<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

(Mark One)

/X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [FEE REQUIRED]

        For the fiscal year ended December 31, 1998

                                       OR

/ /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

        For the transition period from               to

                         Commission file number 0-20908

                         PREMIER FINANCIAL BANCORP, INC.
             (Exact name of registrant as specified in its charter)

            KENTUCKY                                          61-1206757
 (State or other jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                          Identification No.)

         115 N. HAMILTON STREET
          GEORGETOWN, KENTUCKY                                   40324
(Address of principal executive offices)                      (Zip Code)

               Registrants' telephone number:  (502) 863-1955

   Securities registered pursuant to Section 12 (b) of the Act: NONE

   Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK
                                                               (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to filing
requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this 10-K or any amendment
to this Form 10-K. [ ]

The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 26, 1999 was $74,559,662. The number of shares
outstanding of the Registrant's Common Stock as of March 26, 1999 was 5,232,257.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the Form
10-K part indicated:

        DOCUMENT                                               FORM 10-K
        --------                                               ---------

 (1)    Proxy statement for the 1999 annual meeting of         Part III
        shareholders


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

                                   THE COMPANY

        Premier Financial Bancorp, Inc. (Premier or the Company) is a multi-bank
holding company that, as of March 26, 1999, operated twenty banking offices in
Kentucky, six banking offices in Ohio, and three banking offices in West
Virginia through its ten bank subsidiaries (the "Affiliate Banks"), the tenth of
which was acquired on January 20, 1999. At December 31, 1998, Premier had total
consolidated assets of $657.7 million, total consolidated deposits of $523.2
million and total consolidated shareholders' equity of $54.4 million.

        Premier began an acquisition program in 1993 and has acquired six
commercial banks and five branches of other commercial banks since that time.
Premier also owns nonbank subsidiaries that provide consumer lending and data
processing services.

        Premier continues to explore opportunities to acquire banks, savings
associations, branches of either and nonbank companies as permitted by the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). Premier regularly
reviews, analyzes and engages in discussions regarding possible additional
acquisitions. It is not presently known whether, or on what terms, such
discussions will result in further acquisitions, if any. Premier generally does
not announce an acquisition until after the execution of a definitive agreement.

        Premier is a legal entity separate and distinct from its Affiliate 
Banks and nonbank subsidiaries. Accordingly, the right of Premier, and thus 
the right of Premier's creditors and shareholders, to participate in any 
distribution of the assets or earnings of any of the Affiliate Banks or 
nonbank subsidiaries is necessarily subject to the prior claims of creditors 
of such subsidiaries, except to the extent that claims of Premier, in its 
capacity as a creditor, may be recognized. The principal source of Premier's 
revenue is dividends from its Affiliate Banks and nonbank subsidiaries. See 
"REGULATORY MATTERS -- Dividend Restrictions" for discussion of the 
restrictions on the Affiliate Banks' ability to pay dividends to Premier.

        Premier was incorporated as a Kentucky corporation in 1991 and has
functioned as a bank holding company since its formation. Premier's principal
executive offices are located at 115 N. Hamilton Street, Georgetown, Kentucky
40324, and its telephone number is (502) 863-1955.

                                    BUSINESS

GENERAL

        Through the Banks and its data processing subsidiary, the Company
focuses on providing quality, community banking services to individuals and
small-to medium sized businesses primarily in non-urban areas. By seeking to
provide such banking services in non-urban areas, the Company believes that it
can minimize the competitive effect of larger financial institutions that
typically are focused on large metropolitan areas. Through its experiences in
acquiring its Banks, the Company has successfully developed and implemented a
strategy of joining together community banks that retain their commitment to
local orientation and direction, while having the benefit of the Company's
capital for growth and staff assistance to promote safety, soundness and
regulatory compliance. Each Bank is managed on a decentralized basis that offers
customers direct access to the Bank's president and other officers in an
environment conducive to friendly, informed and courteous service. This
decentralized approach also enables each Bank to offer local and timely
decision-making, and flexible and reasonable operating procedures and credit
policies limited only by a framework of centralized risk controls provided by
the Company to promote prudent banking practices. Each Bank maintains its
community orientation by, among other things, having selected members of its
community as members of its board of directors, who assist in the introduction
of prospective customers to the Bank and in the development or modification of
products and services to meet customer needs. As a result of the development of
personal banking relationships with its customers and the convenience and
service offered by the Banks, the Banks' lending and investing activities are
funded primarily by core deposits.


<PAGE>

        When appropriate and economically advantageous, the Company centralizes
certain of the Banks' back office, support and investment functions in order to
achieve consistency and cost efficiency in the delivery of products and
services. The Company centrally provides services such as data processing,
operations support, accounting, loan review and compliance and internal auditing
to the Banks to enhance their ability to compete effectively. The Company also
provides overall direction in the areas of credit policy and administration,
strategic planning, marketing, investment portfolio management and other
financial and administrative services. Each Bank participates in product
development by advising management of new products and services needed by their
customers and desirable changes to existing products and services.

        Each of the Banks provides a wide range of retail and commercial banking
services, including commercial, real estate, agricultural and consumer lending;
depository and funds transfer services; collections; safe deposit boxes; cash
management services; and other services tailored for both individuals and
businesses. Farmers Deposit Bank and Citizens Deposit Bank & Trust in Eminence
and Vanceburg, Kentucky, also offer limited trust services and act as executor,
administrator, trustee and in various other fiduciary capacities. Through
Premier Data Services, Inc., the Company's data processing subsidiary, the
Company currently provides centralized data processing services to eight of the
Banks as well as one non-affiliated bank.

        The Banks' residential mortgage lending activities consist primarily of
loans for purchasing personal residences, or loans for commercial or consumer
purposes secured by residential mortgages. Consumer lending activities consist
of traditional forms of financing for automobile and personal loans.

        The Banks' range of deposit services include checking accounts, NOW
accounts, savings accounts, money market accounts, club accounts, individual
retirement accounts, certificates of deposit and overdraft protection. Deposits
of the Banks are insured by the Bank Insurance Fund administered by the FDIC.

