation cost for stock options under SFAS No.
123 is not reflected in the pro forma net earnings presented, because
(11) Stock Option Plan (Cont.)
compensation cost is reflected over the options' vesting period of five years
and compensation cost for options granted prior to January 1, 1995 is not
considered.
(12) Employees' Savings and Stock Bonus Plan
Effective January 1, 1994, the Bank established the Del Amo Savings Bank, FSB
Employees' Savings and Stock Bonus Plan (the Plan) for the exclusive benefit of
the employees of the Bank. The Plan is a defined contribution stock bonus plan
with a 401k salary deferral feature under which employer matching contributions,
at the discretion of the Bank, can be made in cash or Bank stock. The employees
vest in the Bank's contributions at a rate of 20% per year of service and are
100% vested at death, disability or normal retirement age as defined by the
Plan. The Plan is available to all employees over 21 years of age with at least
six months of service in a plan year. Employee contributions are voluntary as
employees may elect to defer from one to fifteen percent of compensation as
defined by the Plan. The Bank made stock contributions of $6,300 and $14,700 to
the Plan in 1996 and 1995, respectively, which have been recorded as salaries
and employee benefits in the statement of earnings.
(13) Commitments
The Bank operates from leased premises under operating lease agreements expiring
at various dates through 2008. Rent expense for the years ended December 31,
1996 and 1995 was $282,700 and 1994$277,300 respectively. The following is summarizeda
schedule by years of future minimum rental payments:
1997 $ 284,100
1998 263,000
1999 157,100
2000 157,100
2001 157,100
Thereafter 477,400
---------
$ 1,495,800
=============
(14) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
"Disclosures About Fair Value of Financial Instruments", requires disclosure of
fair value information about financial instruments, regardless of whether
recognized in the financial statements of the reporting entity. For purposes of
determining fair value, SFAS No. 107 provides that the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
All of the fair values presented have been made under this definition of fair
value.
It is management's belief that the fair values presented below are accurate
based on the valuation techniques and data available to the Bank as follows:
1995 1994
---- ----
Currently Payable
Federal $ 66,455 $ 56,650
State 17,605 14,931
------ ------
Totalof December
31, 1996, as more fully described below. It should be noted that the operations
of the Bank are managed from a going concern basis and not a liquidation basis.
As a result, the ultimate value of the financial instruments presented could be
substantially different when actually recognized over time through the normal
course of operations. Additionally, a substantial portion of the Bank's inherent
value is its franchise value. Neither of these components have been given
consideration in the presentation of fair values below.
(14) Fair Value of Financial Instruments (Cont.)
The following table presents fair value information for financial instruments
shown in the Bank's Statements of Financial Condition. The Bank does not know
whether the fair values shown below represent values at which the respective
financial instruments could be sold.
December 31, 1996 December 31, 1995
----------------- -----------------
Carrying Estimated Fair Carrying Estimated Fair
Value Value Value Value
--------------- --------------- --------------- ---------------
Cash and cash equivalents................... $ 6,137,400 $ 6,137,400 $ 2,120,900 $ 2,120,900
Certificates of deposit..................... 600,000 600,000 1,598,000 1,598,000
Loans held for sale......................... 3,703,700 3,727,000 4,818,000 4,867,000
Loans held for investment................... 98,451,800 99,397,000 106,357,400 108,095,000
Fixed-term certificate of deposit accounts.. 83,196,800 82,984,000 87,671,700 88,171,000
Non-term deposit accounts................... 15,285,400 15,285,400 14,517,700 14,517,700
FHLB advances............................... 6,000,000 5,951,000 8,000,000 8,263,000
Commitments to sell loans................... -- 23,300 -- 49,000
Fair value estimates are based on the following methods and assumptions, some of
which are subjective in nature. Changes in assumptions could significantly
affect the estimates.
Cash
The carrying amounts reported in the Statements of Financial Condition for this
item approximate fair value.
Certificates of Deposit
The carrying amounts reported in the Statements of Financial Condition for this
item approximate fair value.
Loans Receivable
The portfolio is segregated into those loans with adjustable rates of interest
and those with fixed rates of interest. Fair values for loans held for sale are
based on quotes obtained from individual brokers. Fair values for loans held for
investment are based on discounting future cash flows by the current 84,060 71,581
------ ------
Deferred
Federal 6,273 10,839
State 286 1,796
------ ------
Total deferred 6,559 12,635
------ ------
Total income tax expense $ 90,619 $ 84,216
====== ======
F-16rate
offered for such loans with similar remaining maturities and credit risk. The
amounts so determined for each loan category are reduced by the Bank's allowance
for loan losses which thereby takes into consideration changes in credit risk.
Deposits
The fair value of deposits with no stated term such as regular passbook
accounts, money market accounts and checking accounts, approximates the carrying
amounts reported in the Statements of Financial Conditions. The fair value of
deposits with a stated maturity such as certificates of deposit is based on
discounting future cash flows by the current rate offered for such deposits with
similar remaining maturities.
FHLB Advances
For short term advances, fair value approximates carrying value. The fair value
of long term advances is based on their interest rate characteristics. For
variable rate borrowings, fair value is based on carrying values. For fixed rate
borrowings, fair value is based on discounting future contractual cash flows by
the current interest rate paid on such borrowings with similar remaining
maturities.
Commitments to Sell Loans
The fair market value of commitments to sell loans is based on rates for similar
transactions as of the reporting date.
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTONFSB
Unaudited Statements of Financial Condition
September 30, December 31,
1997 1996
------------- -------------
Assets
Cash and cash equivalents.......................................... $ 4,130,700 $ 6,137,400
Certificates of deposit............................................ 3,100,000 600,000
Loans receivable held for sale at the lower of cost or fair value.. 5,460,400 3,703,700
Loans receivable held for investment, net.......................... 98,027,900 98,451,800
Real estate owned, net (REO)....................................... 408,800 462,100
Accrued interest receivable........................................ 634,700 559,500
Investment in Federal Home Loan Bank stock, at cost................ 897,200 963,500
Premises and equipment, net........................................ 496,100 514,300
Income taxes receivable............................................ 364,600
Prepaid expenses and other assets.................................. 173,100 77,800
------------- ---------------
$ 113,328,900 $ 111,834,700
============= =============
Liabilities and Stockholders' Equity
Deposits........................................................... 100,369,600 98,482,200
FHLB advances...................................................... 5,000,000 6,000,000
Income taxes payable............................................... 77,600 -
Deferred income taxes.............................................. 886,900 886,900
Accrued interest payable and accrued expenses...................... 136,100 12,900
Advance payments by borrowers for taxes and insurance.............. 156,500 92,200
------------- -------------
106,626,700 105,474,200
------------- -------------
Stockholders' Equity
Common stock of $2.50 par value. Authorized 800,000 shares;
issued and outstanding 533,096 and 533,163 at September 30, 1997
and December 31, 1996, respectively.............................. 1,332,900 1,332,900
Additional paid-in capital......................................... 1,425,000 1,424,900
Retained earnings (subject to restrictions)........................ 3,944,300 3,602,700
------------- -------------
6,702,200 6,360,500
------------- -------------
$ 113,328,900 $ 111,834,700
============= =============
See accompanying notes to financial statements.
DEL AMO SAVINGS BANK, FSB
Unaudited Statements of Earnings
Nine months ended
September 30,
---------------------
1997 1996
-------------- -------------
Interest Income:
Interest on loans................................................ $ 5,915,400 $ 6,421,200
Interest on investments.......................................... 428,000 218,500
----------- -----------
6,343,400 6,639,700
Interest Expense:
Interest on deposits............................................. 3,621,300 3,815,600
Interest on FHLB borrowings...................................... 257,900 393,600
------------- -----------
3,879,200 4,209,200
Net interest income......................................... 2,464,200 2,430,500
Provision for loan losses.......................................... 90,000 74,000
----------- -----------
Net interest income after provision for loan losses......... 2,374,200 2,356,500
----------- -----------
Other income:
Loan and other fees.............................................. 96,400 86,600
Loan servicing fees.............................................. 15,900 17,600
Gain on sale of loans held for sale.............................. 341,900 575,500
Other............................................................ 22,300 16,300
----------- -----------
476,500 696,000
----------- -----------
Other expenses:
Salaries and employee benefits................................... 1,135,400 1,235,200
SAIF recapitalization assessment................................. - 673,400
Premises and occupancy expense................................... 370,200 372,300
SAIF insurance premiums.......................................... 70,000 214,600
Professional services............................................ 99,700 102,600
Data processing.................................................. 89,400 114,700
Advertising and promotion........................................ 82,700 115,400
REO operations, net.............................................. 12,200 45,600
Other general and administrative................................. 400,500 326,100
----------- ----------
.. 2,260,100 3,199,900
----------- ----------
Earnings (loss) before income taxes (benefit)................. 590,600 (147,400)
Income taxes (benefit)............................................. 249,000 (61,300)
----------- -----------
Net earnings (loss)........................................... $ 341,600 $ (86,100)
=========== ===========
Earnings (loss) per share.......................................... $ 0.64 $ (0.16)
=========== ===========
See accompanying notes to financial statements.
DEL AMO SAVINGS BANK, FSB
Unaudited Statements of Cash Flows
Nine Months ended
September 30,
-----------------------
Cash flows from operating activities: 1997 1996
---- ----
Net earnings (loss).......................................................... $ 341,600 $ (86,100)
------------ -------------
Adjustments to reconcile net earnings (loss) to net cash used by
operating activities
Depreciation.............................................................. 78,700 94,700
Provision for loan losses................................................. 90,000 74,000
Provision for losses on REO............................................... - 13,000
Loans originated and held for sale........................................ (50,897,900) (77,327,700)
Proceeds from sale of loans held for sale................................. 49,483,100 74,338,500
Amortization of deferred loan fees........................................ (19,500) (33,100)
Net loss on sale of REO................................................... 2,000 8,000
Gain on sale of loans held for sale....................................... (341,900) (575,500)
Federal Home Loan Bank Stock dividend received............................ (44,400) (38,800)
(Increase) decrease in accrued interest receivable........................ (75,200) 66,000
Increase in prepaid expenses and other assets............................. (95,300) (206,800)
Increase in accrued interest payable and accrued expenses................. 123,300 616,900
Increase in advance payments by borrowers for taxes and insurance......... 64,300 78,600
Increase in income taxes payable.......................................... 77,600 -
Provision for deferred income taxes....................................... - (406,300)
Decrease in income taxes receivable....................................... 364,600 -
Stock issued to 401KSOP plan.............................................. - 6,600
------------- -------------
Total adjustments...................................................... (1,190,600) (3,291,900)
-------------- --------------
Net cash used by operating activities.................................. (849,000) (3,378,000)
-------------- --------------
Cash flows from investing activities:
Increase in certificates of deposit.......................................... (2,500,000) (102,000)
Proceeds from sale of REO.................................................... 462,300 174,700
Loans originated............................................................. (7,529,100) (4,029,900)
Principal payments on loans.................................................. 7,471,500 8,589,900
Redemption (purchase) of Federal Home Loan Bank stock........................ 110,700 (8,400)
Investment in premises and equipment......................................... (60,500) (13,300)
-------------- --------------
Net cash (used) provided by investing activities....................... (2,045,100) 4,611,000
-------------- -------------
Cash flow from financing activities:
Increase in demand deposits and savings accounts............................. 8,957,600 1,346,000
Proceeds from issuance of certificates of deposit............................ 10,907,000 3,964,400
Payments on maturing certificates of deposit................................. (17,977,200) (7,948,700)
(Payments) proceeds from FHLB advances....................................... (1,000,000) 500,000
-------------- ---------------
Net cash provided (used) by financing activities....................... 887,400 (2,138,300)
-------------- ---------------
Net decrease in cash and cash equivalents.............................. (2,006,700) (905,300)
Cash and cash equivalents at beginning of period....................... 6,137,400 2,120,900
---------------- ------------
Cash and cash equivalents at end of period............................. $ 4,130,700 $ 1,215,600
================ ===========
Supplemental disclosures of cash flow information:
Interest paid (including interest credited) during the year................. $ 3,858,200 $ 4,204,200
Cash paid during the year for income taxes................................... 50,000 260,000
============= =============
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994(UNAUDITED)
September 30, 1997
NOTE 8 - INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
forA- BASIS OF PRESENTATION
The financial reporting purposes and the amounts used for income tax
purposes. Temporary differences giving rise to the deferred tax
asset/(liability) consist primarily of provision for credit losses,
depreciation, and write down of property to net realizable value,
accounted for differently for financial reporting and tax purposes.
Significant components of the Banks deferred tax assets at December
31, 1995 are as follows:
Deferred tax assets:
Allowance for credit losses $ 36,973
Write down of property to net
realizable value 3,657
Total deferred tax asset 40,630
Deferred tax liabilities 7,558
-------
Net deferred tax asset $ 33,072
======
The effective income tax rate differs from the statutory rate
principally because of the effects of tax exempt interest income of
$177,243 and $190,468 for 1995 and 1994, respectively, and
non-deductible interest expense related to tax exempt income of
$20,534 and $15,107 for 1995 and 1994, respectively.
NOTE 9 - RELATED PARTIES
The Bank has entered into transactions with its directors,
significant shareholders and their affiliates (Related Parties). Such
transactions were made in the ordinary course of business on
substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the same time for comparable
transactions with other customers, and did not,statements include adjustments which, in the opinion of
management, involve moreare necessary for a fair presentation of the results of operation
and financial condition for each of the periods presented. Such adjustments are
of a normal recurring nature. The results of operations for the nine months
ended September 30, 1997, are not necessarily indicative of the results of
operations that can be expected for the year ending December 31, 1997. The
Bank's accounting and reporting policies conform with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Such policies
require management to make estimates and develop assumptions that affect the
amounts reported in the financial statements and related footnotes. Actual
results could differ from management's estimates. For further information, refer
to the financial statements and footnotes thereto included in the Del Amo
Savings annual report for the year ended December 31, 1996.
NOTE B - PENDING ACQUISITION
On November 20, 1997, City Holding Company ("City Holding"), and the Bank
jointly announced the signing of a definitive agreement for City Holding to
acquire the Bank. Under the terms of the agreement, the Bank's stockholders will
receive in a tax-free exchange, a fixed number of shares of City Holding Common
Stock based on the Exchange Ratio, as described in the agreement. The
acquisition is contingent upon regulatory and stockholders' approval, and is
expected to be completed in the first quarter of 1998.
NOTE C - NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 1997, the Bank adopted Statement of Financial Accounting Standards
(SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", which requires that an entity recognize the
financial and servicing assets it controls and the liabilities it has incurred
and derecognize financial assets when control has been surrendered in accordance
with the criteria provided in the Statement. The adoption of SFAS No. 125 did
not have a material impact on the Bank's financial position or results of
operations during 1997.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share", (SFAS No. 128) which
establishes new standards for computing and presenting earnings per share. SFAS
No. 128 is effective for all financial statements issued subsequent to December
15, 1997. The basic and diluted earnings per share computed under SFAS No. 128
are not anticipated to be materially different from earnings per common share
presented herein.
Also, during 1997, the Financial Accounting Standards Board issued several other
new accounting pronouncements which will become effective in 1998. These
pronouncements include SFAS No. 129, "Disclosure of Information about Capital
Structure"; SFAS No. 130, "Reporting Comprehensive Income"; and SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information". The Bank
is in the process of fully evaluating these new pronouncements and expects to
adopt them in 1998 in accordance with the requirements. Such adoption is not
expected to have a significant impact on the financial position or results of
operations of the Bank.
DEL AMO SAVINGS BANK, FSB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Bank was incorporated on May 31, 1977 as "Commonwealth Savings and Loan
Association", a California-chartered savings and loan association with accounts
insured by the Federal Savings and Loan Insurance Corporation. On December 1,
1982, the Bank's name was changed to "Del Amo Savings and Loan Association" and
on March 13, 1989 the name was again changed, this time to "Del Amo Savings
Bank". On May 22, 1990, the Bank completed the conversion of its charter from a
California savings and loan association to that of a Federal savings bank, with
the resultant adoption of its current name, "Del Amo Savings Bank, FSB".
The Bank's operating results are dependent primarily on net interest income, the
difference between interest income earned on loans and federal funds sold, and
the Bank's cost of funds (interest paid to its depositors and on borrowed
funds). Operating results are also affected by the provision for loan losses and
noninterest income and expense items. Noninterest expenses principally consist
of employee salaries and benefits, occupancy and equipment expenses, federal
deposit insurance premiums and other administrative expenses. Factors that
significantly impact operating results include general economic and competitive
conditions, particularly changes in market interest rates, government policies
and actions of regulatory authorities.
Average Balance Sheet
The following tables set forth certain information relating to the Bank's
average balance sheets for the nine months ended September 30, 1997 and 1996,
and for the years ended December 31, 1996 and 1995. The yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown except where noted otherwise.
Average balances are derived from average daily balances.
The yields and costs include fees, which are considered adjustments to yields.
For the Nine Months Ended September 30,
---------------------------------------
1997 1996
----------------------------- -----------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits $ 2,940 $ 140 6.35% $ 2,082 $ 87 5.57%
Federal Funds sold and other
short-term investments 6,264 244 5.19% 2,320 93 5.34%
Loans receivable(3) 101,067 5,915 7.80% 110,011 6,421 7.78%
FHLB Stock 932 44 6.29% 930 39 5.59%
--------- -------- -------- ---------
Total interest-earning
assets 111,203 $ 6,343 7.61% 115,343 $ 6,640 7.68%
========= ========
Noninterest-earning assets 1,648 1,910
------- --------
Total Assets $ 112,851 $117,253
========= ========
Liabilities and Retained Earnings
Interest-bearing liabilities
Money market deposits $ 9,478 $ 229 3.22% $ 4,739 $ 74 2.08%
Passbook deposits 3,389 46 1.81% 3,239 44 1.81%
NOW and other demand
deposits 8,071 61 1.01% 7,206 36 0.67%
Certificate accounts 79,028 3,285 5.54% 85,884 3,662 5.69%
--------- -------- ------ ------ ------ --------
Total deposits 99,966 3,621 4.83% 101,068 3,816 5.03%
FHLB advances 5,036 258 6.83% 8,450 393 6.20%
--------- -------- -------- ---------
Total interest-bearing
liabilities 105,002 $ 3,879 4.93% 109,518 $ 4,209 5.12%
--------- ========= --------- ========
Noninterest-bearing
liabilities 1,331 1,296
Stockholders' equity 6,518 6,439
--------- --------
Total liabilities and
stockholders' equity $112,851 $ 117,253
======== =========
Net interest income $ 2,464 $ 2,431
Net interest rate spread(1) 2.68% 2.55%
Net interest margin(2) 2.95% 2.81%
Ratio of interest-earning
assets to interest-bearing liabilities 105.91% 105.32%
For the Year Ended December 31,
--------------------------------
1996 1995
----------------------------- ----------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits $ 2,033 $ 110 5.41% $ 2,259 $ 146 6.46%
Federal Funds sold and other
short-term investments 2,654 142 5.35% 1,713 101 5.90%
Loans receivable(3) 108,427 8,508 7.85% 109,052 8,370 7.68%
FHLB Stock 939 54 5.75% 869 44 5.06%
--------- -------- -------- ---------
Total interest-earning
assets 114,053 $ 8,814 7.73% 113,893 $ 8,661 7.60%
========= ========
Noninterest-earning assets 2,583 2,726
--------- -------
Total Assets $ 116,636 $116,619
========= ========
Liabilities and Retained Earnings
Interest-bearing liabilities
Money market deposits $ 4,732 $ 70 1.48% $ 3,941 $ 95 2.41%
Passbook deposits 3,248 55 1.69% 3,094 66 2.13%
NOW and other demand
deposits 7,272 85 1.17% 8,205 105 1.28%
Certificate accounts 85,207 4,818 5.65% 88,241 5,067 5.74%
--------- -------- -------- ---------
Total deposits 100,459 5,028 5.01% 103,481 5,333 5.15%
FHLB advances 8,400 535 6.37% 5,875 377 6.42%
--------- -------- -------- ---------
Total interest-bearing
liabilities 108,859 $ 5,563 5.11% 109,356 $ 5,710 5.22%
--------- ========= --------- ========
Noninterest-bearing
liabilities 1,365 973
Stockholders' equity 6,412 6,290
--------- ---------
Total liabilities and
stockholders' $ 116,636 $ 116,619
========== ==========
equity
Net interest income $ 3,251 $ 2,951
Net interest rate spread(1) 2.62% 2.38%
Net interest margin(2) 2.85% 2.59%
Ratio of interest-earning
assets to interest-bearing liabilities 104.77% 104.15%
- ---------------------
(1) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
(2) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
(3) Amount is net of deferred loan fees, loan discounts, loans in process and
loan loss allowances, and includes loans held for sale and nonaccrual loans.
(4) Certificate accounts greater than normal credit risk$100,000 amounted to $10,320,000 as of
September 30, 1997.
Rate/Volume Analysis
The following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Bank's interest income and interest expenses
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume), and (iii) the net change. The changes
attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
Nine months ended Year ended
September 30, December 31,
1997 vs. 1996 1996 vs. 1995
Increase (Decrease) Increase (Decrease)
Due to Change In: Due to Change In:
----------------------------------------------- ---------------------------------------------------
Volume Rate Total Volume Rate Total
----------------- ------------- --------------- -------------------- ------------- ----------------
(Dollars in thousands) (Dollars in thousands)
----------------------------------------------- ---------------------------------------------------
INTEREST INCOME FROM:
Interest-earning $ 40 $ 13 $ 53 $ (14) $ (22) $ (36)
deposits
Federal funds sold &
other short 156 (4) 152 51 (10) 41
term investments
Loans receivable, net (535) 29 (506) (48) 186 138
FHLB stock 0 5 5 4 6 10
---- ------------ ---- ---------- --- --------- ----- -------------- -- ----------- --- -----------
Total interest-earning (339) 43 (296) (7) 160 153
assets
INTEREST EXPENSE ON:
Money market deposits 100 55 155 17 (42) (25)
Passbook deposits 2 - 2 3 (14) (11)
NOW and other demand 5 20 25 (11) (9) (20)
deposits
Certificate accounts (287) (90) (377) (172) (77) (249)
FHLB advances (193) 58 (135) 161 (3) 158
---- ------------ ---- ---------- --- --------- ----- -------------- -- ----------- --- -----------
Total interest-bearing
liabilities (373) 43 (330) (2) (145) (147)
---- ------------ ---- ---------- --- --------- ----- -------------- -- ----------- --- -----------
CHANGE IN NET INTEREST
INCOME $ 34 $ - $ 34 $ (5) $ 305 $ 300
==== ============ ==== ========== === ========= ===== ============== == =========== === ===========
Investment Portfolio
At September 30, 1997, December 31, 1996 and 1995, respectively, investment
securities amounted to $3,100,000, $600,000 and $1,598,000. At each of these
dates, the entire investment securities portfolio was comprised of certificates
of deposit. All of the certificates of deposit for all periods presented had
maximum terms of one year. The weighted average yields on investment securities
were 5.80%, 5.50% and 5.72% as of September 30, 1997, December 31, 1996 and
December 31, 1995, respectively.
Loan Portfolio
The composition of the Bank's loan portfolio is presented in the following
table:
September 30 December 31 December 31
1997 1996 1995
---- ---- ----
Conventional loans secured by deeds of trust
Residential, 1-4 units.................. $ 71,189,000 $ 72,855,600 $ 76,258,200
Residential, 5+ units................... 10,657,500 10,221,200 11,038,600
Commercial and industrial............... 15,962,400 15,307,100 19,115,500
Land.................................... 77,000 77,600 203,400
Home improvement........................ 268,100 274,300 294,600
-------- -------- --------
Total loans secured by real estate. 98,154,000 98,735,800 106,910,300
Loans on savings accounts............... 555,600 356,100 194,700
Less:
Deferred loan fees...................... 56,400 75,700 107,900
Deferred gain on sale of REO............ 24,200 24,400 24,700
Allowance for loan losses............... 601,100 540,000 615,000
-------- -------- --------
Loans receivable held for investment, net. $ 98,027,900 $98,451,800 $106,357,400
============ =========== ============
Loans receivable held for sale (1)........ $ 5,460,400 $ 3,703,700 $ 4,818,000
=========== =========== ===========
(1) Loans receivable held for sale were collateralized by residential, 1-4 unit
properties for all periods presented.
Comparison of Operating Results for the Nine Months Ended September 30, 1997 and
September 30, 1996
General
The Bank reported net earnings of $341,600 or present other
unfavorable features. The aggregate amount$0.64 per share for the nine
months ended September 30, 1997 compared to a net loss of $86,100 or $0.16 per
share for the nine months ended September 30, 1996. This increase of $427,700 or
496.74%, for the nine months ended September 30, 1997 was primarily due to the
one-time SAIF recapitalization assessment of $673,400 paid in 1996, offset by
the decrease in the gain on sale of loans held for sale of $233,600.
Interest Income
Interest income was $6,343,400 and $6,639,700 for the nine months ended
September 30, 1997 and 1996 respectively. The $296,300 decrease in interest
income for the nine months ended September 30, 1997 compared to such related
parties1996 resulted
from a decrease in the average balance of interest-earning assets of $4,140,000
and a decrease in the average yield on interest-earning assets of .07% to 7.61%.
The decrease in the average yield on interest-earning assets is primarily due to
a decrease in the average yield on interest-earning deposits and federal funds
sold.
Interest Expense
Interest expense was $3,879,200 and $4,209,200 for the nine months ended
September 30, 1997 and 1996 respectively. The $330,000 decrease in interest
expense for the nine months ended September 30, 1997 compared to 1996 resulted
from a decrease in the average balance of interest-bearing liabilities of
$4,516,000 and a decrease in the average cost of interest-bearing liabilities of
.19%. The decrease in the average cost of interest-bearing liabilities is
primarily due to a decrease in the average cost on certificate accounts.
Net Interest Income Before Provision for Loan Losses
Net interest income before provision for loan losses was $2,464,200 and
$2,430,500 for the nine months ended September 30, 1997 and 1996 respectively.
The results were comparable for the period.
Provision for Loan Losses
During the nine months ended September 30, 1997 and 1996, the Bank recorded
provisions for loan losses of $90,000 and $74,000, respectively. The increase of
$16,000, or 21.62%, in the provision for loan losses is due primarily to the
continued declines in the real estate values for loans secured by multifamily
loans and originated prior to 1990. Although management considers the level of
allowance for loan losses as of September 30, 1997 to be adequate, there can be
no assurance that the Bank will not have to establish additional loss provisions
in the future.