        County Finance, Inc., a subsidiary of Citizens Deposit Bank & Trust in
Vanceburg, Kentucky, is a consumer loan company that provides secured and
unsecured loans to customers who would generally not qualify, due to credit
experience or other factors, for loans at that Bank.

COMPETITION

        The Banks encounter strong competition both in making loans and
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws that permit multi-bank holding companies as well as the
availability of nationwide interstate banking has created a highly competitive
environment for financial services providers. In one or more aspects of its
business, each Bank competes with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking companies and other financial
intermediaries operating in its market and elsewhere, many of whom has
substantially greater financial and managerial resources. Being smaller
financial institutions, each of the Banks' competitors include large bank
holding companies having substantially greater resources and offer certain
services that Premier Banks may not currently provide. Each Bank seeks to
minimize the competitive effect of larger financial institutions through a
community banking approach that emphasizes direct customer access to the Bank's
president and other officers in an environment conducive to friendly, informed
and courteous service.

        Management believes that each Bank is well positioned to compete
successfully in its respective primary market area, although no assurances can
be given. Competition among financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality and scope of the services rendered, the
convenience of the banking facilities and, in the case of loans to commercial
borrowers, relative lending limits. Management believes that the commitment of
its Banks to personal service, innovation and involvement in their respective
communities and primary market areas, as well as their commitment to quality
community banking service, are factors that contribute to their competitiveness.


<PAGE>

REGULATORY MATTERS

        The following discussion sets forth certain elements of the regulatory
framework applicable to bank holding companies and their subsidiaries and
provides certain specific information relevant to Premier. This regulatory
framework is intended primarily for the protection of depositors and the federal
deposit insurance funds and not for the protection of the holders of securities,
including Premier Common Shares. To the extent that the following information
describes statutory or regulatory provisions, it is qualified in its entirety by
reference to those provisions. A change in the statutes, regulations or
regulatory policies applicable to Premier or its subsidiaries may have a
material effect on the business of Premier.

GENERAL - As a bank holding company, Premier is subject to regulation under the
Bank Holding Company Act ("BHC Act"), and to inspection, examination and
supervision by the Board of Governors of the Federal Reserve System ("Federal
Reserve"). Under the BHC Act, bank holding companies generally may not acquire
ownership or control of more than 5% of the voting shares or substantially all
the assets of any company, including a bank, without the Federal Reserve's prior
approval. Similarly, bank holding companies generally may not acquire ownership
or control of a savings association without the prior approval of the Federal
Reserve. Further, branching by the Affiliate Banks is subject to the
jurisdiction, and requires the approval, of each Affiliate Bank's primary
federal banking regulator and, if the Affiliate Bank is a state-chartered bank,
the appropriate state banking regulator. In addition, bank holding companies
generally may engage, directly or indirectly, only in banking and such other
activities as are determined by the Federal Reserve to be closely related to
banking.

        Under the BHC Act, the Federal Reserve has the authority to require a
bank holding company to terminate any activity or relinquish control of the
nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a risk to the
financial soundness and stability of any bank subsidiary of the bank holding
company. Premier and the Affiliate Banks are subject to the Federal Reserve Act,
which limits borrowings by Premier and its nonbank subsidiaries from the
Affiliate Banks and also limits various other transactions between Premier and
its nonbank subsidiaries with the Affiliate Banks.

        The six Affiliate Banks chartered in Kentucky are supervised, regulated
and examined by the Kentucky Department of Financial Institutions, the two
Affiliate Banks chartered in Ohio are supervised, regulated and examined by the
Ohio Division of Financial Institutions, and the two Affiliate Banks chartered
in West Virginia are supervised, regulated and examined by the West Virginia
Division of Banking. In addition, those Affiliate Banks that are state banks and
members of the Federal Reserve System are supervised and regulated by the
Federal Reserve, and those state banks that are not members of the Federal
Reserve System are supervised and regulated by the Federal Deposit Insurance
Corporation ("FDIC"). Each banking regulator has the authority to issue
cease-and-desist orders if it determines that the activities of a bank regularly
represent an unsafe and unsound banking practice or a violation of law.

        Both federal and state law extensively regulates various aspects of the
banking business, such as, for example, reserve and capital requirements,
truth-in-lending and truth-in-savings disclosure, equal credit opportunity, fair
credit reporting, trading in securities and other aspects of banking operations.
Premier, the Affiliate Banks and Premier's nonbank subsidiaries are also
affected by the fiscal and monetary policies of the federal government and the
Federal Reserve and by various other governmental laws, regulations and
requirements. Further, the earnings of Premier and Affiliate Banks are affected
by general economic conditions and prevailing interest rates. Legislation and
administrative actions affecting the banking industry are frequently considered
by the United States Congress, state legislatures and various regulatory
agencies. It is not possible to predict with certainty whether such legislation
or administrative actions will be enacted or the extent to which the banking
industry, in general, or Premier and the Affiliate Banks, in particular, would
be affected.


<PAGE>

LIABILITY FOR BANK SUBSIDIARIES - The Federal Reserve has a policy to the effect
that a bank holding company is expected to act as a source of financial and
managerial strength to each of its subsidiary banks and to maintain resources
adequate to support each such subsidiary bank. This support may be required at
times when Premier may not have the resources to provide it. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company to
a federal bank regulatory agency to maintain the capital of a subsidiary bank
would be assumed by the bankruptcy trustee and entitled to priority of payment.

        Any depository institution insured by the FDIC may be held liable for
any loss incurred, or reasonably expected to be incurred, by the FDIC 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 "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. In the event that such a default occurred with respect to a bank,
any loans to the bank from its parent holding company will be subordinate in
right of payment to payment of the bank's depositors and certain of its other
obligations.

CAPITAL REQUIREMENTS - Premier is subject to capital ratios, requirements and
guidelines imposed by the Federal Reserve, which are substantially similar to
the ratios, requirements and guidelines imposed by the Federal Reserve and the
FDIC on the banks within their respective jurisdictions. These capital
requirements establish higher capital standards for banks and bank holding
companies that assume greater credit risks. For this purpose, a bank's or
holding company's assets and certain specified off-balance sheet commitments are
assigned to four risk categories, each weighted differently based on the level
of credit risk that is ascribed to such assets or commitments. A bank's or
holding company's capital is divided into two tiers: "Tier I" capital, which
includes common shareholders' equity, noncumulative perpetual preferred stock
and related surplus (excluding auction rate issues), minority interests in
equity accounts of consolidated subsidiaries, less goodwill, certain
identifiable intangible assets and certain other assets; and "Tier 2" capital,
which includes, among other items, perpetual preferred stock not meeting the
Tier I definition, mandatory convertible securities, subordinated debt and
allowances for loan and lease losses, subject to certain limitations, less
certain required deductions.

        Bank holding companies currently are required to maintain Tier I and
total capital (the sum of Tier 1 and Tier 2 capital) equal to at least 4% and 8%
of total risk-weighted assets, respectively. At December 31, 1998, Premier met
both requirements, with Tier I and total capital equal to 12.6% and 16.2% of its
total risk-weighted assets, respectively.

        In addition to the risk-based capital guidelines, the Federal Reserve
requires bank holding companies to maintain a minimum "leverage ratio" (Tier I
capital to adjusted total assets) of 3%, if the holding company has the highest
regulatory ratings for risk-based capital purposes and, accordingly, is required
to maintain a minimum "leverage ratio" of 3%. All other bank holding companies
are required to maintain a leverage ratio of 3% plus at least 100 to 200 basis
points. At December 31, 1998, Premier's leverage ratio was 8.1%.

        The foregoing capital requirements are minimum requirements. The Federal
Reserve may set capital requirements higher than the minimums described above
for holding companies whose circumstances warrant it. For example, holding
companies experiencing or anticipating significant growth may be expected to
maintain capital ratios, including tangible capital positions, well above the
minimum levels. The Federal Reserve has not, however, imposed any such special
capital requirements on Premier.

        Additionally, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), among other things, identifies five capital categories for
insured depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements.

<PAGE>

        An "undercapitalized" bank must develop a capital restoration plan and
its parent holding company must guarantee the bank's compliance with the plan.
The liability of the parent holding company under any such guarantee is limited
to the lesser of 5% of the Bank's assets at the time it became
"undercapitalized" or the amount needed to comply with the plan. Furthermore, in
the event of the bankruptcy of the parent holding company, such guarantee would
take priority over the parent's general unsecured creditors. In addition, FDICIA
requires the various regulatory agencies to prescribe certain non-capital
standards for safety and executive compensation and permits regulatory action
against a financial institution that does not meet such standards.

DIVIDEND RESTRICTIONS - Premier is dependent to a large extent on dividends from
its Affiliate Banks for its revenues. Various federal and state regulatory
provisions limit the amount of dividends the Affiliate Bank can pay to Premier
without regulatory approval. At December 31, 1998, $11.0 million of the total
shareholders' equity of the Affiliate Banks was available for payment of
dividends to Premier without approval by the applicable regulatory authority.

        In addition, federal bank regulatory authorities have authority to
prohibit Premier's Affiliate Banks from engaging in an unsafe or unsound
practice in conducting their business. The payment of dividends, depending upon
the financial condition of the bank in question, could be deemed to constitute
such an unsafe or unsound practice. The ability of the Affiliate Banks to pay
dividends in the future is presently, and could be further, influenced by bank
regulatory policies and capital guidelines as well as each Affiliate Bank's
earnings and financial condition.

INTERSTATE BANKING - Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act"), subject to certain concentration
limits, (i) bank holding companies, such a Premier, are permitted to acquire
banks and bank holding companies located in any state of the United States,
subject to certain restrictions, and (ii) banks are permitted to acquire branch
offices outside their home state by merging with out-of-state banks, purchasing
branches in other states or establishing de novo branch offices in other states;
provided that, in the case of any such purchase or opening of individual
branches, the host state has adopted legislation "opting in" to the relevant
provisions of the Riegle-Neal Act; and provided further, that, in the case of a
merger with a bank located in another state, the host state has not adopted
legislation "opting out" of the relevant provisions of the Riegle-Neal Act.

NUMBER OF EMPLOYEES

        The Company and its subsidiaries collectively had approximately 325
full-time equivalent employees as of March 26, 1999. Its executive offices are
located at 115 N. Hamilton Street, Georgetown, Kentucky, telephone number (502)
863-1955 (facsimile number (502) 863-5604).

ITEM 2.  PROPERTIES

        The Company owns 115 North Hamilton Street in Georgetown, Kentucky, 
at which the Company's executive offices are located. Additionally in 
Georgetown, the Company owns 120 North Hamilton Street, 103 Finley Drive, and 
812 South Broadway which serves as the main office and branch locations of 
Georgetown Bank & Trust Co. In Sharpsburg, Kentucky, the Company owns the 
main banking office of Citizens Bank at 648 Main Street and a building at 652 
Main Street which is being used for the Bank's operations. The Company also 
owns property located at 237 Frankfort Street, Brooksville, Kentucky, which 
was purchased as a possible future branch site for the Bank of Germantown. In 
South Webster, Ohio, Premier owns 110 North Jackson Street, which is the site 
occupied by a branch of Ohio River Bank. Except as noted, each of the Banks 
owns the real property and improvements on where their banking activities are 
conducted.

<PAGE>

        Citizens Deposit Bank & Trust, in addition to its main office at 400
Second Street, Vanceburg, Kentucky has five branch offices in Lewis County,
Kentucky, including one leased facility. The Bank of Germantown, with its main
office on Highway 10, Germantown, Kentucky, has no other offices in Bracken
County, Kentucky. Georgetown Bank & Trust Co., in addition to its main office
has two branches in Scott County, Kentucky. Citizens Bank of Sharpsburg has, in
addition to its main office, one branch located in Bath County, Kentucky.
Farmers Deposit Bank has its main office on Main Street, Eminence, Kentucky, and
two branches in Henry County, Kentucky. The Sabina Bank has its main office at
135 North Howard Street, Sabina, Ohio, and two branches, one each located in
Hardin and Auglaize Counties, Ohio. Ohio River Bank in addition to its main
office at 221 Railroad Street, Ironton, Ohio has one branch in Sciota County,
Ohio. The Bank of Philippi's main office is located at 2 South Main Street in
Philippi, West Virginia. Boone County Bank, in addition to its main office at
300 State Street, Madison, West Virginia, has a branch located in Van, West
Virginia.