Other Income
The following table summarizes other income for the nine months ended September
30,:
1997 1996
---- ----
Loan and other fees $ 112,300 $ 104,200
Gain on sale of loans held for sale 341,900 575,500
Other income 22,300 16,300
--------- ---------
Total other income $ 476,500 $ 696,000
========== ==========
Other income decreased by $219,500, or 31,54%, to $476,500 for the nine months
ended September 30, 1997 as compared to 1996. The decrease was primarily
attributable to a decrease in the gain on sale of loans held for sale due to
changes in market conditions.
Other Expense
The following table summarizes other expense for nine months ended September
30,:
1997 1996
---- ----
Salaries and employee benefits $ 1,135,400 $ 1,235,200
SAIF recapitalization assessment -- 673,400
SAIF insurance premiums 70,000 214,600
Premises and occupancy expense 370,200 372,300
Other expenses 684,500 704,400
----------- -----------
Total other expense $2,260,100 $3,199,900
========== ==========
Other expense decreased $939,800, or 29.37%, to $2,260,100 for the nine months
ended September 30, 1997 as compared to 1996. The decrease is primarily due to a
one-time SAIF recapitalization assessment of $673,400 paid in 1996, a decrease
in annual SAIF insurance premiums of $144,600, and a decrease in salaries and
employee benefits of $99,800, attributable to fewer mortgage banking employees.
Income Taxes
Income taxes increased by $310,300 from a tax benefit of $61,300 for the nine
months ended September 30, 1996 to income taxes of $249,000 for the nine months
ended September 30, 1997. The effective tax rate was 42% for both periods.
Comparison of Financial Condition at September 30, 1997 and December 31, 1996
Total assets at September 30, 1997 were $113.3 million compared to $111.8
million at December 1, 1996, an increase of $1.5 million, or 1.34%. The increase
primarily resulted from increase in loans held for sale of $1.8 million funded
by an increase in deposits of $1.9 million.
The increase of $1.8 million, or 48.65%, in loans held for sale to $5.5 million
at September 30, 1997 was primarily due to the timing of cash receipts from
purchasers of loans. All loans held for sale were sold servicing released.
The decrease in FHLB advances of $1.0 million, or 16.67%, to $5 million at
September 30, 1997, reflects the Bank's liquidity at that point in time.
Comparison of Operating Results for Twelve Months Ended December 31, 1996 and
December 31, 1995
General
The Bank reported net earnings of $21,200 or $0.04 per share for the year ended
December 31, 1996, compared to net earnings of $96,800 or $0.18 per share for
the year ended December 31, 1995. The decrease in earnings was due primarily to
the one-time SAIF recapitalization assessment of $673,400 paid in 1996, offset
by an increase in net interest income of $300,300, and an increase in the gain
on sale of loans held for sale of $609,500.
Interest Income
Interest income was $8,814,300 and $8,661,200 for the years ended December 31,
1996 and 1995 respectively. The $153,100 increase in interest income in 1996
compared to 1995 resulted from an increase in the average yield on
interest-earning assets of 0.13%, partially offset by a decrease in the average
balance of interest-earning assets of $160,000.
Interest Expense
Interest expense was $5,563,200 and $5,710,400 for the years ended December 31,
1996 and 1995 respectively. The decrease in interest expense in 1996 compared to
1995 resulted from a decrease in the average cost on interest-bearing
liabilities of 0.11%, partially offset by an increase in the average balance of
interest-bearing liabilities of $147,000.
Net Interest Income Before Provision for Loan Losses
Net interest income before provision for loan losses was $3,251,100 and
$2,950,800 for the years ended December 31, 1996 and 1995 respectively. The
increase in 1996 compared to 1995 was primarily a result of the net interest
margin increasing to 2.59% from 2.85% during the year.
Provision for Loan Losses
During 1996 and 1995, the Bank established $104,000 and $76,000, respectively,
of provisions for losses on loans. The increase of $28,000, or 36.8%, in the
provision for loan losses is due primarily to the continued declines in the real
estate values for loans secured by multifamily loans and originated prior to
1990. Although management considers the level of allowance for loans losses at
December 31, 1996 to be adequate, there can be no assurance that the Bank will
not have to establish additional loss provisions in the future.
Other Income
The following table summarizes other income for the years ended December 31,:
1996 1995
---- ----
Loan and other fees $ 134,900 $ 99,600
Gain on sale of loans held for sale 740,400 130,900
Other income 22,000 37,300
----------- -----------
Total other income $ 897,300 $ 267,800
========== ==========
Other income increased by $629,500, or 235.06%, in 1996 to $897,300 as compared
to 1995. The increase was primarily due to the increase in the gain on sale of
loans held for sale due to changes in market conditions.
Other Expense
The following table summarizes other expense for the years ended December 31,:
1996 1995
---- ----
Salaries and employee benefits $ 1,615,600 $ 1,400,900
SAIF recapitalization assessment 673,400 --
SAIF insurance premiums 258,900 298,000
Premises and occupancy expense 503,800 489,500
Other expenses 956,500 788,300
------------ ------------
Total other expense $ 4,008,200 $ 2,976,700
=========== ===========
Other expense increased $1,031,500, or 34.7%, in 1996 to $4,008,200 as compared
to 1995. The increase is primarily due to a one-time SAIF recapitalization
assessment of $673,400 paid in 1996, an increase in salaries and employee
benefits of $214,700 attributable to mortgage banking operations, and an
increase in net REO operations of $70,500.
Income Taxes
Income taxes decreased by $54,100 from $69,100 in 1995 to $15,000 in 1996. The
decrease was due to decrease in earnings before income taxes. The effective tax
rates were 41% and 42% for 1996 and 1995, respectively.
Comparison of Financial Condition at December 31, 1996 and December 31, 1995
Total assets at December 31, 1996 were $111.8 million compared to $117.8 million
at December 31, 1995, and 1994 was $1,243,307 and $1,270,962,
respectively. During 1995 new loans to such related parties amounted
to $383,338 and repayments amounted to $410,993.a decrease of $6.0 million, or 5.1%. The Bank leases property to a board member. The lease is classified
as an operating lease and provides for minimum annual rentals of
$6,000 through 1996. The lease is cancelable upon written notice by
either party. The lease provides for the option to purchase the
property. If the right to purchase the property is exercised, all
rental payments made will be applied to the purchase price.
The Bank purchased a portion of land for one of its branch facilitiesdecrease
primarily resulted from a board member. The costdecrease in net loans receivable of the land purchased$9.0 million,
offset by an increase in cash and cash equivalents and certificates of deposit
of $3.0 million.
Cash and cash equivalents increased from the board
member amounted to $149,303.
F-17
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 10 - CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's financial statements do not reflect various commitments
and contingent liabilities which arise in the normal course of
business and which involve elements of credit risk, interest rate
risk and liquidity risk. These commitments and contingent liabilities
are commercial and similar letters of credit. A summary of the Bank's
commitments and contingent liabilities at December 31, 1995, is as
follows:
Notional Amount
---------------
Commercial real estate, construction,
and land development $ 465,000
Other unused commitments 90,000
Commercial and similar letters of credit 38,000
Commitments for commercial real estate, construction and land
development, other unused commitments, and commercial and similar
letters of credit include exposure to some credit loss in the event
of nonperformance for the customer. The Bank's credit policies and
procedures for credit commitments and financial guarantees are the
same as those for extension of credit that are recorded on the
statements of condition. Because these instruments have fixed
maturity dates, and because many of them expire without being drawn
upon, they do not generally present any significant liquidity risk to
the Bank. The Bank has not been required to perform on any financial
guarantees during the past two years. The Bank has not incurred any
losses on its commitments in either 1995 or 1994.
NOTE 11 - CONTINGENCIES
The Bank is a defendant in various litigation and claims arising from
the construction of the Bank's branch facilities. Management, after
consultation with legal counsel, believes that the liabilities, if
any, arising from such litigation and claims will not be material to
the Bank's financial position. The Bank intends to vigorously defend
its position.
NOTE 12 - LEASE OBLIGATIONS
The Bank leases the main office banking facility and exterior
advertising space under operating leases expiring at the end of 1999.
The Bank also leases a branch banking facility under an operating
lease expiring during 1996. The operating lease for the branch
banking facility provides for a renewal option for an additional
period of two years and a purchase option at the end of the initial
term or any extended term of this lease. The minimum future rental
payments under the current terms of the lease are as follows:
Year ended Amount
---------- ------
1996 $ 136,076
1997 111,576
1998 111,576
1999 92,980
2000 -0-
---------
TOTAL MINIMUM FUTURE
LEASE PAYMENTS $ 452,208
=======
Lease expenses charged to operations was $117,344 and $112,608 and
1995 and 1994, respectively.
F-18
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
The Bank is the lessor of property to a board member. The lease is
classified as an operating lease and provides for minimum annual
rentals of $6,000 through 1996. The lease is cancelable upon written
notice by either party. The lease provides for the option to purchase
the property. If the right to purchase the property is exercised, all
rental payments made will be applied to the purchase price.
Following is a summary of property on or held for lease at December
31, 1995 and 1994:
1995 1994
---- ----
Land $ 56,895 $ 56,895
====== ======
NOTE 13 - CONCENTRATIONS OF CREDIT RISK
The Bank grants retail, commercial and commercial real estate loans
to customers located throughout West Virginia, eastern Kentucky, and
southern Ohio. The Bank evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the customer. Collateral held
varies but may include accounts receivable, inventory, property,
plant and equipment, and income-producing commercial properties.
Although the Bank has a diversified loan portfolio, a substantial
portion of the debtors' ability to honor their contracts is dependent
upon the economic conditions in each loan's respective location.
F-19
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 14 - REGULATORY MATTERS
The Bank, as a National Bank, is subject to the dividend restrictions
set forth by the Comptroller of the Currency. Under such
restrictions, the Bank may not, without the prior approval of the
Comptroller of the Currency, declare dividends in excess of the sum
of the current year's earnings (as defined) plus the retained
earnings (as defined) from the prior two years. The dividends,$2.1 million as of December 31, 1995 thatto
$6.1 million as of December 31, 1996 primarily in federal fund investments. The
increase reflects increased investment in federal funds during a period of
decreasing loan originations.
Loans held for sale decreased from $4.8 million at December 31, 1995 to $3.7
million as of December 31, 1996. Loan sales increased to $101.0 million for the
year ended December 30, 1996, compared to $12.0 million for the same period
ended December 31, 1995. All of the loans sold during 1996 were sold servicing
released.
Loans held for investment decreased from $106.4 million at December 31, 1995 to
$98.5 million as of December 31, 1996 due to an increase in principal payments
to $12.9 million, primarily on one to four residential loans and commercial real
estate loans.
Deposits decreased from $102.2 million as of December 31, 1995 to $98.5 million
as of December 31, 1996 primarily as a result of payments on maturing
certificates of deposit of $114.0 million offset by proceeds from issuance of
certificates of deposit of $109.5 million. During this period, the Bank's
pricing of deposits was conservative due to low consumer demand for loans.
FHLB advances decreased from $8.0 million as of December 31, 1995 to $6.0
million as of December 31, 1996 primarily due to the payment of a one year
advance maturing December 31, 1996.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, and proceeds from the sale of loans. While maturities and
scheduled amortization of loans are predictable sources of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition. Beginning in 1994, the Bank could declare, withoutbegan
originating loans for sale, and selling such loans in the approval
of the Comptroller of the Currency, amounted to approximately
$967,291.secondary market
servicing released. The Bank is also requiredhas continued to maintain the required minimum
amountslevels of capital to total risk weightedliquid assets as defined by OTS regulations. This requirement, which
may be varied at the banking
regulators. Atdirection of the OTS depending upon economic conditions and
deposit flow, is based upon a percentage of deposits and short-term borrowings.
The required ratio is currently 5%. The Bank's average liquidity ratios were
9.86% and 5.98% for the nine months ended September 30, 1997 and 1996 and 6.17%
and 5.54% for the years ended December 31, 1995, the Bank is required to have
minimum Tier 11996 and Total capital ratios of 4.00% and 8.00%,1995 respectively. The
Bank's actual ratios atincrease in average liquidity ratio for the nine months ended September 30, 1997
compared to September 30, 1996 was primarily due to a decrease in loans held for
sale during the first two quarters of 1997.
The Bank has other sources of liquidity in the event that date were 14.70%a need for additional
funds arises. Additional sources of funds include FHLB advances and
15.06%, respectively. The Bank's leverage ratio at December 31, 1995,
was 10.82%.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values of financial instruments are as follows:
1995
------------------------
Carrying Fair
Amount Value
-------- ----------
Financial assets:
Cash and cash
equivalents $ 4,449,413 $ 4,449,413
Investment securities 14,896,416 15,177,913
Mortgage-backed and
related securities 500,128 506,421
Loans, net of allowance 17,764,719 17,756,921
---------- ----------
TOTAL $ 37,610,676 $ 37,890,668
========== ==========
Financial liabilities:
Deposits $ 34,593,070 $ 34,579,034
Securities sold under
agreement to repurchase 378,886 378,886
---------- ----------
TOTAL $ 34,971,956 $ 34,957,920
========== ==========
F-20
THE OLD NATIONAL BANK OF HUNTINGTON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amount of cash and equivalents approximate fair
value. For investment securities and mortgage-backed and related
securities, fair value is based on quoted market prices. For loans
receivable, fair values are determined and based on quoted market
prices. For loans receivable, fair values are determined and based
on discounted cash flows. The fair value of demand and savings
deposits and securities sold under agreements to repurchase is
equal to the amount payable at the date of the financial
statements. For certificates
of deposit fair valuematuring within one year. Short-term borrowings from FHLB are used to
offset increases and decreases in loans held for sale. Long-term borrowings from
FHLB are used to fund loans held for investment when long term retail deposits
are not available or pricing is estimated
based on current ratesnot favorable. The Bank believes that it has
sufficient liquidity and capital resources to meet all of its obligations.
The Bank's cash flows are comprised of three primary classifications: cash flows
from operating activities, investing activities and financing activities. Cash
flows provided by (used in) operating activities were ($849,000) and
($3,378,000) for deposits of similar remaining
maturities.
NOTE 16 - INDUSTRY SEGMENT REPORTING
The Company operates principally in a single business segment
offering general commercial banking services.
F-21
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CONDITIONthe nine months ended September 30, 1997 and 1996,
respectively, and were $1,002,300 and ($4,657,000) for the years ended December
31, 1996 and 1995, ---- ----
(UNAUDITED)
ASSETS
Cashrespectively. Net cash provided by (used in) investing
activities consists primarily of disbursements from loan originations and
dueinvestments, offset by principal collection on loans and proceeds from banks $ 2,756,153 $ 3,109,413
Federal funds sold (cash equivalent) 9,200,000 1,340,000
Investment securities
Held to maturities (fair valuethe sale
of $8,364,917
atloans. Disbursements on loans originated were $7.5 million and $4.0 million
for the nine months ended September 30, 1997 and 1996, respectively, and $5.8
million and $5.9 million for the years ended December 31, 1996 and $8,674,708 at1995,
respectively. Principal payments on loans were $7.5 million and $8.6 million for
the nine months ended September 30, 1997 and 1996, respectively, and $12.9
million and $8.2 million for the years ended December 31, 1995) 8,354,862 8,491,067
Available1996 and 1995,
respectively. Net cash provided by (used in) financing activities consisted
primarily of net activity in deposit accounts and FHLB advances. The net
increase in deposits was $1.9 million for sale, at fair value 5,897,664 6,503,205
Mortgage-backed and related securities
Available for sale, at fair value 300,252 506,421
Loans 25,741,170 17,764,719
Less allowance for credit losses (121,705) (96,152)
---------- ----------
Net loans 25,619,465 17,668,567
Properties and equipment 1,089,881 857,726
Other real estate owned -0- 242,894
Deferred income tax benefit -0- 33,072
Accrued income and other assets 621,652 460,865
---------- ----------
TOTAL ASSETS $ 53,839,929 $ 39,213,230
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 3,997,598 $ 4,219,386
Savings and NOW deposits 22,147,673 12,823,184
Time deposits $100,000 and over 5,549,386 4,326,751
Other time deposits 17,419,753 13,223,749
---------- ----------
Total Deposits 49,114,410 34,593,070
Securities sold under agreements to repurchase 415,257 378,886
Accrued expenses and other liabilities 250,408 249,908
----------- -----------
TOTAL LIABILITIES 49,780,075 35,221,864
---------- ----------
SHAREHOLDERS' EQUITY
Common stock - $10 par value 75,000 shares
authorized, issued and outstanding 750,000 750,000
Capital surplus 750,000 750,000
Retained earnings 2,549,997 2,427,836
Less: Net unrealized loss on available
for sale securities 9,857 63,530
--------- ----------
TOTAL SHAREHOLDERS' EQUITY 4,059,854 3,991,366
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 53,839,929 $ 39,213,230
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-22
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF INCOME
NINE MONTHS ENDED
--------------------------------the nine months ended September 30,
September 30,
1996 1995
---- ----
(UNAUDITED) (UNAUDITED)
INTEREST INCOME
Interest and fees on loans $ 1,675,716 $ 905,924
Interest on investment securities:
Taxable 469,631 521,483
Exempt from federal income tax 115,250 116,299
Interest on federal funds sold 206,458 214,126
Interest on mortgage backed and
related securities 73,607 187,675
Interest on other bonds 940 1,189
---------- ----------
TOTAL INTEREST INCOME 2,541,602 1,946,696
--------- ---------
INTEREST EXPENSE
Interest on demand and savings deposits 344,838 345,117
Interest on certificates1997 a net decrease of deposits
over $100,000 220,611 98,749
Interest on other time deposits 638,129 457,651
Interest on federal funds purchased
and securities sold under agreements
to repurchase 16,128 17,390
--------- --------
TOTAL INTEREST EXPENSE 1,219,706 918,907
--------- --------
NET INTEREST INCOME 1,321,896 1,027,789
PROVISION FOR CREDIT LOSSES (136,000) (9,500)
---------- --------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 1,185,896 1,018,289
--------- ---------
OTHER INCOME
Service charges on deposit accounts 33,130 22,169
Other service charges and fees 88,132 38,519
Net investment and mortgage backed
securities gains (losses) (264) (175)
Net gain on sale of fixed assets 28,731 -0-
Other income 28,790 17,241
-------- --------
TOTAL OTHER INCOME 178,519 77,754
-------- --------
OTHER EXPENSES
Salaries and employee benefits 534,156 266,838
Occupancy expense 157,220 100,697
Equipment expense 52,844 23,115
Other expense 430,229 361,042
--------- --------
TOTAL OTHER EXPENSES 1,174,449 751,692
--------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-23
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF INCOME (CONTINUED)
NINE MONTHS ENDED
--------------------------------
September 30, September 30,
1996 1995
---- ----
(UNAUDITED) (UNAUDITED)
INCOME BEFORE INCOME TAXES $ 189,966 $ 344,351
INCOME TAX EXPENSE 67,805 46,436
-------- --------
NET INCOME $ 122,161 $ 297,915
======= =======
NET INCOME PER SHARE OF COMMON
STOCK $ 1.63 $ 3.97
====== =======
AVERAGE SHARES OUTSTANDING 75,000 75,000
======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-24
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED
--------------------------------
September 30, September 30,
1996 1995
---- ----
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 122,161 $ 297,915
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 52,284 18,610
Provision for credit losses 136,000 9,500
Accretion of deferred loan origination fees (23,226) (11,873)
Premium amortization and discount accretion, net (5,220) (1,162)
Realized losses (gains) from investments and
mortgage-backed securities - net 264 175
Gain from sale of other real estate owned (28,731) -0-
Changes in assets and liabilities which provided
(used) cash exclusive of changes shown
separately:
Deferred income tax benefit 33,072 103,134
Accrued income and other assets (160,787) (11,947)
Accrued expenses and other liabilities 34,816 (152,237)
---------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 160,633 252,115
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment
securities - held to maturity 190,520 395,369
Proceeds from sales and maturities of investment
securities - available for sale 2,499,820 1,296,121
Purchase of investment securities - held to maturity (50,000) (122,868)
Purchase of investment securities - available for sale (1,975,443) (1,896,088)
Proceeds from sales and maturities of mortgage backed
and related securities - available for sale 199,985 292,000
Net (increase) decrease in loans (8,063,672) (4,320,229)
Purchases of properties and equipment (284,439) (527,230)
Proceeds from the sale of other real estate owned 271,625 -0-
----------- ------------
NET CASH (USED IN) INVESTING
ACTIVITIES (7,211,604) (4,882,925)
----------- ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-25
THE OLD NATIONAL BANK OF HUNTINGTON
STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED
--------------------------------
September 30, September 30,
1996 1995
---- ----
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Demand, savings and
NOW deposit accounts $ 9,102,701 $ 1,896,741
Time deposits5,418,639 6,201,318
Securities sold under agreements
to repurchase 36,371 (350,292)
--------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 14,557,711 7,747,767
---------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,506,740 3,116,957
--------- ---------
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD 4,449,413 5,641,500
--------- ----------
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD $ 11,956,153 $ 8,758,457
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash received during the six month period for:
Interest $ 2,518,585 $ 1,892,789
========= ==========
Cash paid during the six month period for:
Interest $ 1,180,173 $ 858,773
========= ==========
Income taxes $ 79,899 $ 35,350
========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-26
THE OLD NATIONAL BANK OF HUNTINGTON
NOTE TO FINANCIAL STATEMENTS
The statement of condition as of September 30, 1996, and the statements of
income and cash flows$2.6 million for the nine months ended September 30,
1996, and 1995 are
unaudited; however, in$3.7 million and $1.9 million for the opinion of management, all adjustments of a normal
and recurring nature which are necessary for a fair presentation have been
included. The statement of condition as ofyears ended December 31, 1996
and 1995, respectively. The net decrease in FHLB advances was audited by$1.0 million and
$2.0 million for the Bank's independent auditorsnine months ended September 30, 1997 and should be readyear ended
December 31, 1996, respectively. The net increase in conjunction withFHLB advances was $0.5
million and $3.0 million for the Bank's
audited financial statementsnine months ended September 30, 1996 and the notes thereto as of and for the
year ended December 31, 1995.
F-271995, respectively.
At September 30, 1997 and December 31, 1996, the Bank was "well capitalized"
under the prompt corrective action ("PCA") regulations adopted by the OTS
pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). To be categorized as "well capitalized" the Bank must maintain
minimum core capital, Tier 1 risk-based capital, and risk-based capital ratios
as set forth in the table below.
The following table presents the Bank's regulatory capital position under both
FIRREA and FDICIA:
Tier 1
Tangible Core Risk-based Risk-based
Capital Capital Capital Capital
------- ------- ---------- -----------
As of September 30, 1997 (Dollars in thousands)
Actual capital
Amount $ 6,702 $ 6,702 $ 6,702 $ 7,303
Ratio 5.91% 5.91% 10.35% 11.28%
Minimum required capital (FIRREA)
Amount $ 1,700 $ 3,400 N/A N/A
Ratio 1.50% 3.00% N/A N/A
PCA "well capitalized" capital
Amount N/A $ 5,666 $ 3,886 $ 6,476
Ratio N/A 5.00% 6.00% 10.00%
As of December 31, 1996
Actual capital
Amount $ 6,361 $ 6,361 $ 6,361 $ 6,901
Ratio 5.69% 5.69% 10.00% 10.84%
Minimum required capital (FIRREA)
Amount $ 1,677 $ 3,355 N/A N/A
Ratio 1.50% 3.00% N/A N/A
PCA "well capitalized" capital
Amount N/A $ 5,592 $ 3,818 $ 6,363
Ratio N/A 5.00% 6.00% 10.00%
Annex IAsset Quality and Allowance for Loan Losses
At September 30, 1997, December 31, 1996 and 1995, respectively, non-accrual
loans totaled $804,000, $800,200 and $286,300. The Bank had no troubled debt
restructurings or accruing loans contractually past due 90 days or more for any
of the periods presented. Loans are generally placed on non-accrual when they
become contractually 90 days past due. Accrued interest on loans that are
contractually 90 days or more past due is reversed and charged against income.
Income is subsequently recognized only to the extent cash payments are received
and such loans are restored to an accrual status only if the borrower has
demonstrated the ability to make future payments of principal and interest. For
all periods presented there were no loans where known information about possible
credit problems causes management to have serious doubts as to the ability of
the borrowers to comply with the present loan repayment terms.
The activity in the allowance for loan losses is summarized as follows:
Year Ended
Nine Months Ended December 31,
September 30, ---------------------------
1997 1996 1995
---- ---- ----
Balance at beginning of period............ $540,000 $615,000 $574,000
Provision for loan losses................. 90,000 104,000 76,000
Charge-offs, net.......................... (28,900) (179,000) (35,000)
-------- --------- --------
Balance at end of period.................. $601,100 $540,000 $615,000
======== ======== ========
The allowance for loan losses is allocated as follows:
As of September 30, 1997
------------------------
% of Loans/ Allowance % of Allowance/
Total Loans Amount Total Allowance
----------- --------- ---------------
Loans secured by real estate
Residential, 1-4 units....................... 72.53% $125,000 20.80%
Residential, 5+ units........................ 10.86% 180,000 29.95%
Commercial and industrial.................... 16.26% 189,600 31.54%
Other........................................ 0.35% 2,400 0.40%
Unallocated.................................. 0.00% 104,100 17.31%
----- -------- ------
Total loans secured by real estate... 100.00% $601,100 100.00%
======= ======= ======
As of December 31, 1996
-------------------------------------------------
% of Loans/ Allowance % of Allowance/
Total Loans Amount Total Allowance
----------- --------- ---------------
Loans secured by real estate
Residential, 1-4 units....................... 73.79% $131,000 24.26%
Residential, 5+ units........................ 10.35% 233,000 43.15%
Commercial and industrial.................... 15.50% 167,000 30.93%
Other........................................ 0.36% 1,000 0.19%
Unallocated.................................. 0.00% 8,000 1.48%
----- --------- -------
Total loans secured by real estate... 100.00% $540,000 100.00%
======= ======= ======
As of December 31, 1995
------------------------
% of Loans/ Allowance % of Allowance/
Total Loans Amount Total Allowance
----------- --------- ----------------
Loans secured by real estate
Residential, 1-4 units....................... 71.33% $120,000 19.51%
Residential, 5+ units........................ 10.33% 207,000 33.66%
Commercial and industrial.................... 17.88% 258,000 41.95%
Other........................................ 0.47% 2,000 0.32%
Unallocated.................................. 0.00% 28,000 4.56%
----- --------- -----
Total loans secured by real estate... 100.00% $615,000 100.00%
======= ======= ======
The following ratios are indicative of trends in asset quality and the allowance
for loan losses for the periods indicated:
As of As of
September 30, December 31,
---------------- --------------
1997 1996 1996 1995
----- ---- ---- ----
Non-performing loans as a
percentage of total loans (1) 0.78% 1.00% 0.78% 0.26%
Non-performing assets as
a percentage of total assets (2) 1.07% 1.42% 1.13% 0.59%
Allowance for loan losses as
a percentage of total loans 0.58% 0.62% 0.53% 0.55%
Allowance for loan losses as
a percentage of non-performing loans 74.75% 63.41% 67.50% 215.03%
Allowance for losses as a percentage of
non-performing assets (3) 52.10% 39.12% 43.82% 89.26%
(1) Non-performing loans consist of non-accrual loans. Total loans include loans
held for sale.