ITEM 3.  LEGAL PROCEEDINGS

        The Banks are respectively parties to legal actions that are ordinary
routine litigation incidental to a commercial banking business. In management's
opinion, the outcome of these matters, individually or in the aggregate, will
not have a material adverse impact on the results of operations or financial
position of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 

        There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's common stock is listed on the NASDAQ under the symbol
PFBI. At March 26, 1999, the Company had approximately 818 record holders of its
common shares.

        The following table sets forth on a quarterly basis cash dividends paid
and the range of high and low sales prices on a per share basis during the
quarters indicated. Cash dividends paid per share shown below have been adjusted
retroactively to reflect prior stock splits effected in the form of share
dividends.

                            CASH               SALES PRICE
                        DIVIDENDS PAID      HIGH            LOW
                        --------------      ----            ---
1997:
  First Quarter           $    0.125     $   15.62      $   13.50
  Second Quarter               0.125         18.75          14.25
  Third Quarter                0.15          21.25          17.00
  Fourth Quarter               0.15          27.50          20.12
                          ----------
                          $    0.55
                          ==========


<PAGE>




                            CASH               SALES PRICE
                        DIVIDENDS PAID      HIGH            LOW
                        --------------      ----            ---

1998:
  First Quarter           $  0.15          $25.75         $21.56
  Second Quarter             0.15           23.50          20.00
  Third Quarter              0.15           22.50          18.81
  Fourth Quarter             0.15           19.75          16.50
                          -------
                          $  0.60

1999:
  First Quarter          *$  0.15          $17.50         $14.00


       *      Dividend declared March 10, 1999 to shareholders of record as of
              March 22, 1999, payable March 31, 1999.

       The Company has paid consecutive quarterly cash dividends since its
organization. The Company's annual cash dividend has increased 7 consecutive
years, from $0.12 per share in 1991 to $0.60 per share in 1998. While the
Company currently expects to declare comparable cash dividends in the future,
there can be no assurance that it will do so. The determination whether to pay
cash dividends and the amount of such dividends is at the discretion of the
Company's Board of Directors.

       The payment of dividends by the Company depends largely upon the ability
of the Banks to declare and pay dividends to the Company because the principal
source of the Company's revenue will be dividends paid by the Banks. At December
31, 1998, approximately $11.0 million was available for payment as dividends
from the Banks to the Company without the need for approval from the FDIC or the
state banking regulators. In considering the payment of dividends, the Board of
Directors will take into account the Company's financial condition, results of
operations, tax considerations, costs of expansion, industry standards, economic
conditions and need for funds, as well as governmental policies and regulations
applicable to the Company and the Banks.


<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following table presents consolidated selected financial data for the
Company, it does not purport to be complete and is qualified in its entirety by
more detailed financial information and the audited consolidated financial
statements contained elsewhere in this annual report. The consolidated selected
financial data presented below has been retroactively adjusted to reflect all
prior stock dividends and splits effected in the form of share dividends and has
been restated to give the effect of acquisitions accounted for as a pooling of
interests.

<TABLE>
<CAPTION>

                                               AT OR FOR THE YEAR ENDED DECEMBER 31,
                                      1998         1997         1996         1995        1994
<S>                               <C>          <C>          <C>          <C>         <C>        
EARNINGS
  Net interest income             $    20,108  $    17,458  $    13,454  $    8,021  $     7,319
  Provision for loan losses             1,742        1,399          953         314          335
  Non-interest income                   4,673        4,562        1,835       1,042          870
  Non-interest expense                 15,338       12,232        9,230       6,865        5,464
  Income taxes                          1,997        2,605        1,588         146          567
    Net income                    $     5,704  $     5,784  $     3,518  $    1,737  $     1,823

FINANCIAL POSITION
  Total assets                    $   657,744  $   464,890  $   363,739  $  208,502  $   154,653
  Loans, net of unearned
    income                            395,620      312,102      265,453     147,321      106,431
  Allowance for loan losses             4,363        3,479        3,127       2,114        1,172
  Goodwill and other intangibles       21,555        7,262        5,565         345            8
  Securities                          177,192       73,409       58,253      34,924       30,619
  Deposits                            523,193      358,605      297,116     179,792      136,613
  Other borrowings                     47,671       21,842       15,392       1,502            0
  Debt                                 28,750       28,750            0       5,000        1,500
  Stockholders' equity                 54,399       52,007       48,694      19,883       13,617

SHARE DATA
  Net income - basic              $      1.09  $      1.11  $       .82  $     0.59  $      0.77
  Net income - diluted                   1.09         1.10          .82        0.59         0.77
  Book value                            10.40         9.94         9.30        6.78         5.77
  Cash dividend                          0.60         0.55         0.50        0.45         0.36

RATIOS
  Return on average assets                .97%        1.29%        1.22%       1.27%        1.19%
  Return on average equity              10.80%       11.51%        9.54%      11.47%       13.70%
  Dividend payout                       53.80%       41.61%       51.66%      49.45%       33.60%
  Stockholders' equity to total
    assets at period-end                 8.27%       11.19%       13.39%       9.54%        8.80%
  Average stockholders' equity 
    to average total assets              9.02%       11.21%       12.79%      11.05%        8.69%

CAPITAL RATIOS
  Equity to assets                        8.3%        11.2%        13.4%        9.5%         8.8%
  Leverage ratio                          8.1%        13.6%        12.2%       10.0%         8.8%

</TABLE>

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

This discussion presents Management's analysis of the primary factors affecting
Premier Financial Bancorp, Inc.'s (the "Company" or "Premier") performance and
financial condition. It should be read in conjunction with the accompanying
audited consolidated financial statements included in this report. Unless
otherwise noted, all amounts and per share data have been restated to give the
effect of acquisitions accounted for as a pooling of interests. All dollar
amounts (except per share data) are presented in thousands unless otherwise
noted.