(2) Non-performing assets consist of non-performing loans and
REO.
(3) Allowance for losses includes valuation allowances on loans and REO.
Impact of Inflation and Changing Prices
The Financial Statements and Notes thereto presented herein have been prepared
in accordance with Generally Accepted Accounting Principles ("GAAP") which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Bank's operations. Unlike industrial companies,
nearly all of the assets and liabilities of the Bank are monetary in nature. As
a result, interest rates have a greater impact on the Bank's performance than do
the effects of general levels of inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the price of goods and
services.
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
among
CITY HOLDING COMPANY,
ONBCITY ACQUISITION SUBSIDIARY, N.A.,
(In Organization)SUB, F.S.B.
and
THE OLD NATIONALDEL AMO SAVINGS BANK, OF HUNTINGTON
August 13, 1996FSB
February 2, 1998
ARTICLE I
General
1.1 Bank Merger......................................................... 2
-----------
1.2 Issuance of City Holding Common Stock............................... 2
-------------------------------------
1.3 Taking of Necessary Action.......................................... 2
--------------------------
1.4 Directors of City Holding and Bank.................................. 2
----------------------------------
ARTICLE II
Effect of Transaction on Common Stock of Bank
2.1 Conversion of Stock................................................. 3
-------------------
2.2 Manner of Exchange.................................................. 4
------------------
2.3 Dissenting Shares................................................... 5
-----------------
2.4 No Fractional Shares................................................ 6
--------------------
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of Bank.............................. 6
--------------------------------------
(a) Organization, Standing and Power............................. 6
--------------------------------
(b) Capital Structure; Subsidiaries.............................. 7
-------------------------------
(c) Authority.................................................... 7
---------
(d) Investments.................................................. 8
-----------
(e) Financial Statements......................................... 9
--------------------
(f) Absence of Undisclosed Liabilities........................... 9
----------------------------------
(g) Tax Matters.................................................. 10
-----------
(h) Options, Warrants and Related Matters........................ 11
-------------------------------------
(i) Property; Leases............................................. 11
----------------
(j) Employees.................................................... 12
---------
(k) Certain Contracts............................................ 13
-----------------
(l) Employment Contracts and Related Matters..................... 13
----------------------------------------
(m) Real Estate.................................................. 13
-----------
(n) Affiliates................................................... 13
----------
(o) Agreements in Force and Effect............................... 13
------------------------------
(p) Legal Proceedings; Compliance with Laws...................... 14
---------------------------------------
(q) Employee Benefit Plans....................................... 15
----------------------
(r) Insurance.................................................... 17
---------
(s) Loan Portfolio............................................... 18
--------------
(t) Absence of Changes........................................... 19
------------------
-i-
(u) Brokers and Finders.......................................... 19
-------------------
(v) Securities Portfolio......................................... 19
--------------------
(w) Reports...................................................... 19
-------
(x) Environmental Matters........................................ 19
---------------------
(y) Disclosure................................................... 21
----------
3.2 Representations and Warranties of City Holding...................... 22
----------------------------------------------
(a) Organization, Standing and Power............................. 22
--------------------------------
(b) Capital Structure............................................ 22
-----------------
(c) Authority.................................................... 23
---------
(d) Financial Statements......................................... 24
--------------------
(e) Absence of Undisclosed Liabilities........................... 25
----------------------------------
(f) Absence of Changes........................................... 25
------------------
(g) Brokers and Finders.......................................... 25
-------------------
(h) Options, Warrants and Related Matters........................ 25
-------------------------------------
(i) Reports...................................................... 25
-------
(j) Legal Proceedings; Compliance with Laws...................... 26
---------------------------------------
(k) Employee Benefits Plan....................................... 27
----------------------
(l) Insurance.................................................... 28
---------
(m) Loan Portfolio............................................... 28
--------------
(n) Absence of Changes........................................... 29
------------------
(o) Securities Portfolio......................................... 29
--------------------
(p) Environmental Matters........................................ 29
---------------------
(q) Disclosure................................................... 30
----------
ARTICLE IV
Conduct and Transactions Prior to
Effective Time of the Bank Merger
4.1 Access to Records and Properties of City Holding and Bank........... 30
---------------------------------------------------------
4.2 Registration Statement; Proxy Statement; Shareholder Approval....... 31
-------------------------------------------------------------
4.3 Operation of the Business of Bank................................... 33
---------------------------------
4.4 No Solicitation..................................................... 34
---------------
4.5 Dividends........................................................... 35
---------
4.6 Regulatory Filings.................................................. 35
------------------
4.7 Tax Opinion......................................................... 35
-----------
4.8 Public Announcements................................................ 35
--------------------
4.9 Transactions in City Holding Common Stock........................... 35
-----------------------------------------
4.10 City Holding Rights Agreement....................................... 36
-----------------------------
4.11 Accounting Treatment................................................ 36
--------------------
4.12 Agreement as to Efforts to Consummate............................... 36
-------------------------------------
4.13 Adverse Changes in Condition........................................ 36
----------------------------
-ii-
4.14 Updating of Schedules............................................... 37
---------------------
ARTICLE V
Conditions of Transaction
5.1 Conditions of Obligations of City Holding........................... 37
-----------------------------------------
(a) Representations and Warranties; Performance of Obligations;
No Adverse Change............................................ 37
-----------------
(b) Authorization of Transaction................................. 38
----------------------------
(c) Opinion of Counsel........................................... 38
------------------
(d) Registration Statement....................................... 41
----------------------
(e) Tax Opinion.................................................. 41
-----------
(f) Regulatory Approvals......................................... 42
--------------------
(g) Affiliate Letters............................................ 42
-----------------
(h) Provision for Loan Losses.................................... 43
-------------------------
(i) Accounting Treatment......................................... 43
--------------------
(j) Acceptance by City Holding Counsel........................... 43
----------------------------------
5.2 Conditions of Obligations of Bank................................... 43
---------------------------------
(a) Representations and Warranties; Performance of Obligations;
No Adverse Change............................................ 43
-----------------
(b) Authorization of Transaction................................. 44
----------------------------
(c) Opinion of Counsel........................................... 44
------------------
(d) Registration Statement....................................... 46
----------------------
(e) Regulatory Approvals......................................... 47
--------------------
(f) Tax Opinion.................................................. 47
-----------
(g) Acceptance by Bank's Counsel................................. 47
----------------------------
ARTICLE VI
Closing Date; Effective Time of the
Bank Merger
6.1 Closing Date........................................................ 47
------------
6.2 Filings at Closing.................................................. 48
------------------
6.3 Effective Time...................................................... 48
--------------
ARTICLE VII
Termination; Survival of Representations
Warranties and Covenants; Waiver and Amendment
7.1 Termination......................................................... 48
-----------
-iii-
7.2 Effect of Termination............................................... 50
---------------------
7.3 Survival of Representations, Warranties and Covenants............... 50
-----------------------------------------------------
7.4 Waiver and Amendment................................................ 50
--------------------
ARTICLE VIII
Additional Covenants
8.1 Registration Statement.............................................. 51
----------------------
8.2 Employee Benefits................................................... 51
-----------------
8.3 Indemnification..................................................... 52
---------------
ARTICLE IX
Miscellaneous
9.1 Expenses............................................................ 53
--------
9.2 Entire Agreement.................................................... 53
----------------
9.3 Descriptive Headings................................................ 53
--------------------
9.4 Notices............................................................. 53
-------
9.5 Counterparts........................................................ 54
------------
9.6 Governing Law....................................................... 54
-------------INDEX
Page
ARTICLE I General..................................................................
1.1. Merger...............................................................
1.2. Issuance of City Holding Common Stock................................
1.3. Taking of Necessary Action...........................................
ARTICLE II Effect of Transaction on Common Stock, Assets,
Liabilities and Capitalization of City
Holding, Acquisition Sub and Del Amo......................................
2.1. Conversion of Stock, Exchange Ratio..................................
2.2. Manner of Exchange...................................................
2.3. Dissenting Shares....................................................
2.4. Effects of Merger....................................................
2.5. Withholding Taxes....................................................
ARTICLE III Representations and Warranties.........................................
3.1. Representations and Warranties of Del Amo............................
(a) Organization, Standing and Power............................
(b) Capital Structure...........................................
(c) Authority...................................................
(d) Investments.................................................
(e) Financial Statements........................................
(f) Absence of Undisclosed Liabilities..........................
(g) Tax Matters.................................................
(h) Options, Warrants and Related Matters.......................
(i) Property....................................................
(j) Additional Schedules Furnished to City Holding..............
(k) Agreements in Force and Effect..............................
(l) Legal Proceedings; Compliance with Laws.....................
(m) Employee Benefit Plans......................................
(n) Insurance...................................................
(o) Loan Portfolio..............................................
(p) Absence of Changes..........................................
(q) Brokers and Finders.........................................
(r) Subsidiaries; Partnerships and Joint Ventures...............
(s) Reports.....................................................
(t) Environmental Matters.......................................
(u) Disclosure..................................................
(v) Accounting; Tax; Regulatory Matters.........................
(w) Regulatory Approvals........................................
3.2. Representations and Warranties of City Holding.......................
(a) Organization, Standing and Power............................
(b) Capital Structure...........................................
(c) Authority...................................................
(d) Brokers and Finders.........................................
(e) Reports.....................................................
(f) Disclosure..................................................
3.3. Representations and Warranties of Acquisition Sub....................
(a) Organization Standing and Power.............................
(b) Authority...................................................
ARTICLE IV Conduct and Transactions Prior to Effective Time of the Merger.........
4.1. Access to Records and Properties of City Holding,
Acquisition Sub, and Del Amo.........................................
4.2. Registration Statement, Proxy Statement, Shareholder Approval........
4.3. Operation of the Business of Del Amo.................................
4.4. No Solicitation......................................................
4.5. Dividends............................................................
4.6. Regulatory Filings; Best Efforts.....................................
4.7. Public Announcements.................................................
4.8. Operating Synergies; Conformance to Reserve Policies, Etc............
4.9. Agreement as to Efforts to Consummate................................
4.10. Adverse Changes in Condition........................................
4.11. Nasdaq National Market Listing......................................
4.12. Updating of Schedules...............................................
4.13. Transactions in City Holding Common Stock...........................
ARTICLE V Conditions of Merger.....................................................
5.1. Conditions of Obligations of City Holding and Acquisition Sub........
(a) Representations and Warranties; Performance of Obligations..
(b) Authorization of Transaction................................
(c) Opinion of Counsel..........................................
(d) The Registration Statement..................................
(e) Tax Opinion.................................................
(f) Regulatory Approvals........................................
(g) Affiliate Letters...........................................
(h) Nasdaq National Market Listing..............................
(i) Acceptance by City Holding and Acquisition Sub Counsel......
5.2. Conditions of Obligations of Del Amo.................................
(a) Representations and Warranties; Performance of Obligations..
(b) Authorization of Transaction................................
(c) Opinion of Counsel..........................................
(d) The Registration Statement..................................
(e) Regulatory Approvals........................................
(f) Tax Opinion.................................................
(g) Nasdaq National Market Listing..............................
(h) Acceptance by Del Amo's Counsel.............................
ARTICLE VI Closing Date; Effective Time............................................
6.1. Closing Date.........................................................
6.2. Filings at Closing...................................................
6.3. Effective Time.......................................................
ARTICLE VII Termination; Waiver and Amendment......................................
7.1. Termination..........................................................
7.2. Effect of Termination................................................
7.3. Waiver and Amendment.................................................
ARTICLE VIII Additional Covenants..................................................
8.1. Indemnification of Del Amo Officers and Directors;
Liability Insurance..................................................
8.2. Employee Benefit Matters.............................................
(a) Plan Participation..........................................
(b) Cooperation.................................................
8.3. Accounting...........................................................
ARTICLE IX Miscellaneous...........................................................
9.1. Expenses.............................................................
9.2. Entire Agreement.....................................................
9.3. Descriptive Headings.................................................
9.4. Notices..............................................................
9.5. Counterparts.........................................................
9.6. Governing Law........................................................
Exhibit A - Plan of Merger
-iv-
SCHEDULE DESCRIPTION SECTION IN AGREEMENT
AExhibit B - Form of Optionee Irrevocable Letter of Instruction
Exhibit C - Opinion of Adams, McAndrews, Matson & Landsberg,
counsel to Del Amo and Savings Bank
ArticlesExhibit D - Opinion of Association 3.1(a)
B Bank Bylaws 3.1(a)
C Securities Owned by Bank 3.1(b), 3.1(d), 3.1(d)
D Bank Conflicts, Breaches or 3.1(c)
Defaults
E Bank Financial Statements 3.1(e)
F Bank Tax Matters 3.1(g), 3.1(g), 3.1(g)
G Salary Rates and Bank Common 3.1(j)
Stock Owned by Employees and
Directors of Bank; Owners of
5% of Bank Common Stock;
Outstanding Unexercised
Options, Warrants, Calls,
Commitments or Agreements
H Notes, Bonds, Mortgages, 3.1(k), 5.1(c)(vi), 5.1(c)(viii)
Indentures, Licenses, Lease
Agreements and Other Contracts
of Bank
I Employment Contracts and 3.1(1), 3.1(q)(i), 3.1(q)(i)
Related Matters of Bank 3.1(q)(vii), 3.1(q)(viii)
J Real Estate Owned or Leased 3.1(m)
by Bank
-v-
K Bank Affiliates 3.1(n), 5.1(c)(iv)
L Bank Legal Proceedings 3.1(p), 3.1(p), 3.1(p)
M Bank Insurance 3.1(r)
N Bank Loans 3.1(s), 3.1(s)
O Bank Material Adverse Changes 3.1(t)
P Bank Environmental Matters 3.1(x)
QHunton & Williams, counsel to City Holding
Contingencies 3.2(e)
Rand City Holding Options, Warrants 3.2(h)
Calls, etc.
S City Holding Litigation 3.2(j), 5.2(c)(viii)
T City Holding Environmental
Matters 3.2(p)
U Bank
Salary Adjustments 4.3
V Waiting Periods for City 8.2
Holding Employee Plans
-vi-Exhibit E - Form of Affiliate's Undertaking
INDEX TO SCHEDULES
Section in
Schedule Description Agreement
- -------- ----------- ---------
A-1 Securities Owned by Del Amo 3.1(d)
A-2 Del Amo Financial Statements 3.1(e)
B Del Amo Taxes Being Contested, etc. 3.1(g)
C Salary Rates, Del Amo Common Stock Held by Certain Employees and 3.1(h); 3.1(j)(1)
Directors of Del Amo, Options and Restricted Stock Awards
D Notes, Bonds, Mortgages, Indentures, Licenses, Lease Agreements 3.1(j)(2)
and Other Contracts of Del Amo
E Employment Contracts and Related Matters of Del Amo 3.1(j)(3);
3.1(m)(1);
3.1(m)(7); 3.1(m)(8);
3.1(m)(9)
F Real Estate Owned or Leased by Del Amo 3.1(j)(4)
G Affiliates of Del Amo 3.1(j)(5); 5.1(g)
H Legal Proceedings of Del Amo 3.1(1)
I Insurance of Del Amo 3.1(n)
J Del Amo Loans 3.1(o)
K Certain Changes 3.1(p)
L Environmental Matters 3.1(t)
N Del Amo Subsidiaries and Joint Ventures 3.1(r)
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATIONAmended and Restated Agreement and Plan of Reorganization (the "Agreement"),
dated as of August 13, 1996 by andFebruary 2, 1998 among City Holding Company,CITY HOLDING COMPANY, a West Virginia
corporation ("City Holding"), ONB Acquisition Subsidiary, N.A., an interim national banking
associationCITY ACQUISITION SUB, F.S.B. (in organization), a
federal savings bank and a wholly-owned bysubsidiary of City Holding ("Acquisition"Acquisition
Sub"), and The Old National Bank of Huntington,DEL AMO SAVINGS BANK, FSB, a national banking associationfederal savings bank ("Bank"Del Amo"), recites
and provides:
A. The boards of directors of City Holding and BankDel Amo deem it advisable to
merge BankAcquisition Sub into AcquisitionDel Amo (the "Bank Merger""Merger") pursuant to this Agreement and
the Plan of Merger attached as Exhibit A (the "Plan of Merger") and the provisions
of 12 U.S.C. ss. 215a, whereby the
holders of shares of common stockCommon Stock of BankDel Amo ("BankDel Amo Common Stock") will
receive common stockCommon Stock of City Holding ("City Holding Common Stock").
B. To effectuate the foregoing, the parties desire to adopt this Agreement and
the Plan of Merger, which shall represent a plan of reorganization in accordance
with the provisions of Section 368(a) of the United States Internal Revenue
Code, as amended (the "Code").
C. City Holding shall cause Acquisition to become a party to this Agreement
upon its organization and prior to consummation of the Bank Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from this
Agreement, and of the representations, warranties, conditions and promises
herein contained, City Holding, Acquisition Sub, and BankDel Amo hereby adopt this
Agreement whereby at the "Effective Time of the Bank Merger" (as defined in Article
VI)
BankVI hereof) Acquisition Sub shall be merged with and into AcquisitionDel Amo (which will be
the Surviving Bank, as defined in Section 1.1) in accordance
-1-
with the Plan of
Merger. The outstanding shares of BankDel Amo Common Stock shall be converted into
shares of City Holding Common Stock as provided in this Agreement on the basis,
terms and conditions contained herein and in the Plan of Merger.Merger as set forth as
Exhibit A hereto.
In connection therewith, the parties hereto agree as follows:
ARTICLE I
General
1.1 Bank1.1. Merger. Subject to the provisions of this Agreement and the Plan
of Merger, and 12 U.S.C. ss. 215a, at the Effective Time of the Bank Merger Bankthe separate
existence of Acquisition Sub shall cease and Acquisition Sub shall
be merged with and into Acquisition and the separate existence of Bank
shall cease.
1.2Del Amo (the "Surviving Bank").
1.2. Issuance of City Holding Common Stock. City Holding agrees that at
the Effective Time of the Bank Merger (as defined in Section 6.3
hereof) it will issue City Holding Common Stock to the extent set
forth in, and in accordance with, the terms of this Agreement and
the Plan of Merger.
1.31.3. Taking of Necessary Action. Prior to andIn case at any time after the
Effective Time of the Bank Merger subjectany further action is necessary or
desirable to carry out the provisionspurposes of this Agreement City Holding,
Acquisition and to vest
the Surviving Bank respectively, eachwith full title to all properties, assets,
rights, approvals, immunities and franchises of Del Amo, the
officers and directors of the Surviving Bank shall take all such
action as may be
necessary or appropriate to effect the Bank Merger.
1.4 Directors of City Holding and Bank. At its first meeting following
the Effective Time of the Bank Merger, City Holding agrees to increase the
number of members of City Holding's Board of Directors by two and to elect
William M. Frazier and Leon K. Oxley to fill the resulting vacancies. The two so
elected's eligibility for and election at City Holding's next following Annual
Meeting of Shareholders will be governed by City Holding's Bylaws.
-2-
Following the Effective Time of the Bank Merger, the Directors and
Merchants shall continue as Directors of Merchants for at least five years
following the Effective Time of the Bank Merger unless removed for cause or in
accordance with Bank's Bylaws and shall continue to receive Board fees at least
equal to the Board fees such persons received immediately prior to the Effective
Time of the Bank Merger. As used in this Section, "cause" shall mean dishonesty,
fraud or gross abuse of authority in performance of duty or breach of fiduciary
duty.action.
ARTICLE II
Effect of Transaction on Common Stock, Assets,
Liabilities and Capitalization of Bank
2.1City Holding,
Acquisition Sub and Del Amo
2.1. Conversion of Stock, Exchange Ratio.
(a) Conversion of Stock. At the Effective Time of the Bank Merger:
(a) EachMerger,
each share of BankDel Amo Common Stock issued and outstanding atimmediately
prior to the Effective Time of the Bank Merger (other than
shares of Del Amo Common Stock held by City Holding, or in
Bank's treasury and other than Dissenting Shares as defined in Section 2.3)if
any, which shares shall be canceled), by virtue of the
Merger and without any action byon the holderpart of the holders
thereof, shall be converted into athat number of shares of
City Holding Common Stock equal to the product of one
multiplied by the Exchange Ratio (as defined herein). As
used herein:
(i) "Exchange Ratio" shall mean the quotient (rounded toof (x) the
nearest one one-hundredth) obtained by dividing (i)sum of (A) the product obtained by
multiplyingof 1.55 times the Net Book
Value Per Share (as defined herein) plus (B) the per
share pro rata amount of Del Amo's out-of-pocket
accountable fees, costs and expenses associated with
the Merger (up to a maximum in the aggregate of
$200,000 and only to the extent such costs have not
been capitalized) (the "Merger Expenses") divided by
(y) the Fair Market Value Per City Holding Share (as
defined herein);
(ii) "Net Book Value Per Share" shall mean the net book
value of BankDel Amo at the Measurement Date (as defined
herein) divided by the total number of shares of Del
Amo Common Stock at June 30, 1996 by
2.5 by (ii) $23.325 (the "Cityoutstanding immediately prior to
the Effective Time of the Merger;
(iii) "Fair Market Value Per City Holding Stock Price"). (The quotient thus
obtained is referred to asShare" shall
mean the "Exchange Ratio"). All such sharesaverage closing price of a share of City
Holding Common Stock as reported on The Nasdaq
National Market for the twenty trading days prior to
the Measurement Date; provided, that (A) if the Fair
Market Value Per City Holding Share as determined in
the clause immediately preceding this proviso is
less than $32.00 and greater than or equal to
$30.00, the Fair Market Value Per City Holding Share
shall be validly issued, fully paiddeemed to equal $32.00, (B) if the Fair
Market Value Per City Holding Share as determined in
the clause immediately preceding this proviso is
greater than $43.00 and nonassessable.
(b)less than or equal to
$48.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00, (C) if the Fair
Market Value Per City Holding Share as determined in
the clause immediately preceding this proviso is
greater than $48.00 and less than or equal to
$55.00, the Fair Market Value Per City Holding Share
shall be deemed to equal $43.00 increased by the
amount by which the actual Fair Market Value Per
City Holding Share exceeds $48.00, or (D) if the
Fair Market Value Per City Holding Share as
determined in the clause immediately preceding this
proviso is greater than $55.00 or less than $30.00,
Del Amo and City Holding may terminate this
Agreement in accordance with Section 7.1; and
(iv) "Measurement Date" shall mean the last day of the
month immediately preceding the Closing Date, as
defined in Section 6.1.
The Exchange Ratio at the Effective Time of the
Bank Merger shall be proportionately adjusted to reflect any
consolidation, split-up, other subdivisionsstock dividend, subdivision or
combinations of City Holding Common Stock, any dividend payable in City Holding
Common Stock, or any capital
-3-
reorganization involving the reclassificationcombination of City Holding Common Stock subsequent to the
date of this Agreement.
2.2(b) At the Effective Time of the Merger, but after the
conversion contemplated in Section 2.1(a) above, each share
of Acquisition Sub common stock outstanding immediately
prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holders
thereof, shall be converted into one share of Del Amo
Common Stock.
(c) Notwithstanding any other term or provision hereof, no
fraction of a share of City Holding Common Stock, and no
certificates or scrip therefor or other evidence of
ownership thereof, will be issued in connection with the
conversion of Del Amo Common Stock in the Merger, and no
right to receive cash in lieu thereof shall entitle the
holders thereof to any voting or other rights of a holder
of shares or fractional share interests of City Holding. In
lieu of such fractional shares, any holder of shares who
would otherwise be entitled to fractional shares of City
Holding Common Stock will, upon surrender of a certificate
or certificates representing shares of Del Amo Common Stock
outstanding immediately prior to the Effective Time of the
Merger, be paid the cash value of each such fraction,
computed on the basis of the Fair Market Value Per City
Holding Share.
(d) Prior to the Effective Time of the Merger, the Plan of
Merger shall terminate and be abandoned upon a termination
of the Agreement, notwithstanding approval of the Plan of
Merger by the shareholders of Del Amo.
2.2. Manner of Exchange.
(a) After the Effective DateTime of the Bank Merger, each holder of a
certificate tofor theretofore outstanding shares of BankDel Amo
Common Stock, upon surrender of such certificate to the
agent appointed by City National BankHolding to administer the exchange
of Charleston
(which shall act as exchange agent)certificates (the "Exchange Agent"), accompanied by a
Letterletter of Transmittaltransmittal in the form furnished by City Holding
and the Exchange Agent (the "Letter of Transmittal"), shall
be entitled to receive in exchange therefor a certificate or certificates
representing the number of
full shares of City Holding Common Stock forinto which shares
of BankDel Amo Common Stock theretofore represented by the certificate or
certificates so surrendered shall have been exchanged as provided in this
Article II.be converted pursuant to
Section 2.1 hereof. Until so surrendered, each
outstanding certificate which, prior to the Effective Time
of the Bank Merger, represented BankDel Amo Common Stock (other than
Dissenting Shares referred to in Section 2.3) will be
deemed to evidence the right to receive the number of full
shares of City Holding Common Stock into which the shares
of BankDel Amo Common Stock represented thereby may be
converted in accordance with the Exchange Ratio, and, after
the Effective Time of the Bank Merger will be deemed for all
corporate purposes of City Holding to evidence ownership of
the number of full shares of City Holding Common Stock into
which the shares of BankDel Amo Common Stock represented
thereby were converted.