FORWARD-LOOKING STATEMENTS

Management's discussion and analysis contains forward-looking statements that
are provided to assist in the understanding of anticipated future financial
performance. However, such performance involves risks and uncertainties, and
there are certain important factors that may cause actual results to differ
materially from those anticipated. These important factors include, but are not
limited to, economic conditions (both generally and more specifically in the
markets in which Premier operates), competition for Premier's customers from
other providers of financial services, government legislation and regulation
(which changes from time to time), changes in interest rates, Premier's ability
to originate quality loans and attract and retain deposits, the impact of
Premier's rapid growth, Premier's ability to control costs, and new accounting
pronouncements, all of which are difficult to predict and many of which are
beyond the control of Premier.

OVERVIEW

In 1998, Premier continued to pursue its strategic plan to build a network of
independently managed community banks into a well capitalized, risk controlled
bank holding company with quality earnings and shareholder liquidity. Premier
continued to post strong results in three key financial areas: earnings, total
assets and shareholders' equity. For 1998, net income was $5,704 compared to
$5,784 as restated for 1997; total assets increased to $657,744 from the
$464,890 restated for 1997, and shareholders' equity increased to $54,399 from
$52,007 in 1997.

Quarterly unaudited financial information for the Company for the years ended
December 31, 1998 and 1997, is summarized as follows:

<PAGE>

                                 QUARTERLY FINANCIAL INFORMATION
                         (Dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                        FULL
                                               FIRST     SECOND    THIRD     FOURTH     YEAR
<S>                                             <C>      <C>       <C>       <C>       <C>    
  1998
           Interest Income                      $9,835   $10,605   $12,456   $12,454   $45,350
           Interest Expense                      5,279     5,887     7,183     6,894    25,243
           Net Interest Income                   4,556     4,718     5,273     5,560    20,107
           Provision for Loan Losses               276       720       299       447     1,742
           Securities Gains                          2       141         8        74       225
           Net Overhead                          2,676     1,702     3,186     3,325    10,889
           Income before Income Taxes            1,606     2,437     1,796     1,862     7,701
           Net Income                            1,381     1,642     1,291     1,390     5,704
           Basic Net Income per share             0.28      0.33      0.25      0.23      1.09
           Diluted Net Income per share           0.28      0.33      0.25      0.23      1.09
           Dividends Paid per share               0.15      0.15      0.15      0.15      0.60
  1997
           Interest Income                      $7,696    $8,678   $10,530    $9,947   $36,851
           Interest Expense                      3,504     4,273     6,210     5,406    19,393
           Net Interest Income                   4,192     4,405     4,320     4,541    17,458
           Provision for Loan Losses               236       328       554       281     1,399
           Securities Gains                          0         8     1,164     1,032     2,204
           Net Overhead                          2,177     2,193     2,967     2,537     9,874
           Income before Income Taxes            1,779     1,892     1,963     2,755     8,389
           Net Income                            1,274     1,347     1,367     1,796     5,784
           Basic Net Income per share             0.25      0.26      0.26      0.34      1.11
           Diluted Net Income per share           0.25      0.26      0.26      0.33      1.10
           Dividends Paid per share              0.125     0.125      0.15      0.15      0.55
</TABLE>

ACQUISITIONS

Premier's acquisition philosophy is to seek community bank candidates in
primarily non-urban areas that can become a part of Premier on a non-dilutive
basis within a two year timeframe. In evaluating acquisition opportunities,
Premier conducts a due diligence review to determine both risks and earnings
potential. Desirable candidates have an established base of community
involvement, strong local directors, a history of earnings and readily
identifiable asset risks. Acquisition transactions are structured to make a fair
return on investment while meeting the needs of the shareholders of banks
joining Premier.

In 1998, Premier completed acquisitions of three banks. On March 20, 1998,
Premier acquired Ohio River Bank, located in Ironton, Ohio, in a share exchange
accounted for as a pooling of interests. On June 26, 1998, the Company chartered
Boone County Bank, Inc. in Madison, West Virginia, and The Bank of Philippi,
Inc. in Philippi, West Virginia, for the purpose of acquiring three branch
offices of Banc One Corporation located in Madison, Van and Philippi, West
Virginia.


<PAGE>

Also in 1998, the Company signed a definitive agreement to acquire Mount Vernon
Bancshares and its wholly owned subsidiary, Bank of Mount Vernon, with offices
in Somerset, Mount Vernon, Berea and Richmond, Kentucky. The cash purchase of
Mount Vernon Bancshares was completed January 20, 1999.

In 1997, Premier completed one acquisition and also acquired the deposits and
banking facilities of two branches. On November, 13, 1997, Premier acquired The
Sabina Bank, Sabina, Ohio, in a share exchange accounted for as a pooling of
interests. On December 11, 1997, two branch offices of the Fifth Third Bank of
Western Ohio located in Waynesfield and Ada, Ohio, were acquired for cash and
accounted for as a purchase.

In 1996, Premier completed one acquisition. On July 1, 1996, Farmers Deposit
Bancorp of Eminence, Kentucky, and its wholly owned subsidiary, Farmers Deposit
Bank, were acquired in a cash transaction that was accounted for as a purchase.

The significant financial data relative to these acquisitions is set forth in
Note 2 to the financial statements.

On June 9, 1997, Premier completed its public offering of $28.75 million of
mandatorily redeemable capital securities of a subsidiary trust (capital
securities). These securities qualify as Tier I capital up to an amount not to
exceed 25% of Tier I capital and the portion that exceeds the 25% limitation
qualifies as Tier 2 capital.