(b) Until such outstanding certificates formerly representing BankDel
Amo Common Stock are surrendered in exchange for City
Holding Common Stock, no dividend payable to holders of
record of City Holding Common Stock for any period as of
any date subsequent to the Effective Time of the Bank Merger
shall be paid to the holder of such outstanding
certificates in respect thereof. After the Effective Time
of the Bank Merger, there shall be no further registry of
transfer on the records of BankDel Amo of shares of BankDel Amo
Common Stock. If a certificate representing such shares is
presented to the exchange agent,Del Amo or City Holding, it shall be canceled
and
-4-
exchanged for a certificate representing shares of City
Holding Common Stock as herein provided. City Holding will also issue a certificate in exchange for
shares evidenced by lost certificate(s) provided the record owner thereof
provides City Holding with such substantiation, indemnification and security as
City Holding may reasonably require. Upon surrender of
certificates of BankDel Amo Common Stock in exchange for City
Holding Common Stock, there shall be paid to the
recordholder of the certificates of City Holding Common
Stock issued in exchange thereoftherefor (i) the amount of
dividends theretofore paid with respect tofor such full shares of City
Holding Common Stock as of any date subsequent to the
Effective Time of the Bank Merger which have not yet been paid
to a public official pursuant to abandoned property laws
and (ii) at the appropriate payment date, the amount of
dividends with a record date after the Effective Time of the
Bank Merger, but prior to surrender and a
payment date subsequent to surrender. No interest shall be
payable with respect toon such dividends upon surrender of outstanding
certificates.
2.3(c) At the Effective Time of the Merger, each share of Del Amo
Common Stock held by City Holding, if any, shall be
canceled, retired and cease to exist.
(d) At the Effective Time of the Merger and as provided in the
Plan of Merger, each Del Amo Option (as defined in Section
3.1(j)(1) hereof), which is identified on Schedule C, shall
be canceled as provided in the underlying option agreement.
Notwithstanding the foregoing, if Del Amo shall receive an
irrevocable letter of instruction from an option holder in
the form attached hereto as Exhibit B prior to the meeting
of theshareholders of Del Amo required by Section 4.2, then
the Del Amo Options listed in such letter shall be
converted, at the election of the holder thereof, into
either (i) an option to acquire that number of shares of
City Holding Common Stock equal to the product of (A) the
number of shares of Del Amo Common Stock subject to such
option immediately prior to the Effective Time multiplied
by (B) the Exchange Ratio, at an exercise price per share
equal to the Del Amo Exercise Price (as defined herein)
divided by the Exchange Ratio, or (ii) the right to
receive, upon surrender of such option to the Exchange
Agent accompanied by a Letter of Transmittal, with respect
to each share of Del Amo Common Stock subject to such
option, the number of full shares of City Holding Common
Stock equal to the quotient of (A) the Option Spread (as
defined below) divided by (B) the Fair Market Value Per
City Holding Share. As used herein, "Del Amo Exercise
Price" shall mean the exercise price of the respective Del
Amo Option immediately prior to the Effective Time of the
Merger as identified on Schedule C. As used herein, the
"Option Spread" shall be equal to the difference between
(i) the sum of (A) the product of the Net Book Value Per
Share multiplied by 1.55 plus (B) the Merger Expenses Per
Share (as defined herein) and (ii) the exercise price per
share pursuant to such option. As used herein, "Merger
Expenses Per Share" shall be equal to the Merger Expenses
divided by the total number of shares of Del Amo Common
Stock outstanding immediately prior to the Effective Time
of the Merger.
2.3. Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of BankDel Amo Common Stock which are issued and
outstanding immediately prior to the Effective Time of the Bank Merger
and which are held by a shareholder who has the right (to the
extent such right is available by law) to demand and receive
payment of the fair value of his shares of BankDel Amo Common Stock
pursuant to 12 C.F.R.ss. 552.14 (the "Dissenting Shares") pursuant to 12 U.S.C. ss. 215a, shall
not be converted into or be exchangeable for the right to receive
the consideration provided in Section 2.22.1 of this Agreement,
unless and until such holder shall fail to perfect his or her
right to an appraisaldissent or shall have effectively withdrawn or lost such
right under 12 U.S.C. ss. 215a,C.F.R.ss. 552.14, as the case may be. If such
holder shall have so failed to perfect his right to dissent or
shall have effectively -5-
withdrawn or lost such right, each of his
shares of BankDel Amo Common Stock shall thereupon be deemed to have
been converted into, at the Effective Time of the Bank Merger, the
right to receive that number of shares of City Holding Common
Stock atequal to the product of one multiplied by the Exchange
Ratio.
2.4. Effects of Merger. The number of Dissenting Shares and fractional shares settled
for cash cannot exceed 9.9%Merger shall have the effects set forth in
12 C.F.R. ss. 552.13. As of the shares of Bank Common Stock to preserve the
"pooling of interests" accounting treatmentEffective Time of the Bank Merger. City HoldingMerger, Del
Amo shall either pay or contribute to the capital of Acquisition funds to pay all
amounts payable to holders of Dissenting Shares for such shares.
2.4 No Fractional Shares. No certificates or scrip for fractional
sharesbe a wholly-owned subsidiary of City Holding Common Stock willHolding.
2.5. Withholding Taxes. All payments to be issued. In lieu thereof, City
Holding will pay the value of such fractional shares in cash (subjectmade pursuant to this
Agreement shall be made less all applicable withholding taxes), for which purpose City Holding Common Stock shall
be valued at the City Holding Stock Price.taxes.
ARTICLE III
Representations and Warranties
3.13.1. Representations and Warranties of Bank. BankDel Amo. Del Amo represents and
warrants to City Holding and Acquisition Sub as follows:
(a) Organization, Standing and Power. BankDel Amo is a national banking
associationfederal
savings bank duly organized, validly existing and in good
standing under the laws of the United States and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted and subject to the approval ofperform this Agreement and the Plan
of Merger by shareholders of Bank as
contemplated by Section 4.2, to perform this Agreementand to effect the transactions contemplated
hereby. Bank's Articles of Associationhereby and all
amendments thereto
-6-
to the date hereof and Bank's Bylaws as amended to the date hereof are attached
hereto as Schedule A and Schedule B, respectively. Bank'sthereby. Del Amo's deposits are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") to the
maximum extent permitted by law. Del Amo has delivered to
City Holding complete and correct copies of (i) its Charter
and (ii) its By-laws.
(b) Capital Structure; Subsidiaries. Bank'sStructure. The authorized capital stock of Del Amo
consists entirely of 75,000800,000 shares of Del Amo Common
Stock, par value $10 per share. As of$2.50. On the Effective Time of the Bank Merger, 75,000date hereof, 533,163 shares
of BankDel Amo Common Stock will be
issued and outstanding, and allwere outstanding. All of the issued and
outstanding shares of BankDel Amo Common Stock arewere validly
issued and will be validly issued,are fully paid and nonassessable. Bank
has no subsidiaries.
Except as disclosed on Schedule C, BankDel Amo knows of no
person who beneficially owns 5% or more of the outstanding
BankDel Amo Common Stock.Stock as of the date hereof.
(c) Authority. Subject to the approval of this Agreement and
the Plan of Merger by the shareholders of BankDel Amo as
contemplated by Section 4.2, hereof, the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby and by the Plan of Merger have been
duly and validly authorized by all necessary action on the
part of Bank,Del Amo, and this Agreement is a valid and binding
obligation of Bank,Del Amo, enforceable in accordance with its
terms.terms, except as enforceability may be limited by laws
affecting the enforcement of creditors' rights generally
and subject to any equitable principles limiting the right
to obtain specific performance. The execution and delivery
of this Agreement, the consummation of the transactions
contemplated hereby and by the Plan of Merger and
compliance by BankDel Amo with any of the provisions hereof or
thereof will not except as noted on Schedule D, (i) conflict with or result in a breach of
any provision of Bank's Articles of Associationits Charter or BylawsBy-laws or a default (or
give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or
provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
instrument or obligation to which BankDel Amo is a party, or by
which Bankit or any of its properties or assets may be -7-
bound, (except for such conflict, breach or default, as to which requisite
waivers or consents shall have been obtained by Bank prior to the Effective Time
of the Bank Merger or the obtaining of which shall have been waived by City
Holding);
or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to BankDel Amo or any of
its properties or assets. No consent or approval by any
governmental authority, other than compliance with
applicable federal and state corporate, securities and banking laws,
and regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the FDIC and
the Office of the Comptroller of the Currency (the "OCC"Thrift Supervision ("OTS"), is required in
connection with the execution and delivery by BankDel Amo of
this Agreement or the consummation by BankDel Amo of the
transactions contemplated hereby or by the Plan of Merger.
(d) Investments. All securities owned by BankDel Amo of record and
beneficially are free and clear of all mortgages, liens,
pledges, encumbrances or any other restriction, whether
contractual or statutory, which would materially impair the
ability of BankDel Amo freely to dispose of any such security
at any time, except as noted on Schedule C.A-1. Any
securities owned of record by BankDel Amo in an amount equal to
5% or more of the issued and outstanding voting securities
of the issuer thereof have been noted on such Schedule C.A-1.
There are no voting trusts or other agreements or
undertakings of which Del Amo is a party with respect to
the voting of such securities. With respect to all
repurchase agreements to which BankDel Amo is a party, BankDel Amo
has a valid, perfected first lien or security interest in
the government securities or other collateral securing the
repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds
the amount of the debt secured by such collateral under
such agreement.
-8-
(e) Financial Statements. Schedule EA-2 contains copies of the
following financial statements of BankDel Amo (the "Bank"Del Amo
Financial Statements"):
(i) Balance SheetsStatements of Financial Condition as of December 31, 1995September
30, 1997 (unaudited), and 1994 and MarchDecember 31, 1996 and 1995;1995
(audited);
(ii) Statements of IncomeOperations for each of the three years
in the period ended December 31, 1995, 1994 and 19931996 (audited) and
the three months and nine months ended March
31, 1996 and 1995;September 30,
1997 (unaudited);
(iii) Statements of Changes in Stockholders' Equity for
each of the three years in the period ended December
31, 1995, 19941996 (audited) and 1993;the nine months ended
September 30, 1997 (unaudited); and
(iv) Statements of Cash Flows for each of the three years
in the period ended December 31, 1995, 19941996 (audited) and
1993.the nine months ended September 30, 1997
(unaudited).
Such financial statements and the notes thereto have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis
throughout the periods indicated.indicated unless otherwise noted in
the Del Amo Financial Statements and are consistent with
the books and records of Del Amo. Each of such statements
of financial condition, together with the notes thereto,
presents fairly as of its date the financial condition and
assets and liabilities of Bank. SuchDel Amo. The statements of
operations, statements ofchanges in stockholders' equity and statements of cash flows,
together with the notes thereto, present fairly the results
of operations, changes in stockholders' equity and cash
flows of BankDel Amo for the periods indicated.
Subject to the limitations imposed by federal laws applicable to
national banks, and exceptExcept as disclosed in the BankDel Amo Financial Statements and
as per compliance with and subject to the requirements of
12 C.F.R. ss. 563.134, there are no restrictions precluding
BankDel Amo from paying dividends.dividends when, as and if declared by
their respective Boards of Directors.
(f) Absence of Undisclosed Liabilities. At December 31, 19951996
and March 31, 1996, BankSeptember 30, 1997, Del Amo had no material obligations
or liabilities (contingent or otherwise) of any nature
which were -9-
not reflected in the BankDel Amo Financial
Statements, as of such date, or disclosed in
the notes thereto, except for those which inare disclosed (including
an estimate of the aggregate are immaterial or
disclosedamount of any such liability) in
Schedules specifically referred to herein.
(g) Tax Matters. BankDel Amo has filed or caused to be filed or (in
the case of returns or reports not yet due) will file all
tax returns and reports required to have been filed by or for it
before the Effective Time of the Bank Merger, and all
information set forth in such returns or reports is or (in
the case of such returns or reports not yet due) will be
accurate and complete in all material respects. BankDel Amo has
paid or made adequate provision in all material respects for, (or withor (with respect to
returns or reports not filedyet filed) before the Effective Time
of the Bank Merger will pay or make adequate provision for)for, all
taxes, additions to tax, penalties, and interest for all
periods covered by those returns or reports. Except as disclosed on Schedule F, thereThere are, and
at the Effective Time of the Bank Merger will be, no unpaid
taxes, additions to tax, penalties, or interest due and
payable by Bank or by any other personDel Amo that are or could become a lien on any
asset, or otherwise materially adversely affect the
business, property or financial condition of Bank. BankDel Amo,
except for taxes and any such related liability being
contested in good faith and disclosed in Schedule B. Del
Amo has collected or withheld, or will collect
or withhold before the Effective Time of the Bank Merger, all
amounts required to be collected or withheld by it for any
taxes, and all such amounts have been, or before the
Effective Time of the Bank Merger will have been, paid to the
appropriate governmental agencies or set aside in
appropriate accounts for future payment when due. BankDel Amo
is in material compliance with, and its records contain all
information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply in
all material respects with, all applicable information
reporting and tax withholding requirements under federal,
state, and local laws, rules, and regulations, and such
records identify with -10-
specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue CodeCode. The
statements of 1986 (the "Code"). The balance sheetsfinancial condition contained in the BankDel Amo
Financial Statements fully and properly reflect, as of the
dates thereof, the aggregate liabilities of BankDel Amo for all
accrued taxes, additions to tax, penalties and interest. For periods ending after December 31, 1995, theinterest in
accordance with GAAP. The books and records of BankDel Amo
fully and properly reflect itsany liability for all accrued
taxes, additions to tax, penalties and interest.interest in
accordance with GAAP. Except as disclosed in Schedule F, no tax return or report of Bank is under examination by any taxing authority
or the subject of any administrative or judicial proceeding, BankB,
Del Amo has not granted (nor is it subject to)
any waiver of the period of limitations for the assessment
of tax for any currently open taxable period, and no unpaid
tax deficiency has been asserted in writing against or with
respect to BankDel Amo by any taxing authority. BankDel Amo has not
made or entered into, and holds nodoes not hold any asset subject
to, a consent filed pursuant to Section 341(f) of the Code
and the regulations thereunder or a "safe harbor lease"
subject to former Section 168(f)(8) of the Code and the
regulations thereunder. Schedule FB describes all tax
elections, consents and agreements affecting Bank for any tax period beginning on or after
January 1, 1989, and all such material elections, consents and agreements for
any prior period.Del
Amo. To the best knowledge of Bank,Del Amo, no BankDel Amo
shareholder is a "foreign person" for purposes of Section
1445 of the Code.
(h) Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls,
commitments or agreements of any character to which BankDel Amo
is a party or by which it is bound, calling for the
issuance of securities of BankDel Amo or any security
representing the right to purchase or otherwise receive any
such security.security, except as set forth on Schedule C.
(i) Property; Leases. BankProperty. Del Amo owns (or enjoys use of under capital or
operating leases) all property reflected on the BankDel Amo
Financial Statements as of December 31, 1995 and March 31,
-11-
1996September 30, 1997 (except personal
property sold or otherwise disposed of in the ordinary
course of business). All property shown as being owned is
owned free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever, except
those referred to in such Del Amo Financial Statements or
the notes to the Bank Financial
Statements,thereto, liens for current taxes not yet due and
payable, any unfiled mechanics' liens and such encumbrances
and imperfections of title, if any, as are not substantial
in character or amount or otherwise materially impair business operations.the
use of the subject property. The capital leases if any, relating to leased
property are valid and
subsisting and there does not exist with respect to Bank's obligations
thereunder any material default or event or condition which, after notice or
lapse of time or both, would constitute a material default thereunder. There is
no condemnation proceeding pending or threatened which would preclude or impair
the use of any property as presently being used in the conduct of Bank's
business. Such leases arefairly reflected in the Banksuch Del Amo Financial
Statements.
All property and assets material to the business or
operations of BankDel Amo are in substantially good operating
condition and repair and such property and assets are
adequate for the business and operations of BankDel Amo as
currently conducted.
No notice(j) Additional Schedules Furnished to City Holding. In addition
to any Schedules furnished to City Holding pursuant to
other provisions of violationthis Agreement, Del Amo has furnished
to City Holding the following Schedules which are correct
and complete as of zoning laws, building or fire codes or other
statutes, ordinances or regulations relating to the operations of Bank has been
received by Bank.
(j)date hereof:
(1) Employees. Schedule GC lists as of the date hereof
(A) namethe names of and current annual salary rates for
and the number of shares of Bank Common Stock owned
beneficially by, all present employees of BankDel Amo who eachreceived,
respectively, $50,000 or more in aggregate
compensation, whether in salary or otherwise as
reported or would be reported on Form W-2, during
the year ended December 31, 1996, or are presently
scheduled to receive a salary in excess of $50,000
during the year ending December 31, 1996;1997; (B) the
number of shares of BankDel Amo Common Stock owned
beneficially by each director and five highest
compensated officers of Bank; andDel Amo as of the date
hereof, (C) the names of and the number of shares of
Bank
-12-
Del Amo Common Stock owned by each person who,known to
the knowledge of Bank,Del Amo who beneficially owns 5% or more of the
outstanding BankDel Amo Common Stock.
(k)Stock as of the date
hereof, and (D) the names of, the number of
outstanding options of, and the exercise price of,
each agreement to make stock awards granted to each
person under the 1990 Stock Option Plan or any
option granted to a director of Del Amo
(collectively, "Del Amo Options") and the exercise
price of each such Del Amo Option.
(2) Certain Contracts. Schedule HD lists all notes,
bonds, mortgages, indentures, licenses, lease
agreements and other contracts and obligations to
which BankDel Amo is an indebted party or a party,lessee,
licensee or obligee as of the date hereof except for
those entered into by BankDel Amo in the ordinary course
of its business consistent with its prior practicespractice
and that do not involve morean amount remaining greater
than $50,000.
(l)(3) Employment Contracts and Related Matters. Except in
all cases as set forth on Schedule I, BankE, Del Amo is not
a party to (A) any employment contract not terminable at
the option of BankDel Amo without liability; (B)liability. Except in
all cases as set forth on Schedule E, Del Amo is not
a party to (A) any retirement, stock option, profit sharing or
pension plan or thrift plan or agreement or employee
benefit plan (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974
("ERISA")); (C), (B) any management or consulting
agreement not terminable at the option of BankDel Amo
without liability;liability or (D)(C) any union or labor
agreement.
(m)(4) Real Estate. Schedule JF describes, as of the date
hereof, all interests in real property owned, leased
or otherwise claimed by Bank, including "other real
estate owned."
(n)Del Amo.
(5) Affiliates. Schedule KG sets forth the names and
number of shares of BankDel Amo Common Stock owned as of
the date hereof beneficially or of record by any
persons BankDel Amo considers to be affiliates of Del
Amo ("BankDel Amo Affiliates") as that term is defined
for purposes of Rule 145 under the Securities Act of
1933, as amended (the "1933 "Act"Act").
(o)(k) Agreements in Force and Effect. All material contracts, agreements,
plans, leases, policies and licenses referred to in any
Schedule of BankDel Amo referred to herein are valid and in
full force and effect, and BankDel Amo has not breached any
material provision of, nor are
-13-
is in default in any material respect under the
terms of, any such contract, agreement, lease, policy or
license.
(p)license, the effect of which breach or default would have a
material adverse effect upon either the financial
condition, results of operations, or business of Del Amo.
(l) Legal Proceedings; Compliance with Laws. Except as set
forth in Schedule L, there is noH
describes all legal, administrative, arbitration or other
proceeding or governmental investigation known to Del Amo
pending (including any legal,
administrative, arbitration or other proceeding or governmental investigation
pending involving a violation of the federal antitrust laws), or, to the knowledge of Bank'sDel Amo's management,
threatened or probable of assertion which might
result in money damages payable by Bank in excess of insurance coverage, which
might result in a permanent injunction against Bank, which might result in a
change in the zoningDel Amo. Except
as set forth on Schedule H, no such proceeding or
building ordinances materially affecting the property or
leasehold interests of Bank, or which otherwise, either individually or in the
aggregate, is likely toinvestigation, if decided adversely, would have a material
adverse affecteffect on Bank.either the financial condition, results
of operations or business of Del Amo on a consolidated
basis. Except as set forth in Schedule L, BankH, Del Amo has
complied in all material respects with any laws,
ordinances, requirements, regulations or orders applicable
to its business
(including environmental laws, ordinances, requirements, regulations or orders).
Bankbusiness. Del Amo has all licenses, permits, orders
or approvals (collectively, the "Permits") of any federal,
state, local or foreign governmental or regulatory body
(collectively, "Permits") that are
material to or necessary for the conduct of the business of Bank;its business; the
Permits are in full force and effect; no violations are or
have been recorded in respect of any Permits nor has BankDel
Amo received written notice of any such violation;violations; and no
proceeding is pending or, to the knowledge of Bank,Del Amo,
threatened or probable of
assertion to revise, revoke or limit any Permit. Except as set
forth in Schedule L, BankH, Del Amo has not entered into any
agreements or written understandings with the OCC,Federal
Reserve Board, the OTS, the FDIC or any other regulatory
authority. Bankagency having authority over it. Del Amo is not subject to
any judgment, order, writ, injunction or decree which
materially adversely -14-
affects, or might reasonably be
expected to materially adversely to affect either the
financial condition, (financialresults of operations, or otherwise), business or prospects of
Bank.
(q)Del Amo on a consolidated basis.
(m) Employee Benefit Plans.
(i)(1) Schedule IE includes a correct and complete list of,
and City Holding has been furnished a true and
correct copy of (or an accurate written description
thereof in the case of oral agreements or
arrangements) (A) all qualified pension and
profit-sharing plans, all deferred compensation,
consultant, severance, thrift, option, bonus and
group insurance contracts and all other incentive,
welfare and employee benefit plans, trust, annuity
or other funding agreements, and all other
agreements (including oral agreements) that are
presently in effect, or have been approved prior to
the date hereof, maintained for the benefit of
employees or former employees of Bank,Del Amo or the
dependents or beneficiaries of any employee or
former employee of Bank,Del Amo, whether or not subject
to ERISA (the "Employee Plans");, (B) the most recent
actuarial and financial reports prepared or required
to be prepared with respect to any Employee Plan;Plan and
(C) the most recent annual reports filed with any
governmental agency, the most recent favorable
determination letter issued by the Internal Revenue
Service, and any open requests for rulings or
determination letters, that pertain to any such
Employee Plan that is intended to be qualified Employee Plan.under
Section 401(c) of the Code. Schedule IE identifies
each Employee Plan that is intended to be qualified
under Section 401(a) of the Code and each such plan
is qualified.
(ii)(2) Neither BankDel Amo nor any employee pension benefit
plan (as defined in Section 3(2) of ERISA (a
"Pension Plan")) maintained or previously maintained
by it, has incurred any material liability to the
Pension Benefit Guaranty Corporation ("PBGC") or to
the Internal Revenue Service with respect to any
Pension Plan. There is not currently pending with
the PBGC any filing with respect to any reportable
event under Section 4043 of ERISA nor has any
reportable event occurred as to which a filing is
required and has not been made.
-15-
(iii)(3) Full payment has been made (or proper accruals have
been established) of all contributions which are
required for periods prior to the Closing Date, as
defined in Section 6.1 hereof, under the terms of
each Employee Plan, ERISA, or a collective
bargaining agreement. Noagreement, no accumulated funding
deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code) whether or not waived,
exists with respect to any Pension Plan (including
any Pension Plan previously maintained by Bank). ThereDel Amo),
and except as set forth on Schedule E, there is no
"unfunded current liability" (as defined in Section
412 of the Code) with respect to any Pension Plan.
(iv)(4) No Employee Plan is a "multiemployer plan" (as
defined in Section 3(37) of ERISA). BankDel Amo has not
incurred any liability under Section 4201 of ERISA
for a complete or partial withdrawal from a
multiemployermulti-employer plan (as defined in Section 3(37) of
ERISA). BankDel Amo has not participated in or agreed to
participate in, a multiemployer plan (as defined in
Section 3(37) of ERISA).
(v)(5) All Employee Plans that are "employee benefit
plans",plans," as defined in Section 3(3) of ERISA, that
are maintained by Del Amo or were previously maintained
by BankDel Amo comply and have been administered in
compliance in all material respects with ERISA and
all other applicable legal requirements, including
the terms of such plans, collective bargaining
agreements and securities laws. BankDel Amo does not
have any material liability under any such plan that
is not reflected in the BankDel Amo Financial Statements.
(vi) NoStatements
or on Schedule E hereto.
(6) Except as set forth on Schedule E, no prohibited
transaction has occurred with respect to any
Employee Plan that is an "employee benefit plan" (as
defined in Section 3(3) of ERISA) maintained by BankDel
Amo or any "employee benefit plan" previously maintained by BankDel Amo that would
-16-
result, directly or indirectly, in material
liability under ERISA or in the imposition of a
material excise tax under Section 4975 of the Code.
(vii)(7) Schedule IE identifies each Employee Plan that is an
"employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) and which is funded.its funding status,
whether through insurance, a trust, or from an
employee's general assets. The funding under each
such plan does not exceed the limitations under
Section 419A(b) or 419A(c) of the Code. BankDel Amo is
not subject to taxation on the income of any such
plan or any such plan previously maintained by Bank.
(viii)Del
Amo.
(8) Schedule IE identifies the method of funding
(including any individual accounting) and funded status for all
post-retirement medical or life insurance benefits
for the employees of Bank.
(r)Del Amo. Schedule E also
discloses the funded status of these Employee Plans.
(9) Schedule E identifies each corporate owned life
insurance policy, including any key man insurance
policy and policy insuring the life of any director
or employee of Del Amo, and indicates for each such
policy, the face amount of coverage, cash surrender
value, if any, and annual premiums.
(10) No trade or business is, or has ever been, treated
as a single employer with Del Amo for employee
benefit purposes under ERISA and the Code.