RESULTS OF OPERATIONS

Earnings Summary

Premier recorded net income for 1998 of $5,704, versus $5,784 and $3,518
restated for 1997 and 1996. Basic earnings per common share were $1.09 in 1998
compared to $1.11 in 1997 and $.82 in 1996. Primary increases can be attributed
to an increase in net interest income from 17,458 in 1997 to $20,108 in 1998, an
increase of $2,650 or 15.2%, and a decrease in provision for income taxes from
$2,605 in 1997 to $1,997 in 1998, a difference of $608 or 23.3%. Offsetting
these increases was an increase in the provision for loan losses from $1,399 in
1997 to $1,742 in 1998 and an increase in noninterest expense of $3,106 from
$12,232 in 1997 to $15,338 in 1998.

Net income of $5,784 in 1997 represented a 64.4% increase over the 1996 amount
of $3,518. Net interest income increased 29.8% to $17,458 in 1997 versus $13,454
in 1996. Offsetting this increase was a $446 increase in the provision for loan
losses and a $1,016 increase in income taxes from $1,589 in 1996 to $2,605 in
1997. Fully diluted earnings per share increased 34.1% in 1997 compared to 1996
despite the increase in the weighted average number of shares from 4.3 million
in 1996 to 5.2 million in 1997.

NET INTEREST INCOME

Premier's primary source of revenue is its net interest income, which is the
difference between the interest received on its earning assets and the interest
paid on the funds acquired to support those assets. Loans made to businesses and
individuals are the primary interest earning assets, followed by investment
securities and federal funds sold in the inter-bank market. Deposits are the
primary interest bearing liabilities used to support the interest earning
assets.

<PAGE>

The level of net interest income is affected by both the balances and mix of
interest earning assets and interest bearing liabilities, the changes in their
corresponding yields and costs, by the volume of interest earning assets funded
by non interest bearing deposits, and the level of capital. Premier's long term
objective is to manage this income to provide the largest possible amount of
income while balancing interest rate, credit and liquidity risks.

Nontaxable income from loans and investment securities is presented on a
tax-equivalent basis whereby income exempt from tax has been adjusted upward by
an amount equivalent to the prevailing federal income taxes that would have been
paid if the income had been fully taxable. The discussion of factors influencing
net interest income that follows is based on taxable equivalent data. In each of
the three years, this adjustment is based on an assumed federal income tax rate
of 34%.

                                  SUMMARY OF NET INTEREST INCOME
                       (Dollars in thousands on a taxable equivalent basis)

<TABLE>
<CAPTION>
                                                            1998          1997             1996
<S>                                                     <C>           <C>           <C>        
Interest income................................         $    45,350   $    36,851   $    24,393
Tax equivalent adjustment......................                 607           516           421
                                                        -----------   -----------   -----------
    Interest income............................              45,957        37,367        24,814
Interest expense...............................              25,242        19,393        10,939
                                                        -----------   -----------   -----------
    Net interest income........................         $    20,715   $    17,974   $    13,875
                                                        ===========   ===========   ===========
</TABLE>

The following table shows, for the three year period ended December 31, 
1998,the average distribution of assets, liabilities and the interest earned 
or paid on those items together with the level of shareholders' equity as 
well as Premier's net interest spread and net interest margin on interest 
earning assets (net interest income divided by average earning assets). In 
1998, tax equivalent net interest income increased to $20,715 from $17,974 in 
1997, an increase of $2,741 or 15.2%. This increase was due to an increase of 
$119,241 or 28.4% in average earning assets and an increase of $114,899 or 
31.9% in average interest bearing liabilities. The yield on earning assets in 
1998 of 8.53% was 38 basis points lower than the 8.91% earned in 1997, and 
the cost of interest bearing liabilities decreased 7 basis points to 5.32% in 
1998 from 5.39% in 1997. Consequently, Premier's net interest spread 
decreased from 3.52% in 1997 to 3.21% in 1998 and the net interest margin 
decreased from 4.28% in 1997 to 3.85% in 1998. The decrease in net interest 
spread and net interest margin is primarily attributable to the acquisition 
of the deposit liabilities of the three West Virginia branches. Proceeds from 
these branches were placed in lower yielding assets until higher yielding 
assets could be generated. The Company also experienced the first full year 
effect of the issuance in the second quarter of 1997 of the Company's 28.75 
million in mandatorily redeemable capital securities, the proceeds of which 
were primarily used to fund the West Virginia acquisition.

In an effort to minimize the adverse impact on net income until a permanent
investment could be made of the funds from the issuance of the capital
securities, the Company initiated an investment strategy during the second
quarter of 1998 of selling approximately $75 million of short-term (60 days)
repurchase agreements and investing the proceeds in 2 to 5 year U. S. Treasury
and agency securities with a weighted average interest rate of approximately 1%
higher than the weighted average rate paid on the repurchase agreements.

<PAGE>

The Company's policy is to unwind its position whenever the spread between the
weighted average interest rate of the repurchase agreements and the weighted
average rate on the underlying securities falls below 50 basis points. During
the second quarter of 1998, the spread fell below 50 basis points and the
Company unwound its positions and recognized net gains of $135,000 on the sale
of the underlying securities in the arbitrage portfolio. Although the Company's
investment strategy to minimize the adverse impact on net income has been
successful, the Company's net interest spread and net interest margin have been
significantly reduced by its implementation. Excluding the effects of the
capital securities and the Company's investment strategy, net interest spread
would have been 3.67% in 1998 compared to 4.26% in 1997 and net interest margin
would have been 4.48% in 1998 versus the 5.16% achieved in 1997.

The net interest spread declined 75 basis points from 4.27% in 1996 to 3.52% in
1997, while the net interest margin, which measures net interest income as a
percent of average earning assets, decreased from 5.18% in 1996 to 4.28% in
1997. The decrease in net interest margin is attributable to the issuance of the
capital securities in the second quarter of 1997 and the utilization of a
similar investment strategy as used in 1998 to minimize the adverse impact on
earnings caused by the temporary placement of the securities proceeds.


<PAGE>

The following table presents average balances and interest rates for the
three-year period ended December 31, 1998.