(n) Insurance. All policies or binders of fire, liability,
product liability, workmen's compensation, vehicular and
other insurance held by or on behalf of BankDel Amo are
described on Schedule MI and are valid and enforceable in
accordance with their terms, are in full force and effect,
and insure against risks and liabilities to the extent and
in the manner customary for the industry and are deemed
appropriate and sufficient by Bank. BankDel Amo. Del Amo is not in
default with respect to any provision contained in any such
policy or binder and has not failed to give any notice or
present any claim under any such policy or binder in due
and timely fashion. BankDel Amo has not received notice of
cancellation or non-renewal of any such policy or binder.
BankDel Amo has no knowledge of any inaccuracy in any
application for such policies or binders, any failure to
pay premiums when due or any similar state of facts that might form
the basis for termination of any such insurance. BankDel Amo
has no knowledge of any state of facts or of the occurrence of any
event that is reasonably likely to form the basis for any
material claim
-17-
against it not fully covered (except to the
extent of any applicable deductible) by the policies or
binders referred to above. BankDel Amo has not received notice
from any of their respectiveits insurance carriers that any insurance
premiums will be materially increased in the future or that
any such insurance coverage will not be available in the
future on substantially the same terms as now in effect.
(s)(o) Loan Portfolio. Each loan outstanding on the books of BankDel
Amo is reflected correctly in all material respects by the loan documentation,what it purports to be, was made in all material respects in
the ordinary course of business, was not known to be
uncollectible at the time it was made, accrues interest
(except for loans recorded on Del Amo's books as
non-accrual) in accordance with the terms of the loan, and
with respect to loans originated by Del Amo was made in
all material
respects in accordance with Bank'sDel Amo's standard loan policies unless madeas in
effect at the time the loan was negotiated, except for
loans to facilitate the sale of other real estate owned
("OREO") or loans with waivers or exceptions approved by the Bank's loan committee.renegotiated terms and conditions.
The records of BankDel Amo regarding all loans outstanding and
OREO by Del Amo on its books are accurate in all material
respects.respects and the risk classifications for the loans
outstanding are, in the best judgment of the management of
Del Amo, appropriate. The reserves for possible loan losses
on the outstanding loans of Bank
and the reserves for other real estate owned by BankDel Amo, as reflected in the
BankDel Amo Financial Statements, have been established in
accordance with generally accepted accounting principles
and with the requirements of the OCC,OTS and inthe FDIC. In the
best judgment of the management of Bank,Del Amo, such reserves
are adequate as of the date hereof and will be adequate as
of the Effective Time of the Merger to absorb all material known and
anticipated loan losses in the loan portfolio of Bank, and any losses
associated with other real estate owned or held by Bank.Del Amo.
Except as identified on Schedule N,J, no loanloans in excess of
$50,000 has$100,000 individually or in the aggregate have been
classified by examiners (regulatory or internal) as
"Special Mention," "Substandard," "Doubtful," or "Loss."
Except as disclosed on Schedule F, the OREO included in any
nonperforming asset of Del Amo is recorded at the lower of
cost or fair value less estimated costs to sell based on
independent appraisals that comply with the requirements of
the date
hereof by Bank or regulatory examiners as "Other Loans Specifically Mentioned",
"Substandard", "Doubtful" or "Loss".Financial Institutions Reform, Recovery and Enforcement
Act of 1989 and Uniform Standards of Professional Appraisal
Practice. Except as identified on Schedule N,J, to the best
knowledge of the management of Del Amo, each loan reflected
as an asset on the Bank balance sheetsDel Amo Financial Statements is to the knowledge of
Bank, the
legal, valid and binding obligation of the obligor and any
guarantor, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating
-18-
to or affecting creditor'screditors' rights and to general principles
of equity, principles, and no defense, offset or counterclaim has been
asserted with respect to any such loan, which if successful
would have a material adverse effect on the financial
condition, results of operations,operation or business or prospects of Bank.
(t)Del Amo.
(p) Absence of Changes. Except as set forth inidentified on Schedule O,K,
since December 31, 1995,September 30, 1997, there has not been any material
adverse change in the condition (financial or otherwise), aggregate assets or liabilities,
earnings or business of Bank.Del Amo, other than changes
resulting from or attributable to (i) changes since such
date in laws or regulations, generally accepted accounting
principles or administrative interpretations of any thereof
that affect the banking or savings and loan industries
generally, (ii) changes since such date in the general
level of interest rates, (iii) accruals and reserves
incurred or to be incurred by Del Amo since such date
pursuant to the terms of Section 4.8 hereof, or (iv) any
other accruals, reserves or expenses incurred or to be
incurred by Del Amo since such date with City Holding's
prior written consent. Since such dateSeptember 30, 1997, the
business of BankDel Amo has been conducted only in the ordinary
course.
(u)(q) Brokers and Finders. Neither BankDel Amo nor any of its
officers, directors or employees have employed any broker
or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the
transactiontransactions contemplated herein.
(v) Securities Portfolio. Since December 31, 1995, thereherein, except that Del Amo has
beenemployed Hovde Financial, Inc., and has paid or accrued all
amounts due such advisor in connection with services
rendered.
(r) Subsidiaries; Partnerships and Joint Ventures. Del Amo has
no material deteriorationsubsidiaries and does not own any interest in the quality of the portfolio of securities of
Bank.
(w)any
partnership or joint venture.
(s) Reports. BankDel Amo has filed all material reports and
statements, together with any amendments required to be
made with respect thereto, that were required to be filed
with (i) the OCC;Federal Reserve Board, (ii) the FDIC;FDIC, (iii)
the OTS, and (iii)(iv) any other governmental or regulatory
authority or agency having jurisdiction over itstheir
operations. None ofNo such reportsreport or statements,statement, or any amendments
thereto, contains any statement which, at the time and in the
light of the circumstances under which it was made, was
false or misleading with respect to any material fact
necessary in order to make the statements contained therein
not false or misleading. (x)Del Amo is not required to file
reports under Section 12(g) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the
regulations of the SEC.
(t) Environmental Matters. For purposes of this Agreement,subsection, the
following terms shall have the indicated meaning:
-19-
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental
entity relating to (i) the protection, preservation or
restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii)
the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances. The term
"Environmental Law" includes without limitation (i) the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. ss.Section 9601, et seq;
the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.Section 6901, et seq; the Clean Air Act, as amended,
42 U.S.C. ss.Section 7401, et seq; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. ss.Section 1251, et seq;
the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.Section 9601, et seq; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. ss.Section 11001, et seq; the
Safe Drinking Water Act, 42 U.S.C. ss.Section 300f, et seq;
and all comparable state and local laws, and (ii) any
common law (including without limitation common law that
may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened
as a result of, the presence of or exposure to any
Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated under any
Environmental Law, whether by type or by quantity,
including any material containing any such substance as a
component. Hazardous Substances include without limitation
petroleum, or any derivative or by-product thereof,
asbestos, radioactive material and polychlorinated
biphenyls.
-20-
"Loan Portfolio Properties and Other Properties Owned"
means those properties owned or operated by Bank,Del Amo or any
of its subsidiaries, including those properties serving as
collateral for any loans made and retained by Bank.
ToDel Amo or
for which Del Amo serves in a trust relationship for the
loans retained in portfolio.
Except as disclosed in Schedule L, to the best knowledge of
Bank, except as set forth in Schedule P,Del Amo:
(i) BankDel Amo has not been ornor is in violation of or
liable under any Environmental Law;
(ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or
liable under any Environmental Law; and
(iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or
threatened relating to the liability of the Loan
Portfolio Properties and Other Properties Owned
under any Environmental Law, including without
limitation any notices, demand letters or requests
for information from any federal or state
environmental agency relating to any such
liabilities under or violations of Environmental
Law, except in the case of
clauses (i), (ii) and (iii) above for such violations and liabilities, and
actions, suits, demands, notices, claims, investigations or proceedings, which
would not singly or in the aggregate have a material adverse effect on the
financial condition, results of operations, business or prospects of Bank.
(y)Law.
(u) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished
prior to the date hereof, no written statement,
certificate, schedule, list or other written information
furnished by or on behalf of BankDel Amo at any time to City
Holding, in
connection with this Agreement when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material
-21-
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Bank to City Holding is or will be a true and
complete copy of such document, unmodified except by another document delivered
by Bank.
3.2 Representations and Warranties of City Holding. City Holding
represents and warrants to Bank as follows:
(a) Organization, Standing and Power. (i) City Holding is a
corporation duly organized, validly existing and in good standing under the laws
of West Virginia and has all requisite corporate power and authority to own,
lease and operate its properties, to effect this transaction and to carry on its
business as now being conducted. City Holding has delivered to Bank complete and
correct copies of (i) its Articles of Incorporation and all amendments thereto
to the date hereof, and (ii) its Bylaws as amended to the date hereof.
(ii) At the Effective Time of the Bank Merger,
Acquisition is an interim national banking association, duly organized, validly
existing and in good standing under the laws of the United States. Acquisition
is being formed as an "interim" national banking association solely to
facilitate the Merger and has had no prior business operations.
(b) Capital Structure. As of December 31, 1995, the authorized
capital stock of City Holding consisted of 500,000 shares of Preferred Stock,
par value $25 per share, and 20,000,000 shares of Common Stock, par value $2.50
per share, of which 5,092,046 shares of City Holding Common Stock were issued
and outstanding. All of such issued and outstanding shares of City Holding
Common Stock were validly issued, fully paid and nonassessable at such date.
-22-
City Holding will own at the Effective Time of the Bank Merger all of
the issued and outstanding common stock of Acquisition free and clear of any
liens, claims, encumbrances, charges or rights of third parties of any kind
whatsoever.
City Holding also owns all of the issued and outstanding capital stock
of The City National Bank of Charleston, The Peoples Bank of Point Pleasant,
First State Bank & Trust, Home National Bank of Sutton, Blue Ridge Bank, Bank of
Ripley, Peoples State Bank, The First National Bank of Hinton, Merchants
National Bank, City Financial Corporation, City Mortgage Corporation and Hinton
Financial Corporation (each a "Subsidiary" and together the "Subsidiaries"). The
Subsidiaries are duly organized, validly existing and in good standing under the
laws of their jurisdiction of incorporation and have all requisite corporate
power and authority to own, lease and operate their properties and to carry on
their business as now being conducted.
(c) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of City Holding and
Acquisition, and this Agreement is a valid and binding obligation of City
Holding and Acquisition, enforceable in accordance with its terms. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby and compliance by City Holding and Acquisition with any of
the provisions hereof will not (i) conflict with or result in a breach of any
provision of City Holding's, Acquisition's or a Subsidiary's Articles of
Incorporation, or any of their respective Bylaws or result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or to which City Holding, Acquisition or a
Subsidiary is a party,
-23-
or by which any of them or any of their properties or assets may be bound; or
(ii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to City Holding, Acquisition or a Subsidiary or any of their
properties or assets. No consent or approval by any government authority, other
than compliance with applicable federal and state corporate, securities and
banking laws, and regulations of the United States Securities and Exchange
Commission ("SEC"), Federal Reserve Board, West Virginia Department of Banking
and the OCC are required in connection with the execution and delivery by City
Holding or Acquisition of this Agreement or the consummation by City Holding and
Acquisition of the Bank Plan of Merger.
(d) Financial Statements. City Holding has delivered to Bank
copies of the following financial statements of City Holding (the "City Holding
Financial Statements"):
(i) Consolidated Balance Sheets as of December 31,
1995 and 1994 and March 31, 1996 and 1995;
(ii) Consolidated Statements of Income for each of
the three years ended December 31, 1995, 1994 and 1993 and the three months
ended March 31, 1996 and 1995;;
(iii) Consolidated Statements of Changes in
Stockholders' Equity for each of the three years ended December 31, 1995, 1994
and 1993; and
(iv) Consolidated Statements of Cash Flows for each
of the three years ended December 31, 1995, 1994 and 1993.
Such consolidated financial statements and the notes thereto
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. Each of such
consolidated balance sheets, together with the notes thereto, presents fairly as
of its date the financial condition and assets and liabilities of City
-24-
Holding and the Subsidiaries. The consolidated statements of income, statements
of changes in shareholders' equity and statements of cash flows, together with
the notes thereto, present fairly the consolidated results of operations of City
Holding and the Subsidiaries for the periods indicated.
(e) Absence of Undisclosed Liabilities. Except as disclosed on
Schedule Q, at December 31, 1995 and March 31, 1996, City Holding and the
Subsidiaries had no material liabilities (contingent or otherwise) of any nature
which were not reflected on the City Holding Financial Statements or disclosed
in the notes thereto at such date except for those which in the aggregate are
immaterial.
(f) Absence of Changes. Since December 31, 1995, there has not
been any material adverse change in the condition (financial or otherwise),
aggregate assets or liabilities, earnings or business of City Holding as
reflected on its consolidated financial statements as of such date and for the
year then ended.
(g) Brokers and Finders. Neither City Holding nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger.
(h) Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, commitments or agreements of
any character to which City Holding is a party or by which it is bound calling
for the issuance of securities of City Holding or any security representing the
right to purchase or otherwise receive any such security, except as set forth in
Schedule R.
(i) Reports. City Holding and the Subsidiaries have filed all
reports and statements, together with any amendments required to be made with
respect thereto, that were
-25-
required to be filed with (i) United States Securities and Exchange Commission
(the "SEC"); (ii) the Federal Reserve Board; (iii) the OCC; (iv) the FDIC; (v)
West Virginia Department of Banking; and (vi) any other governmental or
regulatory authority or agency having jurisdiction over their operations. Each
of such reports and documents, including the financial statements, exhibits and
schedules thereto, which was filed with the SEC was in form and substance in
compliance with the 1933 Act or the Securities Exchange Act of 1934 (the "1934
Act"), as the case may be. No such report or statement, or any amendments
thereto, contains any statement which, at the time and in the light of the
circumstances under which it was made, was false or misleading with respect to
any material fact necessary in order to make the statements contained therein
not false or misleading.
(j) Legal Proceedings; Compliance with Laws. Except as set
forth in Schedule S, there is no legal, administrative, arbitration or other
proceeding or governmental investigation pending (including any legal,
administrative, arbitration or other proceeding or governmental investigation
pending involving a violation of the federal antitrust laws), or, to the
knowledge of City Holding's management, threatened or probable of assertion,
which might result in damages payable by City Holding or any Subsidiary in
excess of insurance coverage, which might result in a permanent injunction
against Bank or a Subsidiary, which might result in a change in the zoning or
building ordinances materially affecting the property or leasehold interests of
City Holding or a Subsidiary, or which otherwise, either individually or in the
aggregate, is likely to have a material adverse affect on City Holding or any
Subsidiary. Except as set forth in Schedule S, City Holding and each Subsidiary
has complied in all material respects with any laws, ordinances, requirements,
regulations or orders applicable to its business (including environmental laws,
ordinances, requirements, regulations or orders). City Holding
-26-
and each Subsidiary has all licenses, permits, orders or approvals of any
federal, state, local or foreign governmental or regulatory body (collectively,
"Permits") that are material to or necessary for the conduct of its business;
the Permits are in full force and effect; no violations are or have been
recorded in respect of any Permits, nor has City Holding or any Subsidiary
received notice of any such violation; and no proceeding is pending or, to the
knowledge of City Holding or any Subsidiary, threatened or probable of assertion
to revise, revoke or limit any Permit. Except as set forth in Schedule S,
neither City Holding nor any Subsidiary has entered into any agreements or
written understandings with the OCC, the FDIC or any other regulatory authority.
Neither City Holding nor any Subsidiary is subject to any judgment, order, writ,
injunction or decree which materially adversely affects, or might reasonably be
expected to materially adversely affect, its condition (financial or otherwise),
business or prospects.
(k) Employee Benefits Plan.
(i) With respect to qualified pension and
profit-sharing plans, all deferred compensation, consultant, severance, thrift,
option, bonus and group insurance contracts and all other incentive, welfare and
employee benefit plans, trust, annuity or other funding agreements, and all
other agreements that are presently in effect, for the benefit of employees of
City Holding or any Subsidiary, or the dependents or beneficiaries of any
employee thereof, whether or not subject to ERISA (the "City Holding Employee
Plans"), full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the Closing Date
under the terms of each City Holding Employee Plan, ERISA, or a collective
bargaining agreement. No accumulated funding deficiency (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, exists with
respect to any
-27-
such pension plan. There is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any such pension plan;
(ii) All City Holding Employee Plans that are
"employee benefit plans", as defined in Section 3(3) of ERISA, that are
maintained by City Holding or any Subsidiary comply and have been administered
in compliance in all material respects with ERISA and all other legal
requirements, including the terms of such plans, collective bargaining
agreements and securities laws. Neither City Holding nor any of its Subsidiaries
has any material liability under any such plan that is not reflected in the City
Holding Financial Statements; and
(iii) No prohibited transaction has occurred with
respect to any City Holding Employee Plan that is an "employee benefit plan" (as
defined in Section 3(3) of ERISA) maintained by City Holding or any Subsidiary
that would result, directly or indirectly, in material liability under ERISA or
in the imposition of a material excise tax under Section 4975 of the Code.
(l) Insurance. City Holding or its Subsidiaries maintain and
hold valid and enforceable policies or binders of fire, liability, product
liability, workmen's compensation, vehicular and other insurance insuring
against risks and liabilities to the extent and in the manner customary for the
industry and are deemed appropriate and sufficient by City Holding.
(m) Loan Portfolio. Each loan outstanding on the books of the
Subsidiaries is reflected correctly in all material respects by the loan
documentation, was made in, in all material respects, the ordinary course of
business, was not known to be uncollectible at the time it was made, and was
made in all material respects in accordance with the Subsidiary's standard loan
policies. The records of the Subsidiaries regarding all loans outstanding on its
books are accurate in all material respects. The reserves for possible loan
losses on the outstanding loans
-28-
of the Subsidiaries and the reserves for other real estate owned by the
Subsidiaries as reflected in the City Holding Financial Statements, have been
established in accordance with generally accepted accounting principles and with
the requirements of the applicable regulatory authority, and, in the best
judgment of the management of City Holding, are adequate to absorb all material
known and anticipated loan losses in the loan portfolio of the Subsidiaries, and
any losses associated with other real estate owned or held by them.
(n) Absence of Changes. Since December 31, 1995, there has not
been any material adverse change in the condition (financial or otherwise),
aggregate assets or liabilities, earnings or business of City Holding and its
Subsidiaries. Except as disclosed on Schedule Q, since such date the business of
City Holding and each of its Subsidiaries has been conducted only in the
ordinary course.
(o) Securities Portfolio. Since December 31, 1995, there has
been no material deterioration in the quality of the portfolio of securities of
City Holding and its Subsidiaries.
(p) Environmental Matters. To the best knowledge of City
Holding, except as set forth in Schedule T,
(i) Neither City Holding nor any Subsidiary has
been or is in violation of or liable under any Environmental Law;
(ii) None of the properties owned or operated by
City Holding or any Subsidiary has been or is in violation of or liable under
any Environmental Law; and
(iii) There are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened relating to the
liability of the properties owned or operated by City Holding or any Subsidiary
under any Environmental Law, including without limitation any notices, demand
letters or requests for information from any federal or state environmental
-29-
agency relating to any such liabilities under or violations of Environmental
Law, except in the case of clauses (i), (ii) and (iii) above for such violations
and liabilities, and actions, suits, demands, notices, claims, investigations or
proceedings, which would not singly or in the aggregate have a material adverse
effect on the financial condition, results of operations, business or prospects
of City Holding and its Subsidiaries.
(q) Disclosure. This Agreement, and, except to the extent of
any subsequent correction or supplement with respect thereto furnished prior to
the date hereof, no written statement, certificate, schedule, list or other
written information furnished by or on behalf of City Holding to Bank, in connection with this Agreement, when considered
as a whole, contains or will contain any untrue statement
of a material fact or omits or will omit to state a
material fact necessary in order to make the statements
herein or therein, in light of the circumstances under
which they arewere made, not misleading. Each document
delivered or to be delivered by Del Amo to City Holding is
or will be a true and complete copy of such document,
unmodified except by another document delivered by Del Amo.
(v) Accounting; Tax; Regulatory Matters. Subject to action
taken by the Board of Directors of Del Amo pursuant to or
as a result of the exception clause to the first sentence
of Section 4.4 hereof, Del Amo has not taken or agreed to
take any action or has any knowledge of any fact or
circumstance that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368 of
the Code, or materially impede or delay receipt of any
approval referred to in Section 4.6 hereof.
(w) Regulatory Approvals. Del Amo knows of no reason why the
approvals, consents and waivers of governmental authorities
referred to in Sections 5.1(f) and 5.2(e) hereof should not
be obtained on a timely basis without the imposition of any
condition of the type referred to in Section 5.1(f) hereof.
3.2. Representations and Warranties of City Holding. City Holding
represents and warrants to Del Amo as follows:
(a) Organization, Standing and Power. City Holding is a
corporation duly organized, validly existing and in good
standing under the laws of West Virginia and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted. City Holding has delivered to Del Amo
complete and correct copies of its Articles of
Incorporation and all amendments thereof to the date hereof
and its By-laws as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of City
Holding consists of 20,000,000 shares of Common Stock and
500,000 shares of Preferred Stock, of which 6,071,327
shares of Common Stock and no shares of Preferred Stock
were issued and outstanding as of September 30, 1997. All
of such issued and outstanding shares of City Holding
Common Stock were validly issued, fully paid and
nonassessable at such date.
(c) Authority. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary
action on the part of City Holding; and this Agreement is a
valid and binding obligation of City Holding, enforceable
in accordance with its terms. The execution and delivery of
this Agreement, the consummation of the transactions
contemplated hereby and compliance by City Holding with any
of the provisions hereof will not (i) conflict with or
result in a breach of any provision of its Articles of
Incorporation or By-laws or a default (or give rise to any
right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other
instrument or obligation to which City Holding is a party,
or by which it or any of its properties or assets may be
bound or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to City Holding or
any of its properties or assets. No consent or approval by
any governmental authority, other than compliance with
applicable federal and state securities and banking laws,
the rules of the National Association of Securities
Dealers, Inc. (the "NASD") and regulations of the Federal
Reserve Board, the OTS, the FDIC, and the West Virginia
Division of Banking is required in connection with the
execution and delivery by City Holding of this Agreement or
the consummation by City Holding of the transactions
contemplated hereby or by the Plan of Merger.
(d) Brokers and Finders. Neither City Holding nor any of its
respective officers, directors or employees has employed
any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, except that City
Holding has employed Baxter, Fentriss & Co. and will be
liable for its fees.
(e) Reports. City Holding has filed all material reports and
statements, together with any amendments required to be
made with respect thereto, that were required to be filed
with (i) the Federal Reserve Board, (ii) the FDIC, (iii)
the West Virginia Division of Banking, (iv) the SEC and (v)
any other governmental or regulatory authority or agency
having jurisdiction over their operations. Each of such
reports and documents, including the financial statements,
exhibits and schedules thereto, filed with the SEC pursuant
to the 1934 Act was in form and substance in compliance in
all material respects with the 1934 Act. No such report or
statement, or any amendments thereto, contains any
statement which, at the time and in light of the
circumstances under which it was made, was false or
misleading with respect to any material fact necessary in
order to make the statements contained therein not false or
misleading.
(f) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished
prior to the date hereof, no written statement,
certificate, schedule, list or other written information
furnished by or on behalf of City Holding at any time to
Del Amo, in connection with this Agreement when considered
as a whole, contains or will contain any untrue statement
of a material fact or omits or will omit to state a
material fact necessary in order to make the statements
herein or therein, in light of the circumstances under
which they were made, not misleading. Each document
delivered or to be delivered by City Holding to Del Amo is
or will be a true and complete copy of such document,
unmodified except by another document delivered by City
Holding.
3.3. Representations and Warranties of Acquisition Sub. Acquisition Sub
represents and warrants to Del Amo as follows:
(a) Organization Standing and Power. Acquisition Sub is a
federal savings bank duly organized, validly existing and
in good standing under the laws of the United States.
(b) Authority. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
and by the Plan of Merger have been duly and validly
authorized by all necessary action on the part of
Acquisition Sub, and this Agreement is a valid and binding
obligation of Acquisition Sub enforceable in accordance
with its terms. The execution and delivery of this
agreement, the consummation of the transactions
contemplated hereby and by the Plan of Merger and
compliance by Acquisition Sub with any of the provisions
hereof or thereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or
Bylaws or a default (or give rise to any right of
termination, cancellation, or acceleration) under any of
the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument
or obligation to which Acquisition Sub is a party, or by
which it or any of its properties or assets may be bound
(except for such conflict, breach or default as to which
requisite waivers or consents either shall have been
obtained by Acquisition Sub by the Effective Time of the
Merger or the obtaining of which shall have been waiver by
Del Amo), or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to
Acquisition Sub or any of its property or assets. No
consent or approval by any government authority, other than
compliance with applicable federal and state securities and
banking laws, regulations of the Federal Reserve Board, the
FDIC, the OTS and the West Virginia Division of Banking, is
required in connection with the execution and delivery by
Acquisition Sub of this Agreement or the consummation by
Acquisition Sub of the transactions contemplated hereby or
by the Plan of Merger.
ARTICLE IV
Conduct and Transactions Prior to
Effective Time of the Bank Merger
4.14.1. Access to Records and Properties of City Holding, Acquisition Sub,
and Bank.Del Amo. Between the date of this Agreement and the Effective
Time of the Bank Merger, each of City Holding (for itself and for each of its Subsidiaries)Acquisition Sub on
the one hand, and Bank,Del Amo on the other, agrees to give to the
other reasonable access to all itsthe premises and books and records
(including tax returns filed and those in preparation) of it and
its subsidiaries and to cause its officers to furnish the other
with such financial and operating data and other information with
respect to the business and properties as the other shall from
time to time request for the purposes of verifying the
warrantiesrepresentations and representationswarranties set forth herein, preparing the
Registration Statement (as -30-
defined in Section 4.2)4.2 hereof) and
applicable regulatory filings (as set forth in Section 4.6
hereof), and preparing unaudited financial statements of BankDel Amo
as of a date prior to the Effective Time of the Merger in order to
facilitate City Holding'sHolding in performance of its post-Closing Date
financial reporting requirements; provided, that any such investigationrequirements. Each party shall be conducted in such manner as not to interfere unreasonably with the
operation of the respective business of the other. City Holding and Bank shall
each maintain the
confidentiality of all confidential information furnished to themit by
the other partiesparty hereto concerning the business, operations, and
financial condition of the party furnishing such information, and
shall not use any such information except in furtherance of the
Banktransactions contemplated hereby or by the Plan of Merger. If this
Agreement is terminated, each party hereto shall promptly return
all documents and copies of, and all workpapers containing,
confidential information received from the other party hereto. The
obligations of confidentiality under this Section 4.1 shall
survive any such termination of this Agreement and shall remain in
effect, except to the extent that (a) one party shall have
directly or indirectly acquired the assets and business of the
other party; (b) as to any particular confidential information
with respect to one party, such information (i) shall become
generally available to the public other than as a result of an
unauthorized disclosure by the other party or (ii) was available
to the other party on a nonconfidential basis prior to its
disclosure by the first party; or
(c) disclosure by any party is
required by subpoena or order of a court of competent jurisdiction
or by order of a regulatory authority of competent jurisdiction.
4.2jurisdiction;
or (d) disclosure is required by law or by the SEC or bank or
thrift regulatory authorities in connection with the transactions
contemplated by this Agreement or otherwise, provided that the
disclosing party has, prior to such disclosure, advised the other
party of the circumstances necessitating such disclosure and the
parties have reached mutually agreeable arrangements relating to
such disclosure.
4.2. Registration Statement;Statement, Proxy Statement;Statement, Shareholder Approval. BankDel
Amo will duly call and will hold a meeting of its shareholders as
soon as practicable for the purpose of approving the Bank Merger, and in connection
therewith will recommend to and encourage shareholders that they vote in favor
of the Bank Merger and
will comply fully with the provisions of Title 12 of the
United States Code and theapplicable rules and regulations of
the OCC,bank and -31-
itsthrift regulatory authorities, and the Articles of
AssociationIncorporation and By-laws of Del Amo relating to the callcalling and
holding of a meeting of shareholders for such purpose. The Board
of Directors of BankDel Amo will recommend to and actively encourage
shareholders that they vote in favor of the Bank Merger. City Holding
and BankDel Amo will jointly prepare the proxy statement-prospectus to
be used in connection with such meeting (the "Proxy
Statement-Prospectus") and City Holding will prepare and file with
the SEC a Registration Statement on Form S-4 (the "Registration
Statement"), of which such Proxy Statement- ProspectusStatement-Prospectus shall be a
part, and use its best efforts promptly to have the Registration
Statement declared effective. In connection with the foregoing,
City Holding will comply with the requirements of the 1933 Act,
and the 1934 Act, the NASD and the rules and regulations of the SEC
under such Actsacts with respect to the offering and sale of City
Holding Common Stock in connection with the Bank MergerTransaction and with
all applicable state Blue Sky and securities laws. The notices of
such meetings and the Proxy Statement-Prospectus shall not be
mailed to BankDel Amo shareholders until the Registration Statement
shall have become effective under the 1933 Act. BankDel Amo covenants
that none of the information supplied by Bank,Del Amo and City Holding
covenants that none of the information supplied by City Holding for inclusion in
the Proxy Statement-Prospectus will, at the time of the mailing of
the Proxy Statement-Prospectus to BankDel Amo shareholders, contain
any untrue statement of a material fact nor will any such
information omit any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading; and at
all times subsequent to the time of the mailing of the Proxy
Statement-Prospectus, up to and including the date of the meeting
of BankDel Amo shareholders to which the statementProxy Statement-Prospectus
relates, and the Effective Time of the Bank Merger, none of such information in the Proxy
Statement-Prospectus, as amended or supplemented, will contain an
untrue statement of a material fact or omit any material fact
required to be stated -32-
therein in order to make the statements
therein, in light of the circumstances in which they were made,
not misleading.
City Holding, as the sole shareholder of Acquisition, hereby approves
this Agreement and the Plan of Merger.
4.34.3. Operation of the Business of Bank. BankDel Amo. Del Amo agrees that from
the date
hereofSeptember 30, 1997 to the Effective Time of the Bank Merger, it has
operated, and it will operate, its business substantially as
presently operated and only in the ordinary course and in general
conformity with applicable laws and regulations, and, consistent
with such operation, it will use its best efforts to preserve
intact its present business organizationorganizations and its relationships
with persons having business dealings with it. Without limiting
the generality of the foregoing, BankDel Amo agrees that it will not,
without the prior written notice toconsent of City Holding, unless required
by regulatory authorities (i) make any
change in the compensationsalaries, bonuses or title of J. Walker Owens,
Nicholas Barakonski, Diana Bowers, Randy C. Bowers, Jasna Penich,
Catherine A. Jaramillo or Enid E. Malm or change the fees payable
to any executive officer;director; (ii) make any change in the compensationtitle, salaries or
titlebonuses of any other employee, other than those set forth on Schedule U and other than those permitted by
current employment policies in the ordinary course of business,
any of which changes shall be reported promptly reported to City Holding;
(iii) enter into any bonus, incentive compensation, deferred
compensation, profit sharing, thrift, retirement, pension, group
insurance or other benefit plan or (except as
otherwise specifically contemplated in this Agreement) any employment or consulting
agreement or amend any such plan or agreement to increase the
benefits accruing or payable thereunder;under existing plans; (iv) create
or otherwise become liable with respect to any indebtedness for
money borrowed or purchase money indebtedness except in the
ordinary course of business; (v) amend Bank'sits Articles of
AssociationIncorporation or Bylaws;By-laws; (vi) except as provided in Section 4.5
hereof declare any dividend or make any distribution,
or effect any split or combination in respect of its capital
stock; (vii) issue or contract to issue any shares of BankDel Amo
capital stock or securities exchangeable for or convertible into
capital stock; (vii)stock except up to 76,637 shares of Del Amo Common Stock
issuable pursuant to Del Amo Options outstanding as of September
30, 1997; (viii) purchase any shares of BankDel Amo capital stock;
(viii)(ix) enter into, renew, extend or assume any material contract or
obligation, exceptobligation; (x) other than as provided in subsection (A) below
with respect to the ordinary coursework-out of business; (ix)nonperforming assets, waive,
release, compromise or assign any -33-
right of substantial value; (x)or claim involving $75,000
or more; (xi) propose or take any other action which would make
any representation or warranty in Section 3.1 hereof untrue; (xi)(xii)
introduce any new products or services or change the
rate of interest on any deposit instrument to above-market
interest rates; (xii)(xiii) make any change in policies respecting
extensions of credit or loan charge-offs; (xiii)(xiv) change reserve
requirement policies; (xiv)(xv) change securities portfolio policies;
(xv) change
financial(xvi) acquire a policy or tax accounting methods or practices; (xvi) enter into any new agreement, amendment
or endorsement or make any changes relating to insurance coverage,
excluding "tail" insuranceincluding coverage for its directors and officers, which would
result in an additional payment obligation of $50,000 or more;
or
(xvii) propose or take any action with respect to the closing of
any branches.
Bankbranches; (xviii) amend the terms of the Del Amo Options;
(xix) amend the terms of the written severance or employment
agreements identified in Schedule E; or (xx) make any change in
any tax election or accounting method or system of
internal accounting controls, except as may be appropriate to
conform to any change in regulatory accounting requirements or
generally accepted accounting principles. Del Amo further agrees
that, between the date of this Agreement and the Effective Time of
the Bank Merger, it will consult and reasonably cooperate with City Holding
regarding all actions described in the immediately preceding
paragraph and (i)(A) loan portfolio management, including management and
work-out of nonperforming assets, and credit review and approval
procedures, (ii)and (B) securities portfolio and funds management,
including management of interest rate risk; and (iii) expense management, all with the objective of achieving
appropriate operating synergies and appropriate accruals prior to the Effective
Time of the Bank Merger.
4.4risk.
4.4. No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms, neither BankDel Amo nor any of its
executive officers, directors, representatives, agents or
affiliates shall, directly or indirectly, encourage, solicit or
initiate discussions or negotiations with(with any person (otherother than
City Holding) concerning any merger, sale of substantial assets,
tender offer, sale of shares of stock or similar transaction
involving BankDel Amo (collectively, a "Significant Transaction") or
disclose, directly or indirectly, any information not customarily
disclosed to the public concerning Bank,Del Amo, afford
-34-
to any other
person access to the properties, books or records of BankDel Amo or
otherwise assist any person preparing to make or who has made such
an offer, or enter into any agreement with any third party
providing for a business
combination transaction, equity investmentSignificant Transaction.
4.5. Dividends. Del Amo agrees that subsequent to September 30, 1997,
and until the Effective Time of the Merger, it will not declare
any dividends or sale of significant amount of
assets. Bank will promptly communicate to City Holding the termsdistributions in respect of any proposal
which it may receive in respect to anyclass of the foregoing transactions.
4.5 Dividends. Bank agrees that in 1996 it will only declare and pay
cash dividends aggregating $1.35 per share.
4.6its
securities.
4.6. Regulatory Filings.Filings; Best Efforts. City Holding and BankDel Amo shall
jointly prepare all regulatory filings required to consummate the
transactions contemplated by the Agreement and the Bank Plan of Merger
and submit the filings for approval with the Federal Reserve
Board, the OCCOTS and the West Virginia DepartmentDivision of Banking as soon
as practicable after the date hereof. City Holding and BankDel Amo
shall use their best efforts to obtain approvals of such filings.
4.7 Tax Opinion. City Holding and Bank shall each use their best
efforts to obtain the tax opinion referred to in paragraph (e) of Section 5.1
and paragraph (f) of Section 5.2.
4.84.7. Public Announcements. Each party will consult with the other
before issuing any newspress release or otherwise making any public
statements with respect to the Bank Merger and shall not issue any
press release or make any such public statement prior to such
consultations and approval of the other party, which approval
shall not be unreasonably withheld, except as may be required by
law.
4.9 Transactions inlaw or the policies of the NASD.
4.8. Operating Synergies; Conformance to Reserve Policies, Etc. Between
the date hereof and the Effective Time of the Merger, Del Amo's
management will work with City Holding Common Stock. Other thanto achieve appropriate
operating efficiencies following the issuanceClosing Date. Subject to Del
Amo's approval, which will not be unreasonably withheld, City
Holding's notification to Del Amo's customers and City Holding's
direct contact with customers will commence following receipt of
Federal Reserve Board approval. At the request of City Holding Common Stockand
upon receipt by Del Amo of written confirmation from City Holding
that there are no conditions to the exercise of stock options granted pursuant
to employee benefit plansobligations of City Holding
orunder this Agreement set forth in connectionArticle V hereof which they
believe will not be fulfilled so as to permit them to consummate
the Merger and the other transactions contemplated hereby, not
more than three days before the Effective Time of the Merger and
after the Measurement Date, Del Amo shall establish such
additional accruals, reserves and charge-offs, through appropriate
entries in its accounting books and records (provided such
adjustments are in accordance with the operation
in the ordinary course of City Holding's dividend reinvestment plan, neither
City Holding nor Bank will purchase, sell or
-35-
otherwise acquire or dispose of any sharesGAAP and applicable law and
regulation) as may be necessary to conform Del Amo's accounting
and credit loss reserve practices and methods to those of City
Holding Common Stock during(as such practices and methods are to be applied from and
after the period of calculationEffective Time of the Merger) and to City Holding Stock Price.
4.10 City Holding Rights Agreement. City Holding agrees that any rights
issued pursuant to the Rights Agreement adopted by it in 1990 shall be issuedHolding's
plans with respect to each sharethe conduct of City Holding Common Stock issued pursuantthe business of Del Amo
following the Merger, as well as the costs and expenses relating
to the terms hereofconsummation by Del Amo of the Merger and the Planother
transactions contemplated hereby. Any such accruals, reserves and
charge-offs shall not be deemed to cause any representation and
warranty of Merger, regardless whether there has occurred a
Distribution Date under the terms of such Rights Agreement priorDel Amo to the
occurrencebe untrue or inaccurate as of the Effective
Time of the Bank Merger.
4.11 Accounting Treatment. City Holding and BankMerger, nor shall use their best
effortsany such accruals, reserves or
charge-offs be included in the determination of Net Book Value Per
Share pursuant to cause the Bank Merger to be accounted for as a "pooling of
interests."
4.12Section 2.1.
4.9. Agreement as to Efforts to Consummate. Subject only to the other
terms and conditions of this Agreement, each of City Holding and
Bank eachDel Amo agrees to use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation,
using reasonable effort to lift or rescind any injunction or
restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated herein.
Each of City Holding and Bank eachDel Amo shall use its best efforts to
obtain consents of all third parties and governmental bodies
necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
4.134.10. Adverse Changes in Condition. City Holding and BankDel Amo each agrees
to give written notice promptly to the other concerning any material adverse change
in its condition from the date of this Agreement until the Effective Time of the
Bank Merger that might adversely affect the consummation of the transactions
contemplated hereby or upon becoming aware of the
-36-
occurrence or impending occurrence of any event
or circumstance which would cause or constitute a material breach of any of
the representations, warranties or covenants of such party
contained herein. Each of City Holding and Bank eachDel Amo shall use its
best efforts to prevent or promptly to remedy the same. 4.14 Updating of Schedules. From the date of execution of this
Agreement until the consummation of the Bank Merger, each party agrees to keep
up to date all of the Schedules applicable to it and to provide notification to
the other of any changes or additions or events which have caused, or after the
lapse of time may cause, any such change or addition in any of such Schedules.
No updating of Schedules or
notification made pursuant to this Section 4.144.10 shall be deemed to
cure any breach of any representation or warranty made in thethis
Agreement or any Schedule unless City Holding or exhibit unlessDel Amo, as the
other partycase may be, specifically agrees thereto in writing, nor shall any
such updating of Schedules or notification be considered to constitute or give rise to a
waiver by Del Amo on the one hand, or City Holding on the other
partyhand, of any condition set forth in this Agreement.
4.11. Nasdaq National Market Listing. City Holding will file with Nasdaq
a Supplemental Listing Application for the shares of City Holding
Common Stock to be issued in the Merger and have such shares
approved for listing on The Nasdaq National Market prior to the
Effective Time of the Merger.
4.12. Updating of Schedules. Del Amo shall notify City Holding, and City
Holding shall notify Del Amo, of any changes, additions or events
which may cause any change in or addition to any Schedules
delivered by it under this Agreement, promptly after the
occurrence of same and at the Closing Date by delivery of updates
of all Schedules, including future quarterly and annual Del Amo
Financial Statements. No notification made pursuant to this
Section 4.12 shall be deemed to cure any breach of any
representation or warranty made in this Agreement or any Schedule
unless City Holding or Del Amo, as the case may be, specifically
agrees thereto in writing, nor shall any such notification be
considered to constitute or give rise to a waiver by Del Amo on
the one hand, or City Holding on the other hand of any condition
set forth in this Agreement.
4.13. Transactions in City Holding Common Stock. Other than the issuance
or acquisition of City Holding Common Stock pursuant to City
Holding employee benefit plans, or the purchase or sale of City
Holding Common Stock by City Holding in its capacity as trustee
under City Holding employee benefit plans or in any other
fiduciary capacity in which it is directed to sell or purchase
City Holding Common Stock, none of City Holding, Acquisition Sub
or Del Amo will, nor will any such party permit any affiliate to
directly or indirectly, purchase, publicly sell or publicly
acquire any shares of City Holding Common Stock during the 20
trading days prior to the Measurement Date.
ARTICLE V
Conditions of Transaction
5.1Merger
5.1. Conditions ofto Obligations of City Holding.Holding and Acquisition Sub. The
obligations of City Holding and Acquisition Sub to perform this
Agreement are subject to the satisfaction at or prior to the
Effective Time of the Merger of the following conditions unless
waived by City Holding.Holding and Acquisition Sub.
(a) Representations and Warranties; Performance of Obligations; No Adverse Change.Obligations.
The representations and warranties of BankDel Amo set forth in
Section 3.13.l hereof shall be true and correct in all
material respects as of the date of this Agreement and as
of the Effective Time of the Bank Merger as though made on and
as of the Effective Time of the Bank Merger; BankMerger (or on the date when
made in the case of any representation and warranty which
specifically relates to an earlier date); Del Amo shall
have in all material respects performed
-37-
all obligations
required to be performed by it and satisfied all conditions
required to be satisfied by it under this Agreement prior
to the Effective Time of the Bank Merger; there shall have occurred no material adverse
change in the condition (financial or otherwise), assets, liabilities,
properties, business or prospects of Bank from December 31, 1995 to the
Effective Time of the Bank Merger; and City Holding and
Acquisition Sub shall have received a certificate signed by
the Chief Executive Officer and by the Chief Financial
Officer of the chief executive officer and chief financial officer of BankDel Amo, which may be to their best knowledge
after due inquiry, to such effects.
City Holding may, at its expense, conduct a pre-Merger audit to
determine that the conditions described in the preceding paragraph are satisfied
as of the Effective Time of the Bank Merger.
(b) Authorization of Transaction. All action necessary to
authorize the execution, delivery and performance of this
Agreement by Del Amo and the consummation of the
transactions contemplated herein (including the shareholder
action referred to in Section 4.2) shall have been duly and
validly taken by the boardBoard of directors of BankDirectors and by the
shareholders of Bank,Del Amo and Banknot rescinded, and Del Amo
shall have full power and right to merge onexecute the termsPlan of
Merger provided herein.in Exhibit A.
(c) Opinion of Counsel. City Holding shall have received an
opinion of Woods, RogersAdams, McAndrews, Matson & Hazlegrove P.L.C.,Landsberg, counsel to
Bank,Del Amo, dated the Closing Date and satisfactory in form
and substance to counsel to City Holding, toin substantially
the effect that:
(i) Bank is a national banking association
organized and in good standing under the laws of the United States and has all
requisite corporate power to own, lease and operate its properties and to carry
on its businessform attached hereto as now being conducted as described in the Registration
Statement and Proxy Statement--Prospectus;
(ii) Bank has full power to carry out the
transactions provided for in the Agreement; all corporate and other proceedings
required to be taken by or on the part of
-38-
Bank to authorize it to execute and deliver the Agreement and to consummate the
transactions contemplated thereby and by the Plan of Merger have been duly and
validly taken; the Agreement has been duly and validly authorized, executed and
delivered by Bank and constitutes a valid and binding obligation of Bank
enforceable in accordance with its terms except as same (A) may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to the
rights of creditors, and (B) is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or law); and the Plan of Merger has been approved by the Board of
Directors and the shareholders of Bank;
(iii) All outstanding shares of Bank Common Stock to
be exchanged for shares of City Holding Common Stock at the Effective Time of
the Bank Merger have been duly authorized;
(iv) To the best knowledge of such counsel, except
as listed in Schedule K to the Agreement, there are no persons who may be deemed
to be Bank Affiliates;
(v) To the best knowledge of such counsel, Bank is
not a party to or bound by any outstanding option or agreement (other than this
Agreement) to sell, issue, buy or otherwise dispose of or acquire any shares of
Bank Common Stock or other security of Bank;
(vi)Exhibit C.
(d) The execution and delivery by Bank of the
Agreement, consummation by Bank of the transactions contemplated hereby, and
compliance by Bank with the provisions hereof will not conflict with or result
in a breach of any provision of the Articles of Association or Bylaws of Bank,
as applicable, or result in a default (or give rise to rights of termination,
cancellation or acceleration) under any of the terms, conditions, or provisions
of any note, bond, mortgage, indenture, license, agreement or any other
instrument listed in Schedule H (such counsel having no knowledge of any item
called for by such schedule which
-39-
is not disclosed therein), or violate any court order, writ, injunction or
decree applicable to Bank or any of its properties or assets, of which such
counsel has knowledge after making inquiry of Bank's President with respect
thereto;
(vii) Except as set forth in Schedule L, if any, such
counsel does not know of any litigation that is pending or threatened which
might result in money damages payable by Bank in excess of insurance coverage,
which might result in a permanent injunction against Bank or which, individually
or in the aggregate, otherwise might have a material adverse effect on Bank or
the transactions contemplated by this Agreement;
(viii) Such counsel does not know of any default
under, or the occurrence of any event which with the lapse of time, action or
inaction by a third party would result in a default under any outstanding
indenture, contract or agreement listed in Schedule H to the Agreement (such
counsel having no knowledge of any item called for by Schedule which is not
disclosed therein) or under any governmental license or permit or a breach of
any provision of the Articles of Association or Bylaws of Bank;
(ix) All legal matters pertaining to consummation of
the Bank Merger under the laws of the United States, including receipt of all
required regulatory approvals, other than the filing of the Articles of Merger
relating to the Plan of Merger with the OCC, have been completed to the
satisfaction of such counsel in all material respects; and
(x) On the basis of facts within their knowledge,
such counsel have no reason to believe that (except as to financial statements
and other financial data, or as to material relating to, and supplied by, City
Holding for inclusion in the Proxy Statement-Prospectus as to which no belief
need be expressed) the Proxy Statement-Prospectus (as amended or supplemented,
if so amended or supplemented) contained any untrue statement of a material fact
-40-
or omitted any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading as of (A) the time the Registration Statement became
effective, (B) the time of the meeting of Bank shareholders referred to in
Section 4.2 of the Agreement, or (C) at the Closing Date.
(d) Registration Statement. The Registration Statement
shall be effective under the 1933 Act and City Holding
shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be
exemptions from registration requirements necessary to
offer and issue the City Holding Common Stock in connection
with the Bank Merger, and neither the Registration Statement nor
any such permit, authorization or exemption shall be
subject to a stop order or threatened stop order by the SEC
or any state securities authority.
(e) Tax Opinion. City Holding and BankAcquisition Sub shall have
received, in form and substance reasonably satisfactory to them, an
opinion of Hunton & Williams to the effect that, for
federal income tax purposes, that consummation of
the Merger will constitutequalify as a
"reorganization" as defined inunder Section 368(a) of the Code; thatCode, and no
taxable gain or loss will be recognized by City Holding,
Acquisition Sub, or BankDel Amo upon consummation of the
Merger (but Acquisition or Bank may
be required to include in income certain amounts as a result of the termination
of any bad-debt reserve maintained by Bank and other possible required changes
in accounting methods); that no taxable gain will be recognized by a Bank
shareholder on the exchange by such shareholder of shares of Bank Common Stock
solely for shares of City Holding Common Stock (including any fractional share
interest); that the basis of City Holding Common Stock (including any fractional
share interest) received in the Bank Merger will be the same as the basis of the
Bank Common Stock surrendered in exchange therefor; that the holding period of
such City Holding Common Stock for such a Bank shareholder will include the
holding period of the Bank
-41-
Common Stock surrendered in exchange therefor, if such Bank Common Stock is a
capital asset in the hands of the shareholder at the Effective Time of the Bank
Merger; and that a Bank shareholder who receives cash in lieu of a fractional
share of City Holding Common Stock will recognize gain or loss equal to any
difference between the amount of cash received and the shareholder's basis in
the fractional share interest.Merger.
(f) Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to
permit City Holding and Acquisition Sub to consummate the Bank
Merger and to issue City Holding Common Stock to BankDel Amo
shareholders shall have been received and all related waiting periods
shall have
expired, all applicable federal and state laws governing the Merger
shall have been complied with, and there shall notcontained no conditions deemed in good faith to be
in any order or decree of
any regulatory authority any condition or requirement reasonably deemed
objectionable tomaterially disadvantageous by City Holding.
(g) Affiliate Letters. EachWithin 60 days of the date hereof, each
shareholder of BankDel Amo who is a BankDel Amo Affiliate shall
have executed and delivered a commitment and undertaking in
the form of Exhibit E to the effect that (1) such
shareholder will dispose of the shares of City Holding
Common
Stock received by him in connection with the Bank Merger only in
accordance with the provisions of paragraph (d) of Rule 145; (ii)145 under the 1933
Act; (2) such shareholder will not dispose of any of such
shares until City Holding has received, at its expense, an
opinion of Adams, McAndrews, Matson & Landsberg (or other
counsel acceptable to itit), satisfactory in form and
substance to counsel to City Holding, that such proposed
disposition will not violate the provisions of Rule 145 and
any applicable securities laws; (iii) that they will notlaws which opinion shall be
rendered promptly following counsel's receipt of such
shareholder's written notice of its intent to sell or
reduce their risk with respect to theshares
of City Holding shares acquired in the Bank
Merger until after the publication of combined financial results covering 30
days of combined operations;Common Stock; and (iv)(3) the certificates
representing said shares may bear a legend referring to the
foregoing restrictions.
-42-
(h) Provision for Loan Losses. OnNasdaq National Market Listing. If the Closing Date, Bank's
reserve for loan losses on outstanding loans and reserve for other real estate
owned shall, in the reasonable judgmentshares of City
Holding Common Stock to be adequateissued in the Merger are not
repurchased on the open market, such shares to absorb
all known or anticipated loan lossesbe issued in
Bank's loan portfolio and Bank's known
or anticipated losses associated with other real estate owned.
(i) Accounting Treatment. City Holdingthe Merger shall have received,
in form and substance satisfactory to it, a letter dated the Effective Timebeen approved for listing, upon
notice of the Bank Merger from Ernst & Young, L.L.P. to the effect that the Transaction
will qualify for "pooling-of-interests" accounting treatment.
(j)issuance, on The Nasdaq National Market.
(i) Acceptance by City Holding and Acquisition Sub Counsel. The
form and substance of all legal matters contemplated hereby
and of all papers delivered hereunder shall be reasonably
acceptable to Hunton & Williams, counsel for City Holding.
5.2Holding
and Acquisition Sub.
5.2. Conditions of Obligations of Bank.Del Amo. The obligations of BankDel
Amo to perform this Agreement are subject to the satisfaction
at or prior to the Effective Time of the Merger of the
following conditions unless waived by Bank:Del Amo:
(a) Representations and Warranties; Performance of Obligations; No Adverse Change.Obligations.
The representations and warranties of City Holding and
Acquisition Sub set forth in Section 3.2 hereof shall be
true and correct in all material respects as of the date of
this Agreement and as of the Effective Time of the Bank Merger
as though made on and as of the Effective Time of the
Bank Merger;Merger (or on the date when made in the case of any
representation and warranty which specifically relates to
an earlier date); City Holding and Acquisition Sub shall
have in all material respects performed all obligations
required to be performed by them and satisfied all
conditions required to be satisfied by them under this
Agreement prior to the Effective Time of the Bank Merger; there shall have occurred no material adverse change in
the condition (financial or otherwise), assets, liabilities, properties,
business or prospects of City Holding from December 31, 1995 or March 31, 1996,
to the Effective Time of the Bank Merger; and
BankDel Amo shall have received a certificate ofsigned by the
chief executive officerChief Executive Officer and by the chief financial officerChief Financial Officer
of City Holding and Acquisition Sub, which may be to their
best knowledge after due inquiry, to such effects.