                       AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST
                                             ANALYSIS
                                      (Dollars in thousands)

<TABLE>
<CAPTION>

                                                       1998                          1997                             1996
                                         Average              Average  Average                Average  Average              Average
                                         Balance   Interest     Rate   Balance    Interest     Rate    Balance    Interest   Rate
                                        --------   --------     ----   --------   --------     -----   --------   --------   -----
<S>                                     <C>        <C>          <C>    <C>        <C>           <C>    <C>        <C>         <C>
Assets:
 Interest earning assets
 U.S. Treasury and federal agency
   Securities                           $139,655   $  8,249     5.91%  $ 92,530   $  5,679      6.14%  $ 34,039   $  1,971    5.76%
 States and municipal obligations(1)      20,623      1,555     8.09     18,027      1,455      8.07     12,783      1,017    7.96
 Other securities (1)                      4,553        565     9.49      5,155        507      9.84      3,716        395   10.63
                                        --------   --------     ----   --------   --------     -----   --------   --------   -----
   Total investment securities          $164,831   $ 10,369     6.29   $115,712   $  7,641      6.60   $ 50,538   $  3,383    6.67
 Federal funds sold                       31,667      1,686     5.32     18,572      1,037      5.58      9,945        534    5.37
 Interest-bearing deposits with Banks      2,146        115     5.36          0          0      0           376         19    5.05

 Loans, net of unearned income(3) (4)
   Commercial                            144,557     14,284     9.88    118,530     11,944     10.08     92,435      9,333   10.10
   Real estate mortgage                  145,004     14,208     9.80    120,863     11,640      9.63     78,194      7,654    9.79
   Installment                            50,528      5,295    10.48     45,815      5,105     11.14     36,377      3,891   10.70
                                        --------   --------     ----   --------   --------     -----   --------   --------   -----
     Total loans                        $340,089   $ 33,787     9.93   $285,208   $ 28,689     10.06   $207,006   $ 20,878   10.09

Total interest-earning assets           $538,733   $ 45,957     8.53%  $419,492   $ 37,367      8.91%  $267,865   $ 24,814    9.26%
Allowance for loan losses                 (3,936)                        (3,256)                         (2,618)
Cash and due from banks                   17,657                         10,083                           8,482
Premises and equipment                     9,850                          7,034                           5,273
Other assets                              23,280                         14,734                           9,250
                                        --------                       --------                        --------
   Total assets                         $585,584                       $448,087                        $288,252

Liabilities:
 Interest bearing deposits:
  NOW and money market                  $ 93,741   $ 3,268      3.49%  $ 51,268   $ 1,733       3.38%  $ 38,085   $  1,267    3.33%
  Savings                                 51,818     1,525      2.94     32,671       968       2.96     25,904        754    2.91
  Certificates of deposit and other
   time deposits                         251,047    14,666      5.84    195,177    11,495       5.89    144,581      8,293    5.74
                                        --------   --------     ----   --------   --------     -----   --------   --------   -----
    Total interest-bearing deposits     $396,606   $19,459      4.91   $279,116   $14,196       5.09   $208,570   $ 10,314    4.95
  Other borrowings                        18,271     1,194      6.53     49,993     2,755       5.50      4,585        249    5.43
  FHLB advances                           31,141     1,737      5.58     14,301       810       5.66      3,660        208    5.68
  Debt                                    28,750     2,852      9.91     16,460     1,632       9.91      2,029        168    8.28
                                        --------   --------     ----   --------   --------     -----   --------   --------   -----

   Total interest-bearing liabilities   $474,768   $25,242      5.32%  $359,870   $19,393      5.39%   $218,844   $ 10,939    5.00%


 Non-interest bearing demand deposits     54,043                         34,462                          30,004
 Other liabilities                         3,949                          3,514                           2,538
                                        --------                       --------                        --------
   Total liabilities                    $532,760                       $397,846                        $251,386

Shareholders' Equity:                     52,824                         50,241                          36,866

Total liabilities and shareholders'     --------                       --------                        --------
  equity                                $585,584                       $448,087                        $288,252

Net interest income (1)                             20,715                         17,974                           13,875

Net interest spread (1)                                         3.21%                          3.52%                          4.26%
Net interest margin (1)                                         3.85%                          4.28%                          5.18%

</TABLE>

(1)    Taxable - equivalent yields are calculated assuming a 34% federal income
       tax rate.
(2)    Yields are calculated on historical cost except for yields on marketable
       equity securities that are calculated using fair value.
(3)    Includes loan fees, immaterial in amount, in both interest income and the
       calculation of yield on loans.
(4)    Includes loans on nonaccrual status.


<PAGE>

The accompanying analysis of changes in net interest income in the following
table shows the relationship of the volume and rate portions of these changes in
1998 and 1997.

                           ANALYSIS OF CHANGES IN NET
                                 INTEREST INCOME
              (Dollars in thousands on a taxable equivalent basis)

<TABLE>
<CAPTION>
                                           1998 VS. 1997                      1997 VS. 1996
                                    INCREASE (DECREASE) DUE TO         INCREASE (DECREASE) DUE TO
                                             CHANGE IN                          CHANGE IN
                                                           NET                                NET
                                   VOLUME       RATE      CHANGE      VOLUME       RATE      CHANGE
<S>                              <C>         <C>         <C>        <C>         <C>         <C>      
Interest Income:
Loans                            $   5,456   $    (358)  $   5,098  $   7,867   $     (56)  $   7,811
Investment securities                3,105        (377)      2,728      4,304         (46)      4,258
Federal funds sold                     699         (50)        649        481          22         503
Deposits with banks                    115                     115        (19)                    (19)
                                 ---------   ---------   ---------  ---------   ---------   ---------
    Total interest income        $   9,375   $    (785)  $   8,590  $  12,633   $     (80)  $  12,553

Interest Expense:
Deposits -
  NOW and money market           $   1,479   $      56   $   1,535  $     445   $      21   $     466
  Savings                              564          (7)        557        200          14         214
  Certificates of deposit            3,265         (94)      3,171      2,969         233       3,202
  Other borrowings                  (1,999)        438      (1,561)     2,503           3       2,506
  FHLB borrowings                      940         (13)        927        603          (1)        602
  Debt                               1,219           1       1,220      1,424          40       1,464
                                 ---------   ---------   ---------  ---------   ---------   ---------
    Total interest expense       $   5,468   $     381   $   5,849  $   8,144   $     310   $   8,454