-43-
(b) Authorization of Transaction. All action necessary to
authorize the execution, delivery and performance of this
Agreement by City Holding and Acquisition Sub and the
consummation of the transactions contemplated hereby shall
have been duly and validly taken by the boardsBoards of directorsDirectors
of City Holding and Acquisition Sub and the Board of
Directors and shareholders of Bank,Del Amo, and City Holding and
Acquisition Sub
shall have full power and right to merge and to acquire and assumewith Del Amo on
the terms provided herein.
(c) Opinion of Counsel. BankDel Amo shall have received an opinion
of Hunton & Williams, counsel to City Holding, and Acquisition, dated the
Closing Date and satisfactory in form and substance to
counsel to Bank, to the effect
that:
(i) City Holding and Acquisition are corporations
organized and in good standing under the laws of West Virginia and the United
States, respectively, and have all requisite corporate power to own, lease and
operate their respective properties and to carry on their respective businesses
as now being conducted as describedDel Amo, in the Registration Statement and Proxy
Statement-Prospectus;
(ii) City Holding and Acquisition have full power to
carry out the transactions provided for in the Agreement; all corporate and
other proceedings required to be taken by or on the part of City Holding and
Acquisition to authorize them to execute and deliver the Agreement and to
consummate the transactions contemplated thereby and by the Plan of Merger have
been duly and validly taken; the Agreement has been duly and validly authorized,
executed and delivered by City Holding and Acquisition and constitutes a valid
and binding obligation of City Holding and Acquisition enforceable in accordance
with its terms exceptform attached hereto as same (A) may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to the rights of creditors; and
(B) is subject to general principles of equity (regardless of whether
-44-
such enforceability is considered in a proceeding in equity or law); the Plan of
Merger has been approved by the board of directors of Acquisition; and the
shares of City Holding Common Stock to be issued in the Bank Merger in exchange
for shares of City Holding Common Stock have been duly authorized and when so
issued will be validly issued, fully paid and nonassessable;
(iii) All outstanding shares of City Holding Common
Stock have been duly authorized and are fully paid and nonassessable;
(iv) Execution and delivery by City Holding and
Acquisition of the Agreement, consummation by City Holding and Acquisition of
the transactions contemplated thereby, and compliance by City Holding and
Acquisition with the provisions thereof will not conflict with or result in a
breach of any provisions of either City Holding's or Acquisition's Articles of
Incorporation or Articles of Association, respectively, or either of their
Bylaws or result in a default (or give rise to rights or termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or any other
instrument or of City Holding, Acquisition or any Subsidiary known to such
counsel, or violate any court order, writ, injunction or decree applicable to
City Holding, Acquisition or any Subsidiary or any of their properties or
assets, of which such counsel has knowledge after making inquiry with respect
thereto.
(v)Exhibit
D.
(d) The shares of City Holding Common Stock to be
issued pursuant to the Agreement have been duly registered under the 1933 Act;
(vi) All legal matters pertaining to consummation of
the Bank Merger under the laws of the United States, including the receipt of
all regulatory approvals, other than
-45-
the filing of the Articles of Merger relating to the Bank Merger with the OCC,
have been completed to the satisfaction of such counsel in all material
respects;
(vii) On the basis of facts within their knowledge,
such counsel have no reason to believe that (except as to financial statements
and other financial data, or as to material relating to, and supplied by, Bank
for inclusion in the Proxy Statement-Prospectus, as to which no belief need be
expressed) the Proxy Statement-Prospectus (as amended or supplemented, if so
amended or supplemented) contained any untrue statement of a material fact or
omitted any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading (A) as of the time the Registration Statement became
effective; (B) as of the time of the special meeting of shareholders of Bank
mentioned in Section 4.2 of the Agreement; or (C) as of the Closing Date;
(viii) Except as set forth in Schedule S, such
counsel does not know of any litigation that is pending or threatened which
might result in money damages payable by City Holding, Acquisition or any
Subsidiary in excess of insurance coverage, which might result in a permanent
injunction against any of them or which, individually or in the aggregate,
otherwise might have a material adverse effect on City Holding or the
transactions contemplated by this Agreement; and
(ix) Such counsel does not know of any default
under, or the occurrence of any event which with the lapse of time, action or
inaction by a third party would result in a default under any governmental
license or permit or a breach of any provision of the Articles of Incorporation
or Bylaws of City Holding, Acquisition or any Subsidiary.
(d) Registration Statement. The Registration Statement
shall be effective under the 1933 Act and City Holding
shall have received all state securities laws or "blue sky"
permits -46-
and other authorizations or there shall be
exemptions from registration requirements necessary to
offer and issue the City Holding Common Stock in connection
with the Bank Merger, and neither the Registration Statement nor
any such permit, authorization or exemption shall be
subject to a stop order or threatened stop order by the SEC
or any state securities authority.
(e) Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to
permit City Holding and
AcquisitionDel Amo to consummate the Bank Mergertransactions contemplated
hereby and to permit City Holding to issue City Holding
Common Stock to BankDel Amo shareholders shall have been
received and all
related waiting periods shall have expired.received.
(f) Tax Opinion. City Holding, Acquisition Sub, and BankDel Amo
shall have received, in form and substance reasonably
satisfactory to them, an opinion of Hunton & Williams to
the effect set forththat, for federal income tax purposes, the
Merger will qualify as a "reorganization" under Section
368(a) of the Code; no taxable gain will be recognized by
City Holding, Acquisition Sub, or Del Amo upon consummation
of the Merger; no taxable gain will be recognized by a Del
Amo shareholder on the exchange by such shareholder of
shares of Del Amo Common Stock solely for shares of City
Holding Common Stock (including any fractional share
interest) in Section 5.1(e).the Merger; a Del Amo shareholder's aggregate
basis in City Holding Common Stock (including any
fractional share interest) received in the Merger will be
the same as the shareholder's basis in the Del Amo Common
Stock surrendered in exchange therefor; the holding period
of such City Holding Common Stock (including any fractional
share interest) for a Del Amo shareholder will include the
holding period of the Del Amo Common Stock surrendered in
exchange therefor, if such Del Amo Common Stock is held as
a capital asset by the shareholder at the Effective Time of
the Merger; and a Del Amo shareholder who receives cash in
lieu of a fractional share of City Holding Common Stock
will recognize gain or loss equal to any difference between
the amount of cash received and the shareholder's basis in
the fractional share interest.
(g) Nasdaq National Market Listing. If the shares of City
Holding Common Stock to be issued in the Merger are not
repurchased on the open market, such shares to be issued in
the Merger shall have been approved for listing, upon
notice of issuance, on The Nasdaq National Market.
(h) Acceptance by Bank'sDel Amo's Counsel. The form and substance of
all legal matters contemplated hereby and of all papers
delivered hereunder shall be reasonably acceptable to
counsel for Bank.Del Amo.
ARTICLE VI
Closing Date; Effective Time
of the
Bank Merger
6.16.1. Closing Date. Unless another date or place is agreed to in writing
by the parties, the closing of the transactions contemplated in
this Agreement shall take place at the offices of Frazier & Oxley, L.C., 401 Tenth Street,
Huntington,City Holding,
Charleston, West Virginia, 25727, at 10:00 A.M., local time, on such date
as City Holding shall designate to BankDel Amo at least 10 days prior
to the designated Closing Date and isas reasonably acceptable to Bank;Del
Amo; provided, that the date so designated shall notin no event be earlier than 30 days (or 15
days if
-47-
permitted under the Bank Merger Act) or
later than 60 days following the date of
the decision of the Federal Reserve Board and the OCC, whichever decision occurs
later, approving the MergerJune 30, 1998 (the "Closing Date").
6.26.2. Filings at Closing. Subject to the provisions of Article V hereof,
at the Closing Date, City Holding and Acquisition Sub shall cause
the Articles of MergerCombination relating to the BankPlan of Merger to be filed
in accordance with Title 12the rules and regulations of the United States Code,OTS, and each
of City Holding, Acquisition Sub and BankDel Amo shall take any and
all lawful actions to cause the Bank Merger to become effective.
6.36.3. Effective Time. Subject to the terms and conditions set forth
herein, including receipt of all required regulatory approvals,
the Bank Merger shall become effective at the time Articles of
Merger relating toCombination filed with the Bank
MergerOTS are made effective by the OCC (the "Effective
Time of the Bank Merger").
ARTICLE VII
Termination; Survival of Representations
Warranties and Covenants; Waiver and Amendment
7.17.1. Termination. This Agreement shall be terminated, and the
MergerTransaction abandoned, if the shareholders of BankDel Amo shall not
have givenapproved the approvalMerger at the meeting required by Section 5.1(b).4.2.
Notwithstanding such approval by such shareholders, this Agreement
may be terminated in writing at any time prior to the Effective Time of the
Bank Merger, by:
(a) The mutual consent of City Holding, Acquisition Sub and Bank,Del
Amo, as expressed by their respective boardsBoards of directors;Directors;
(b) Either City Holding or Bank,Acquisition Sub on the one hand or
Del Amo on the other hand, as expressed by their respective
boardsBoards of directors, after March 31, 1997;
-48-
Directors, if the Merger has not occurred by June
30, 1998, provided that the failure of the Merger to so
occur shall not be due to a willful breach of any
representation, warranty, covenant or agreement by the
party seeking to terminate this Agreement;
(c) By City Holding and Acquisition Sub in writing authorized
by its Boardtheir respective Boards of Directors if BankDel Amo has, or
by Bank,Del Amo in writing authorized by its Board of Directors,
if City Holding or Acquisition Sub has, in any material
respect, breached (i) any covenant or agreement contained
herein, or (ii) any representation or warranty contained
herein, in any case if such breach has not been cured by
the earlier of 30 days after the date on which written
notice of such breach is given to the party committing such
breach or the Closing Date; provided that it is understood
and agreed that either party may terminate this Agreement
on the basis of any such material breach of any
representation or warranty which is not cured within 30
days of written notice thereof contained herein
notwithstanding any qualification therein relating to the
knowledge of the other party;
(d) Either City Holding or Bank, in writing authorizedAcquisition Sub on the one hand or
Del Amo on the other hand, as expressed by their respective
boardsBoards of directors,Directors, in the event that any of the
conditions precedent to the obligations of such partyparties to
consummate the Bank Merger have not been satisfied or fulfilled
or waived by the party entitled to so waive on or before
the Closing Date, provided that neitherno party shall be entitled
to terminate this Agreement pursuant to this subparagraph
(d) if the condition precedent or conditions precedent
which provide the basis for termination can reasonably be
and are satisfied within a reasonable period of time, in
which case, the Closing Date shall be appropriately
postponed;
(e) City Holding or Bank,and Acquisition Sub, if the BoardBoards of
Directors of either
corporationCity Holding and Acquisition Sub shall have
determined in their sole discretion, exercised in good
faith, that the Bank Merger, has become inadvisable or
impracticable by reason of (A) the issuance of any order,
decree or advisory letter of regulatory authority
containing conditions or requirements reasonably deemed
objectionable to City Holding or (B) the threat or the
institution of any litigation, proceeding or investigation
(including under federal antitrust laws) to restrain or
prohibit the consummation of the transactions contemplated by this
AgreementMerger or to obtain other
relief in connection with this Agreement;
-49-
(f) Del Amo, if the Board of Directors of Del Amo shall have
determined in its sole discretion, exercised in good faith,
that the Merger has become inadvisable or impracticable by
reason of (A) the issuance of any order, decree or advisory
letter of regulatory authority containing conditions or
requirements reasonably deemed objectionable to Del Amo, or
(B) the threat or the institution of any litigation,
proceeding or investigation (including under federal
antitrust laws) to restrain or prohibit the consummation of
the Merger or to obtain other relief in connection with
this Agreement;
(g) City Holding, Acquisition Sub, or Bank,Del Amo, if either the Federal
Reserve Board, the OTS or the OCCWest Virginia Division of
Banking deny approval of the Bank Mergertransactions contemplated
hereby and the time period for all appeals or requests for
reconsideration has run;
(g) [Left blank intentionally]
(h) City Holding, if holdersthere has been a material adverse change
in the business operations or consolidated financial
condition of more than 9.9%Del Amo from that shown by the Del Amo
Financial Statements as of September 30, 1997. For purposes
of this paragraph (h), the term "material adverse change"
shall not include the following: (i) changes resulting from
movements in general market interest rates, (ii) changes in
laws, rules and regulations and accounting principles, and
(iii) any other matters mutually agreed by the parties to
this Agreement;
(i) Del Amo if, prior to the date of the outstanding sharesshareholders meeting,
a corporation, partnership, person or other entity or group
shall have made a bona fide, unsolicited proposal
that the Board of Bank Common Stock exercise their rightsDirectors of Del Amo believes, in good
faith after consultation with financial advisors, is more
favorable, from a financial point of view, to the
shareholders of Del Amo than the proposal set forth in this
Agreement (a "Superior Proposal"); provided, that (i) Del
Amo shall have promptly informed City Holding of
all the terms and conditions of such Superior Proposal and
shall have furnished to City Holding copies of any such
written proposal or offer and any communications in
response thereto and (ii) City Holding does not make,
within five business days of City Holding receiving the
information described above with respect to such Superior
Proposal, an appraisaloffer that the Board of their shares pursuantDirectors of Del Amo
believes, in good faith after consultation with its
financial advisors, is at least as favorable, from a
financial point of view, to 12 U.S.C. ss. 215athe shareholders of Del Amo as
such Superior Proposal;
(j) City Holding if, prior to the Effective Time of the Merger,
the Board of Directors of Del Amo shall have withdrawn or
modified in connection witha manner adverse to City Holding its approval
or recommendation of the Bank Merger.
7.2Merger, or shall have recommended
another offer or shall have resolved to do any of the
foregoing; or
(k) City Holding or Del Amo, if the Fair Market Value Per City
Holding Share as defined in Section 2.1(a)(iii) is greater
than $55.00 or less than $30.00.
7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement and the Bank Merger pursuant to Section
7.1, this Agreement, other than the provisions of Sections 4.1
(last sentence)three sentences) and 9.1, shall become void and have no
effect, without any liability on the part of any party or its
directors, officers or shareholders.
7.3 Survival of Representations, Warranties and Covenants. The
respective representations and warranties, covenants and agreements (except for
thoseshareholders, provided that nothing
contained in Sections 1.2, 1.3, 1.4, 2.2, 2.3, 2.4, 4.1 (last sentence),
8.2, 8.3, 9.1, 9.2, 9.3, 9.4, 9.5 and 9.6, whichthis Section 7.2 shall survive the effectivenessrelieve any party from
liability for any willful breach of the Bank Merger indefinitely) of City Holding, Acquisition and Bank contained
herein shall survive for one year following the Effective Time of the Bank
Merger.
7.4this Agreement.
7.3. Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose
shareholders are, entitled to the benefits thereof and this
Agreement may be amended or supplemented by written instructions
duly executed by all parties hereto at any time, whether before or
after the meeting of Bank
-50-
Del Amo shareholders referred to in Section
4.2 hereof, exceptexcepting statutory requirements and requisite
approvals of shareholders and regulatory authorities.authorities, provided
that any such amendment or waiver executed after shareholders of
Del Amo have approved this Agreement and the Plan of Merger shall
not modify either the amount or form of the consideration to be
received by such shareholders for their shares of Del Amo Common
Stock or otherwise materially adversely affect such shareholders
without their approval.
ARTICLE VIII
Additional Covenants
8.1 Registration Statement.8.1. Indemnification of Del Amo Officers and Directors; Liability
Insurance. After the Effective Time of the Merger, City Holding
Acquisitionagrees to provide indemnification to the directors, employees and
Bank
acknowledgeofficers of Del Amo and agree that the Bank Merger is a transactionsubsidiaries thereof for events
occurring prior to whichor subsequent to the 1933
Act is applicable. EachEffective Time of the
parties agrees to comply with the provisions of
the 1933 Act and all rules and regulations of the SEC promulgated pursuant to
the 1933 Act and cooperate in connection with the preparation and filing by City
Holding of a Registration Statement under the 1933 Act relating to the Bank
Merger. Bank agrees (a) to give the representativesMerger as if they had been directors, employees or officers of
City Holding accessprior to the books, recordsEffective Time of the Merger, to the
extent permitted under the West Virginia Corporation Act and filesthe
Articles of Bank atIncorporation and Bylaws of City Holding as in effect
as of the date of this Agreement. Such indemnification shall
continue for six years after the Effective Time of the Merger,
provided that any reasonable timeright to indemnification in respect of any claim
asserted or made within such six year period shall continue until
final disposition of such claim. City Holding will provide
officers and directors liability insurance coverage to all Del Amo
and subsidiaries thereof directors and officers, whether or not
they become part of the City Holding organization after the
Effective Time of the Merger, to the same extent it is provided to
City Holding's officers and directors, provided that coverage will
not extend to acts as to which notice has been given prior to the
Effective Time of the Merger. The right to indemnification and
insurance provided in this Section 8.1 is intended to
be for the purposebenefit of preparingdirectors, employees and officers of Del Amo
and the subsidiaries thereof and as such Registration Statement; (b) to provide to City Holding upon
request such information relating to Bank, its business and financial condition,
as shallmay be appropriatepersonally
enforced by them at law or in connection with the preparation of the Registration
Statement; and (c) to submit to City Holding for its prior approval all press
releases or other oral or written statements made or issued by Bank and its
officers or directors, which relate to the Merger in any manner.
8.2equity.
8.2. Employee Benefits.Benefit Matters.
(a) Plan Participation. All employees of BankDel Amo immediately
prior to the Effective Time of the Bank Merger ("Transferred Employees")who are employed
by Del Amo immediately following the Effective Time of the
Merger will be covered byentitled to participate in City Holding's
401(k) plan and employee benefit plans asstock ownership plan to whichthe extent
they are eligible based on their length of service,
compensation, job classification, and position and the
existing Del Amo 401(k) plan and employee stock ownership
plan will be terminated as of the Effective Time of the
Merger. Except as specifically provided in this Section 8.2
and as otherwise prohibited by law, an
employee's service with Bank.Del Amo which is recognized by the
applicable benefit plan of Del Amo at the Effective Time of
the Merger shall be recognized as service with City Holding's benefits plans will recognizeHolding
for purposes of eligibility to participate and for vesting butif
applicable, (but not for purposes of benefit accrual
-51-
accrual) under
any existing definedthe corresponding City Holding benefit plan, of City Holding, all Transferred
Employees' service with Bank,if any,
subject to applicable break in servicebreak-in-service rules.
(b) Cooperation. Del Amo agrees to cooperate with City Holding
will either terminate Bank'sin implementing any decision made by City Holding under
this Section 8.2 with respect to employee benefit plans merge
such plans with comparableand
to provide to City Holding employee benefit plans, or maintain
Bank's plans as separate plans. If Bank's plans are terminated, subject to
applicable law City Holding intends to allow Transferred Employees to contribute
funds distributed on termination of any Bank plan to the comparable City Holding
plan.
Except as described in Schedule V, as of the Effective Time of the Bank
Merger employees of Bank who become employees of Acquisition as the Surviving
Bank will be entitled to immediate coverage under City Holding Employee Plans
without any waiting period.
For at least five years following the Effective Time of the Bank
Merger, except with approval of the continuing directors of Bank or the
requirements of the OCC, no employee of Bank as of the date of this Agreement
may be terminated and no decrease may be made in the compensation levels, fringe
benefits or similar arrangements of such employees. No provision of this
Agreement shall be deemed to limit the right of City Holding to require the
termination of any employee of Bank for cause, or the right of Bank, with the
approval of the Continuing Directors, to terminate any employee with or without
cause. This paragraph shall not be deemed to create a contract of employment
with any employee of Bank.
8.3 Indemnification. City Holding shall indemnify, and advance expenses
(including legal fees and expenses) in matters that may be subject to
indemnification to, persons who served as directors and officers of Bank on or before the Effective Time
of the Bank Merger with respect to liabilitiesa schedule of service credit for its
employees.
8.3. Accounting. City Holding agrees that it will account for the
transactions contemplated under this Agreement under the purchase
method of accounting.
ARTICLE IX
Miscellaneous
9.1. Expenses. Each party hereto shall bear and claims (and related expenses) made against them resulting from their service as
such priorpay the costs and
expenses incurred by it relating to the Effective Time of the Merger in accordance with and subject to
the
-52-
requirements and other provisions of City Holdings' Articles of Incorporation
and Bylaws in effect on the date oftransactions contemplated
hereby, provided, that if this Agreement and applicable provisions of
lawis terminated pursuant to
the same extent asSection 7.1(e) by City Holding, is obliged thereunder to indemnify and
advance expenses to its own directors and officers with respect to liabilities
and claims made against them resulting from their service as such to City
Holding. On or prior to the Closing Date, Bank may purchase, at reasonable cost
(or, if it be determined to be less costly, City Holding will, provide)within 15 days
of Del Amo's presentation of its invoice, reimburse Del Amo for
its out-of-pocket accountable fees, costs and expenses associated
with the Merger up to a maximum of $200,000; further provided, if
this Agreement is terminated pursuant to Section 7.1(c), (f), (h)
(i) or (j) by Del Amo, Del Amo will, within 15 days of City
Holding's presentation of its invoice, reimburse City Holding for
its out-of-pocket accountable fees, costs and expenses associated
with the Merger up to a policymaximum of "tail" insurance$200,000. If this Agreement is
terminated pursuant to cover actsSection 7.1(d), the terminating party may,
within 15 days of presentation of its invoice, recover its
out-of-pocket accountable fees, costs and omissionexpenses associated with
the Merger up to a maximum of $200,000 if such termination results
from a failure of the Bank's directors and
officers occurring priornon-terminating party to the Effective Timemeet a condition or
conditions specified in Article V of the Bank Merger.
ARTICLE IX
Miscellaneous
9.1 Expenses. If the Bank Merger is consummated, all of the costs
will be borne by City Holding. If the Bank Merger is not consummated, each
party shall bear its own expenses.
9.2this Agreement.
9.2. Entire Agreement. This Agreement contains the entire agreement
among City Holding, Acquisition Sub and BankDel Amo with respect to
the Mergertransactions contemplated hereby and the related transactions
and supersedes all prior agreements (including the Letter
Agreement), arrangements or understandings with respect thereto.
9.39.3. Descriptive Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction
of any provisions of this Agreement.
9.49.4. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if
delivered personally or sent by registered or certified mail,
postage prepaid, addressed as follows:
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If to City Holding or Acquisition:
City Holding Company
3601 MacCorkle Avenue, S.E.
Charleston, West Virginia 25304
Attention:Acquisition Sub:
Steven J. Day
President and Chief Executive Officer
City Holding Company
3601 MacCorkle Avenue, SE
Charleston, West Virginia 25304
Copy to:
Lathan M. Ewers, Jr.Randall S. Parks
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
If to Bank:
The Old NationalDel Amo Savings Bank, of Huntington
Box 325
Huntington, West Virginia 25703
Attention: William M. FrazierFSB:
Nicholas Barakonski
President and Chief Executive Officer
Del Amo Savings Bank FSB
3422 Carson Street
Torrance, California 90503
Copy to:
Talfourd H. Kemper
Woods, RogersPeter F. McAndrews
Adams, McAndrews, Matson & Hazlegrove, P.L.C.
10 South Jefferson Street,Landsberg
429 Santa Monica Boulevard, Suite 1400
Roanoke, Virginia 24011
9.5550
Santa Monica, California 90401
9.5. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together
shall constitute but one agreement.
9.69.6. Governing Law. Except as may otherwise be required by the laws of
the United States, this Agreement shall be governed by and
construed in accordance with the laws of West Virginia.
-54-
IN WITNESS WHEREOF, each of the parties hereto havehas caused this Amended and
Restated Agreement dated as of February 2, 1998 to be executed on theirits behalf and
its corporate seal (if any) to be hereunto affixed and attested by its officers
thereunto duly authorized, all as of the day and year first above written.
CITY HOLDING COMPANY
By /s/ Steven J. Day
-------------------------------------
Name: Steven J. Day
Title: President and& Chief Executive Officer
ONBCITY ACQUISITION SUBSIDIARY, N.A.SUB, F.S.B.
(In Organization)
By /s/ Steven J. Day
-------------------------------------
Name: Steven J. Day
Title: President
DEL AMO SAVINGS BANK, FSB
By /s/ Nicholas Barakonski
-------------------------
Name: Nicholas Barakonski
Title: President and Chief
Executive Officer
THE OLD NATIONAL BANK OF HUNTINGTON
By
/s/ J. Walker Owens /s/ Jean Clawson Babbit
- ---------------------- ------------------------
J. Walker Owens Jean Clawson-Babbit
/s/ Nicholas Barakonski /s/ William M. Frazier
----------------------Clayton
- ----------------------- -----------------------
Nicholas Barakonski William M. Frazier
President
-55-
Clayton
/s/ Robert M. DavidsonSeymour S. Bilowit /s/ W. Kenneth Grant
--------------------------- ------------------------E.J. Chris Sorenson
- ----------------------- -----------------------
Seymour S. Bilowit E.J. Chris Sorenson
/s/ Ezra A. Midkiff, Jr. /s/ W. Michael Frazier
--------------------------- ------------------------
/s/ John J. Klim, Jr. /s/ Frank L. Gaddy
--------------------------- ------------------------
/s/ Leon K. Oxley /s/ W. B. Andrews
--------------------------- ------------------------
/s/ Lucian R. Carter /s/ William M. Frazier
--------------------------- ------------------------
TheDiana Bowers
- -----------------------
Diana Bowers
All of the Directors of The Old National Bank of Huntington sign for the purpose of
agreeingDel Amo have signed above to agree to vote all their
shares of BankDel Amo Common Stock beneficially owned by them and with respect to
which they have power to vote in favor of the Bank Merger and the transactions
contemplated by this Amended and Restated Agreement dated as of February 2, 1998
and to cause the BankMerger and the Plan of Merger to be recommended by the Board of
Directors of BankDel Amo to the shareholders of BankDel Amo in the proxy statement sent
to shareholders in connection with such shareholders' meeting.
-56-
Exhibit AANNEX B
PLAN OF MERGER
OF
THE OLD NATIONALCITY ACQUISITION SUB, F.S.B.
INTO
DEL AMO SAVINGS BANK, OF HUNTINGTON
INTO
ONB ACQUISITION SUBSIDIARY, N.A.FSB
Section 1. The Old National Bank of Huntington, a national banking
associationCity Acquisition Sub, F.S.B. ("Bank"Acquisition Sub"), shall, upon
the date and time thatspecified in the Articles of Merger are made
effectiveCombination executed by
Acquisition Sub and Del Amo Savings Bank, FSB ("Del Amo") and filed with the
Office of the Comptroller of the CurrencyThrift Supervision (the "Effective Time of the Bank Merger"), be merged
(the "Bank Merger""Merger") with and into ONB Acquisition
Subsidiary, N.A., a national banking association (interim) ("Acquisition"),
which is a subsidiary of City Holding Company ("City Holding"), andDel Amo, which shall be the Surviving Bank.surviving bank (the
"Surviving Bank").
Section 2. Conversion of Stock. At the Effective Time of the Bank
Merger:
(i) Each share of BankDel Amo Common Stock ("Bank Common Stock")
issued and outstanding at the Effective Time of the Bank Merger (other
than shares held by City Holding or in Bank's treasury and other than
Dissenting Shares, shall, and without any action by the holder thereof,
be converted into a number of shares of City Holding Common Stock
("City Holding Common Stock") equal to the quotient (rounded to the
nearest one one-hundredth) obtained by dividing (i) the product
obtained by multiplying the per share book value of Bank Common Stock
at June 30, 1996, by 2.5 by (ii) $23.325. The quotient thus derived is
referred to as the "Exchange Ratio".
(ii) Each share of Acquisition Common Stock issued and outstanding
immediately prior to the Effective Time of the Bank Merger
shall remain outstanding as one sharebe converted into shares of common stock of the Surviving
Bank.
(iii) Each share of Bank Common Stock issuedof
City Holding Company in such amount equal to the product
of one multiplied by the Exchange Ratio (as defined
herein). Cash shall be paid in lieu of any fractional
share interest at $ per share (the Fair Market Value
Per City Holding Share, as defined herein). As used
herein:
(A) "Exchange Ratio" shall mean the quotient of
(x) the sum of (A) the product of 1.55 times
the Net Book Value Per Share (as defined
herein) plus (B) the per share pro rata
amount of Del Amo's out-of-pocket
accountable fees, costs and expenses
associated with the Merger (up to a maximum
in the aggregate of $200,000 and only to the
extent such costs have not been capitalized)
(the "Merger Expenses") divided by (y) the
Fair Market Value Per City Holding Share;
(B) "Net Book Value Per Share" shall mean the net
book value of Del Amo at the Measurement
Date (as defined herein) divided by the
total number of shares of Del Amo Common
Stock outstanding immediately prior to the
Effective Time of the Bank Merger and held byMerger;
(C) "Fair Market Value Per City Holding
or inShare" shall mean the treasuryaverage closing
price of Bank shall be canceled.
Section 3. Mannera share of Conversion of Bank Common Stock. The manner in
which outstanding shares of Bank Common Stock shall be converted into City Holding Common
Stock as specifiedreported on The Nasdaq National
Market for the twenty trading days prior to
the Measurement Date; provided, that (A)
if the Fair Market Value Per City Holding
Share as determined in Section 2 hereof, after the Effective Timeclause
immediately preceding this proviso is
less than $32.00 and greater than or equal
to $30.00, the Fair Market Value Per City
Holding Share shall be deemed to equal
$32.00, (B) if the Fair Market Value Per
City Holding Share as determined in the
clause immediately preceding this proviso
is greater than $43.00 and less than or
equal to $48.00, the Fair Market Value Per
City Holding Share shall be deemed to
equal $43.00, (C) if the Fair Market
Value Per City Holding Share as
determined in the clause immediately
preceding this proviso is greater than
$48.00 and less than or equal to $55.00, the
Fair Market Value Per City Holding Share
shall be deemed to equal $43.00 increased
by the amount by which the actual Fair
Market Value Per City Holding Share
exceeds $48.00, or (D) if the Fair Market
Value Per City Holding Share as determined
in the clause immediately preceding this
proviso is greater than $55.00 or less than
$30.00, Del Amo and City Holding may
terminate this Plan of Merger; and
(D) "Measurement Date" shall mean the last day of
the Bankmonth immediately preceding the closing
of the transactions contemplated by the
agreement of which this Plan of Merger is a
part.
(ii) Each outstanding option to acquire Del Amo Common Stock
that was granted under the Del Amo 1990 Stock Option Plan
(the "Del Amo Options") shall be canceled as follows:
(i) Each share of Bank Common Stock, other than shares held
by City Holding orprovided in
the treasuryunderlying option agreement. Notwithstanding the
foregoing, if Del Amo shall receive an irrevocable letter
of Bank and other than Dissenting
Shares,instruction from an option holder prior to the meeting
of the shareholders of Del Amo to approve the Merger, then
the Del Amo Options listed in such letter shall be
converted, at the election of the option holder, into
either (i) an option to acquire that number of shares of
City Holding Common Stock as
provided in Section 2(i).equal to the product of (x) the
number of shares of Del Amo Common Stock subject to such
option immediately prior to the Effective Time of the
Merger multiplied by (y) (the Exchange Ratio), at an
exercise price per share equal to the exercise price of
such option immediately prior to the Effective Time of the
Merger divided by (the Exchange Ratio), or (ii) No fractionalthe
right to receive the number of full shares of City Holding
Common Stock equal to the quotient of (x) (the Option
Spread, as defined herein) divided by (y) $ (the Fair
Market Value Per City Holding Share) (with cash being paid
in lieu of any fractional share interest at $ per
share). The "Option Spread" shall be issued, but insteadequal to the
valuedifference between (i) the sum of fractional shares(A) the product of the
Net Book Value Per Share multiplied by 1.55 plus (B) the
Merger Expenses Per Share (as defined herein) and (ii) the
exercise price per share pursuant to such option. As used
herein, "Merger Expenses Per Share" shall be paid in
cash (subjectequal to all applicable
withholding taxes), for which purpose City Holdingthe
Merger Expenses divided by the total number of shares of
Del Amo Common Stock shall
be valued at the City Holding Stock Price.
(iii) Certificates for shares of Bank Common Stock shall be
submitted for exchange for City Holding Common Stock accompanied by a
Letter of Transmittaloutstanding immediately prior to be furnished within 10 business days after the
Effective Time of the Bank MergerMerger.
(iii) Each share of Acquisition Sub Common Stock outstanding
immediately prior to Bank's shareholders of record as
of the Effective Time of the Merger
shall be converted into one share of Del Amo Common Stock
(after giving effect to the conversion contemplated
above).
Section 3. Articles of Incorporation, Bylaws and Directors of the
Surviving Bank. At the Effective Time of the Merger, there shall be no change
caused by the Merger in the Charter (except any change caused by the filing of
Articles of Combination relating to the Merger), Bylaws, or Board of Directors
of the Surviving Bank.
Section 4. Conditions to Bank Merger. Consummation of the
Merger is subject to the following conditions:
(i) The approving vote of the holders of two-thirds of the
outstanding shares of Del Amo Common Stock entitled to
vote.
(ii) The approval of the Merger by the West Virginia Division
of Banking, the Board of Governors of the Federal Reserve
System and the Office of Thrift Supervision.
(iii) The satisfaction of the conditions contained in the
Amended and Restated Agreement and the Plan of
Reorganization, dated February 2, 1998, among City Holding
Company, Acquisition Sub and Del Amo, or the waiver of
such conditions by the party for whose benefit they were
imposed.
Section 5. Manner of Exchange.
(i) After the Effective Time of the Merger, each holder of a
certificate for theretofore outstanding shares of Del Amo
Common Stock, upon surrender of such certificate to the
agent appointed by City Holding to administer the exchange
of certificates (the "Exchange Agent"), accompanied by a
letter of transmittal in the form furnished by City
Holding and the Exchange Agent (the "Letter of
Transmittal"), shall be entitled to receive in exchange
therefor the number of full shares of City Holding Common
Stock into which shares of Del Amo Common Stock shall be
converted pursuant to Section 2 hereof (with cash in lieu
of any fractional share interest at $ per share).
Until so surrendered, each outstanding certificate which,
prior to the Effective Time of the Bank
Merger, represented BankDel
Amo Common Stock shallwill be deemed to evidence only
the right to
receive the number of full shares of City Holding Common
Stock determinedinto which the shares of Del Amo Common Stock
represented thereby may be converted in accordance with
Section 2 hereof, (with cash being paid in lieu of any
fractional share interest at $ per share) and, after
the Exchange Ratio.Effective Time of the Merger, will be deemed for all
corporate purposes of City Holding to evidence ownership
of the number of full shares of City Holding Common Stock
into which the shares of Del Amo Common Stock represented
thereby were converted.
(ii) Until such outstanding sharescertificates formerly representing BankDel
Amo Common Stock are so surrendered in exchange for City
Holding Common Stock, no dividend payable to holders of
record of City Holding Common Stock for any period as of
any date subsequent to the Effective Time of the Merger
shall be paid to the holder of such outstanding
certificates in respect thereof. After the Effective Time
of the Merger, there shall be no further registry of
transfer on the records of Del Amo of shares of Del Amo
Common Stock. If a certificate representing such shares is
presented to Del Amo or City Holding, it shall be canceled
and exchanged for a certificate representing shares of
City Holding Common Stock as herein provided. Upon
surrender of certificates of Del Amo Common Stock in
exchange for City Holding Common Stock, there shall be
paid to the recordholder of the certificates of City
Holding Common Stock issued in exchange therefor (i) the
amount of dividends theretofore paid for such full shares
of City Holding Common Stock as of any date subsequent to
the Effective Time of the Merger which have not yet been
paid to a public official pursuant to abandoned property
laws and (ii) at the appropriate payment date, the amount
of dividends with a record date prior to surrender and a
payment date subsequent to surrender. No interest shall be
payable on such dividends upon surrender of outstanding
certificates.
(iii) At the Effective Time of the Merger, each outstanding Del
Amo Option shall be converted in the manner provided in
Section 2(ii) hereof without any further action on the
part of the holder thereof..
Section 6. Effect of the Bank Merger. The Bank Merger, shall be paid
to the holder of such outstanding certificates in respect thereof. Upon
such surrender, dividends accrued or declared on City Holding Common
Stock shall be paid in accordance with Section 2.2 of the Agreement and
Plan of Reorganization among City Holding, Acquisition and Bank.
Section 4. Dissenting Shares. Notwithstanding anything in this Plan of
Merger to the contrary, shares of Bank Common Stock which are issued and
outstanding immediately prior toupon the
Effective Time of the Bank Merger, and which
are heldshall have the effect provided by a shareholder who has the right (to the extent such right is
available by law) to demand and receive payment12 C.F.R.
552.13.
ANNEX C
[Letterhead of Hovde Financial, Inc.]
November 20, 1997
Board of Directors
Del Amo Savings Bank, F.S.B.
3422 Carson Street
Torrance, CA 90503
Members of the fair value of his shares
ofBoard:
Del Amo Savings Bank, Common Stock pursuantF.S.B ("Del Amo") has proposed to 12 U.S.C. ss. 215a (the "Dissenting Shares")
shall be canceledenter into an
Agreement and shall not be converted into or by exchangeable for the
right to receive the consideration provided in Section 2 of this Plan of Merger,
unlessReorganization ("Agreement") with City Holdings Company
("City Holdings") and until such holder shall fail to perfect his right to dissent or shall
have effectively withdrawn or lost such right under the 12 U.S.C. ss. 215a, as
the case may be. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, his shares of Bank Common Stock shall
thereupon be deemed to have been converted, at the Effective Time of the Bank
Merger, into the right to receive sharesCity Acquisition Sub, F.S.B. (Acquisition Sub"), a wholly
owned subsidiary of City Holding Common Stock.
Section 5. Articles of Association, BylawsHoldings, whereby Acquisition Sub will be merged with
and Directors ofinto Del Amo (the "Transaction"). Pursuant to the Surviving Bank. At the Effective Time of the Bank Merger, the Articles of
Association, By-laws and Directors of Bank shall become the Articles of
Incorporation, Bylaws and Directors of the Surviving Bank.
2
ANNEX II
12 U.S.C.A. SS. 215A(b), (c) AND (d)
(b) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of theAgreement, shareholders of
each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger,Del Amo shall be entitled to receive consideration, in the form of City Holdings
common stock, equal to 1.55 times Del Amo's Net Book Value per share (as defined
in the Agreement) or approximately $20.231 per share, subject to certain
conditions set forth in the Agreement. Other terms and conditions of this merger
are more fully set forth in the Agreement.
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking and
financial advisory services to commercial banks and thrift institutions. Our
principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community offerings,
private placements, merger and acquisition transactions and recapitalizations.
Pursuant to a Consulting Agreement between Del Amo and Hovde, Hovde was engaged
to assist Del Amo in this Transaction. WE are familiar with the operations of
Del Amo, having acted as an advisor in connection with the proposed transaction,
and having participated in the negotiations leading to the Agreement.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of Del Amo and City Holdings
as well as material prepared in connection with the proposed transaction,
including but not limited to: (i) the Agreement and Plan of Reorganization; (ii)
certain publicly available information concerning Del Amo as well as publicly
available information concerning City Holdings; (iii) the nature and terms of
recent sale and merger transactions involving thrifts and thrift holding
companies that we consider relevant.
In addition, we have conducted meetings with members of the senior
management of Del Amo for the purpose of reviewing the future prospects of Del
Amo. We also performed a discounted cash flow analysis to determine a range of
present values per share of the Del Amo's common stock, assuming Del Amo
continued to operate as a stand-alone entity. In addition, we have taken into
account our assessment of general economic, regulatory, market and industry
conditions and our experience in similar transactions as well as our overall
knowledge of the banking industry and our general experience in securities
valuations.
- ---------------------
(1) Assumes closing date of March 1998, projected equity at 12/31/97 of $6.9
million with additional income of $60,000 through Feb. 28, 1998 (assumed
determination date). Projected book value per share at closing of $13.05.
Del Amo Savings Bank, F.S.B.
November 20, 1997
Page 2
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by Del
Amo and City Holdings and in the discussions with Del Amo's management.
Based on the foregoing and our experience as investment bankers, we are
of the opinion that, as of the date hereof, the transaction is fair, from a
financial point of view, to the shareholders of Del Amo.
Very truly yours,
/s/ Hovde Financial, Inc.
HOVDE FINANCIAL, INC.
ANNEX D
12 C.F.R. ss. 552.14
ss. 552.14 Dissenter and appraisal rights.
(a) Right to demand payment of fair or appraised value. Except as provided
in paragraph (b) of this section, any stockholder of a Federal stock association
combining in accordance with ss. 552.13 of this part shall have the right to
demand payment of the fair or appraised value of his stock: Provided, That such
stockholder has not voted in favor of the combination and complies with the
provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to ss. 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ, or any combination of such
shares of stock and cash.
(c) Procedure. (1) Notice. Each constituent Federal stock association shall
notify all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is to be
submitted for stockholder approval, of the right to demand payment of appraisal
value of shares, and shall include in such notice a copy of this section. Such
written notice shall be mailed to stockholders of record and may be part of
management's proxy solicitation for such meeting.
(2) Demand for appraisal and payment. Each stockholder electing to make a
demand under this section shall deliver to the Federal stock association, before
voting on the combination, a writing identifying himself or herself and stating
his or her intention thereby to demand appraisal of and payment for his or her
shares. Such demand must be in addition to and separate from any proxy or vote
against the combination by the stockholder.
(3) Notification of effective date and written offer. Within ten days after
the effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent Federal
stock associations who have complied with the provisions of paragraph (c)(2)
of this section and have not voted in favor of the combination, of the
effective date of the combination;
(ii) Make a written offer to each stockholder to pay for dissenting
shares at a specified price deemed by the resulting association to be the
fair value thereof; and
(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (c)(6) of this section (set out in the
notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and
statement of income of the association the shares of which the dissenting
stockholder holds, for a fiscal year ending not more than sixteen months before
the date of notice and offer, together with the latest available interim
financial statements.
(4) Acceptance of offer. If within sixty days of the effective date of the
combination the fair value is agreed upon between the resulting association and
any stockholder who has complied with the provisions of paragraph (c)(2) of this
section, payment therefor shall be made within ninety days of the effective date
of the combination.
(5) Petition to be filed if offer not accepted. If within sixty days of the
effective date of the combination the resulting association and any stockholder
who has complied with the provisions of paragraph (c)(2) of this section do not
agree as to the fair value, then any such stockholder may file a petition with
the Office, with a copy by registered or certified mail to the resulting
association, demanding a determination of the fair market value of the share so
held by him whenstock of
all such mergerstockholders. A stockholder entitled to file a petition under this
section who fails to file such petition within sixty days of the effective date
of the combination shall be approved bydeemed to have accepted the Comptroller upon written
request madeterms offered under the
combination.
(6) Stock certificates to be noted. Within sixty days of the effective date
of the combination, each stockholder demanding appraisal and payment under this
section shall submit to the receiving associationtransfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) Withdrawal of demand. Notwithstanding the foregoing, at any time before thirtywithin
sixty days after the effective date of consummationthe combination, any stockholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered upon the combination.
(8) Valuation and payment. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate staff of
the merger, accompanied by the surrender of his
stock certificates.
(c) VALUATION OF SHARES
The value ofOffice to appraise the shares of any dissenting shareholder shall be ascertained,to determine their fair market value, as of
the effective date of the merger,combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
anindependent persons as to the suitability of the appraisal made by a committeemethodology and the
adequacy of three persons, composedthe analysis and supportive data. The Director after consideration
of (1) one selectedthe appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notifiedresulting
association of the appraised value of his shares, appeal to
the comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to thefair market value of the shares, upon surrender of
the appellant.
(d) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES; STATE
APPRAISAL AND MERGER LAW
If, within ninety dayscertificates representing such stock. Payment shall be made, together with
interest from the effective date of consummationthe combination, at a rate deemed equitable
by the Director.
(9) Costs and expenses. The costs and expenses of any proceeding under this
section may be apportioned and assessed by the Director as he or she may deem
equitable against all or some of the merger,parties. In making this determination the
Director shall consider whether any party has acted arbitrarily, vexatiously, or
not in good faith in respect to the rights provided by this section.
(10) Voting and distribution. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any reason onepurpose nor be entitled to the payment of
dividends or moreother distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the appraiserscombination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is not selected as herein provided, ordeemed to have accepted the
appraisers failterms offered upon the combination, such stockholder shall thereupon be entitled
to determinevote and receive the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expensesdistributions described above.
(11) Status. Shares of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The valueresulting association into which shares of the
shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association whichstockholders demanding appraisal rights would have been delivered to such
dissenting shareholdersconverted or exchanged,
had they not requested payment shall be sold byassented to the receiving association at an advertised public auction, and the receiving
associationcombination, shall have the right to purchase anystatus of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or personsauthorized and
at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of suchunissued shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receivingresulting association.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors
Section 31-1-9 of the West Virginia Corporation Act provides in part
that each West Virginia corporation shall have power to indemnify any director,
officer, employee or agent or former director, officer, employee or agent
against expenses actually and reasonably incurred by him in connection with the
defense of any claim, action, suit or proceeding against him by reason of being
or having been such director, officer, employee or agent other than an action by
or in the right of the corporation if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation. With respect to an action by or in the right of the corporation the
director, officer, employee or agent or former director, officer, employee or
agent may be indemnified if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation, except
in relation to matters as to which he shall be finally adjudged in such action,
suit or proceeding against him by reason of being or having been such director,
officer, employee or agent to be liable for negligence or misconduct in the
performance of duty; and to make any other or further indemnity to any such
persons that may be authorized by the articles of incorporation or any by-law
made by the shareholdersstockholders or any resolution adopted, before or after the event,
by the shareholders.stockholders. The By-laws of City Holding contain provisions pursuant to
the foregoing section of the West Virginia Corporation Act indemnifying the
directors, officers, employees and agents of City Holding in certain cases
against expenses and liabilities under judgments and reimbursements of amounts
paid in settlement.
City Holding has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (l) the
directors and officers of City Holding against certain losses, to the extent
such losses are not indemnified by City Holding, and (2) City Holding, to the
extent it indemnifies such directors and officers for losses as permitted under
the laws of West Virginia.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
2 Amended and Restated Agreement and Plan of
Reorganization dated August
13, 1996,February 2, 1998, among
City Holding Company, ONBCity Acquisition Subsidiary, N.A.Sub,
F.S.B. (in organization), and The Old NationalDel Amo Savings
Bank, of HuntingtonFSB (attached to the Proxy
Statement/Prospectus included herein as Annex I)A)
5 Opinion of HuntonSteptoe & WilliamsJohnson with respect
to legality of securities being offered.*
8 Opinion of Hunton & Williams with respect to tax
consequences of the Bank Merger
24(a)Merger*
23.1 Consent of Ernst & Young LLP
24(b)23.2 Consent of Trainer, WrightKPMG Peat Marwick LLP
23.3 Consent of Steptoe & Paterno, C.P.A.s
24(c)Johnson*
23.4 Consent of Hunton & Williams (included in Exhibit 5
and Exhibit 8)Williams*
25 Power of Attorney (included on signature pages of
the Registration Statement)
99(a)Attorney*
99 Form of ProxyProxy*
(b) Financial Statement Schedules -- None
(c) Report, Opinion or Appraisal -- None
- ----------------------------------
* Previously filed.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus
required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the registration;
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the registration statement
or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a
post-effective amendment any of the securities
being registered in which remain unsold at the
termination of the offering.
4. That prior to any public reoffering of the
securities registered hereunder through the use of
a prospectus which is a part of this registration
statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule
145(c), the Registrant undertakes that such
reoffering prospectus will contain, or will be
amended to contain, the information called for by
the applicable registration form with respect to
reoffering by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form;
5. That every prospectus (i) that is filed
pursuant to the paragraph immediately preceding,
or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in
connection with an offering of securities
subject to Rule 415, will be filed as part of an
amendment to the registration statement and will
not be used until such amendment is effective, and
that for the purposes of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to
be the initial bona fide offering thereof;
6. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling
persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of
the Securities and Exchange Commission such
indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the Registrant of expenses
incurred or paid by a director, officer or
controlling person of the Registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question
whether such indemnification by it is against
public policy as expressed in the Act and will
be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first-class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statementRegistration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Charleston,
State of West Virginia on November 22, 1996.
CITY HOLDING COMPANY
Bythis 4th day of February, 1998.
City Holding Company
--------------------
(Registrant)
/s/ Steven J. Day
-------------------------------------------
Steven J. Day
President and& Chief Executive Officer
POWER OF ATTORNEY(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities indicated on November 22, 1996. Each of the directors and/or officers
of City Holding Company whose signature appears below hereby appoints Steven J.
Day,February 4, 1998.
/s/ Robert A. Henson and Lathan/s/ Dawn Woolsey
- ----------------------------- -------------------------------
Robert A. Henson Dawn Woolsey
Chief Financial Officer Chief Accounting Officer
(Principal Financial Officer) (Principal Accounting Officer)
/s/ Samuel M. Ewers, Jr., and each of them severally, as
his attorney-in-fact to sign in his name and behalf, in any and all capacities
stated below and to file with the Commission, any and all amendments, including
post-effective amendments to this registration statement, making such changes in
the registration statement as appropriate, and generally to do all such things
in their behalf in their capacities as officers and directors to enable City
Holding Company to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission.
Signature Title and Capacity
--------- ----------------------------Bowling*
- ------------------------------ -------------------------------
Samuel M. Bowling C. Scott Briers
Director Director
/s/ Dr. D. K. Cales* /s/ Steven J. Day
President and Chief
- ----------------- Executive Officer; Director----------------------------- -------------------------------
Dr. D. K. Cales Steven J. Day
Director President & Chief Executive Officer/Director
(Principal Executive Officer)
/s/- ----------------------------- -------------------------------
Robert A. Henson Chief Financial Officer
- --------------------
Robert A. Henson
/s/ Samuel M. Bowling Chairman of the Board;
- --------------------- Director
Samuel M. Bowling
/s/ Otis L. O'Connor Secretary; Director
- --------------------
Otis L. O'Connor
*Darrell K. Cales,D. Fisher Jack E. Fruth
Director Director
/s/ Jay Goldman* /s/ Carlin K. Harmon*
- ----------------------------- -------------------------------
Jay Goldman Carlin K. Harmon
Director Director/Executive Vice President
- ----------------------------- -------------------------------
C. Dallas Kayser Dale Nibert
Director Director
/s/ Otis L. O'Connor*
- ----------------------------- -------------------------------
Otis L. O'Connor Bob F. Richmond
Director Director
/s/ Mark H. Schaul*
- ----------------------------- -------------------------------
Mark H. Schaul DirectorsVan R. Thorn
Director Director
/s/ George J. Davis*
- ----------------------------- -------------------------------
George J. Davis Hugh R. Clonch
Director/Executive Vice President Director
/s/ William M. Frazier* /s/ Leon K. Oxley *
- ----------------------------- -------------------------------
William M. Frazier Leon K. Oxley
Director Director
/s/ David E. Haden*
- -----------------------------
David E. Haden
Director
*By: /s/ Robert A. Henson
---------------------
Robert A. HensonSteven J. Day
-------------------------
Steven J. Day
Attorney-in-Fact
Exhibit Index
Exhibit
Number Exhibit Page
2 Amended and Restated Agreement and Plan of
Reorganization dated August 13,
1996,February 2, 1998, among City Holding
Company, ONBCity Acquisition Subsidiary, N.A.Sub, F.S.B. (in organization),
and The Old NationalDel Amo Savings Bank, of HuntingtonFSB (attached to the Proxy
Statement/Prospectus included herein as Annex I)A)
5 Opinion of HuntonSteptoe & WilliamsJohnson with respect to
legality of securities being offered*
8 Opinion of Hunton & Williams with respect to tax
consequences of the Bank Merger
24(a)Merger*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ernst & Young LLP
24(b)23.3 Consent of Trainer, WrightSteptoe & Paterno, C.P.A.s
24(c)Johnson*
23.4 Consent of Hunton & Williams (included in Exhibit 5 and
Exhibit 8)Williams*
25 Power of Attorney (included on signature pages of the
Registration Statement)
99(a)Attorney*
99 Form of ProxyProxy*
(b) Financial Statement Schedules - None
(c) Report, Opinion or Appraisal - None
- ----------------
* Previously filed.