       Net interest income       $   3,907   $  (1,166)  $   2,741  $   4,489   $    (390)  $   4,099
</TABLE>


<PAGE>

PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES

The company maintains its allowance for possible loan losses (allowance) at a
level that is considered sufficient to absorb potential losses in the loan
portfolio. The allowance is increased by the provision for possible loan losses
as well as recoveries of previously charged-off loans, and is decreased by loan
charge-offs. The provision is the necessary charge to expense to provide for
current loan losses and to maintain the allowance at an adequate level
commensurate with management's evaluation of the risks inherent in the loan
portfolio. Various factors are taken into consideration when the Company
determines the amount of the provision and the adequacy of the allowance. Some
of the factors include:

o      Past due and nonperforming assets;

o      Specific internal analyses of loans requiring special attention;

o      The current level of regulatory classified and criticized assets and the
       associated risk factors with each;

o      Examinations and reviews by the Company's independent accountants and
       internal loan review personnel; and

o      Examinations of the loan portfolio by federal and state regulatory
       agencies.

The data collected from these sources is evaluated with regard to current
national and local economic trends, prior loss history, underlying collateral
values, credit concentrations, and industry risks. An estimate of potential
future loss on specific loans is developed in conjunction with an overall risk
evaluation of the total loan portfolio.


<PAGE>

The following table is a summary of the Company's loan loss experience for each
of the past five years.

                         SUMMARY OF LOAN LOSS EXPERIENCE
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                              ----------------------------------------------------------
                                                 1998       1997        1996        1995        1994
<S>                                           <C>         <C>        <C>         <C>          <C>       
Balance at beginning of year                  $   3,479   $  3,127   $   2,114   $    1,172   $    1,192
Balance of allowance for loan losses of
  Acquired subsidiaries at acquisition date         115          0         812          803            0
Amounts charged off:
  Commercial                                        502        532         252           74          312
  Real estate mortgage                               60        139          68           19            5
  Consumer                                          630        634         657          181          200
                                              ---------   --------   ---------   ----------   ----------
    Total loans charged off                   $   1,190   $  1,305   $     977   $      274   $      517

Recoveries on amounts previously charged off:

  Commercial                                         45         48          91           32           94
  Real estate mortgage                                1          0           4            2            5
  Consumer                                          170        210         130           64           63
                                              ---------   --------   ---------   ----------   ----------
    Total recoveries                                216        258         225           98   $      162

Net charge-offs                                     974      1,047         752          176          355
Provision for loan losses                         1,742      1,399         953          315          335
                                              ---------   --------   ---------   ----------   ----------
Balance at end of year                        $   4,362   $  3,479   $   3,127   $    2,114   $    1,172

Total loans, net of unearned income:
  Average                                       340,089    285,208     207,006      117,947      102,515
  At December 31                                395,620    312,102     265,453      147,321      106,431

As a percentage of average loans:
  Net charge-offs                                   .29%       .37%        .36%         .15%         .35%
  Provision for possible loan losses                .51%       .49%        .46%         .27%         .33%
Allowance  as a  percentage  of year-end net       1.10%      1.11%       1.18%        1.43%        1.10%
loans
Allowance as a multiple of net charge-offs            4          3           4           12            3

</TABLE>


The provision for possible loan losses for 1998 was $1,742 compared to $1,399 in
1997, an increase of $343. This increase can be mainly attributed to loan growth
and the provisions necessary to maintain an adequate reserve. In 1998, net
charge-offs were $974 compared to $1,047 in 1997, a decrease of $73. At December
31, 1998, Premier's allowance for possible loan losses was 1.10% of period-end
loans compared to 1.11% at December 31, 1997. This allowance is consistent with
the historical net charge-off experience.


<PAGE>

Net charge-offs to average loans were .29% for the year 1998 compared to .37%
for the year 1997. At December 31, 1998, Premier's allowance for possible loan
losses totaled $4,362, representing an increase of $883 over the amount restated
for December 31, 1997. The allowance for possible loan losses was 89% of
nonperforming loans on December 31, 1998, compared to 242% at December 31, 1997.
At year end 1997, nonperforming loans represented 1.25% of total outstanding
loans, up from .46% on December 31, 1997.

The provision for possible loan losses for 1998 was $1,742, an increase of $343
over the $1,399 in 1997. Net charge-offs in 1998 were $974, down $73 or 7.0%
from the $1,047 charged off in 1997.

The following table sets forth an allocation for the allowance for possible loan
losses by category of loan and a percentage of loans in that category. In making
the allocation, consideration was given to such factors as management's
evaluation of risk in each category, current economic conditions and charge-off
experience. An allocation for the allowance for possible loan losses is an
estimate of the portion of the allowance that will be used to cover future
charge-offs in each major loan category, but it does not preclude any portion of
the allowance allocated to one type of loan being used to absorb losses of
another loan type.

                 ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AND
                         PERCENT OF LOANS TO TOTAL LOANS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                        At December 31,
                       ---------------------------------------------------------------------------------------
                            1998              1997             1996              1995             1994
                       Amount     %      Amount     %     Amount      %      Amount    %      Amount      %
<S>                    <C>       <C>     <C>       <C>    <C>        <C>    <C>       <C>    <C>         <C>  
Commercial             $1,695    22.5%   $1,226    27.0%  $1,066     18.5%  $   704   19.6%  $   560     20.7%
Real estate mortgage    1,728    57.8       732    51.1    1,229     60.7       616   58.3       175     58.1
Consumer                  738    19.7       965    21.9      739     20.8       620   22.1       292     21.2
Unallocated               202      --       556      --       93       --       174     --       145       --
                       ------    ----    ------    ----   ------     ----   -------   ----   -------     ---- 
  Total                $4,363   100.0%   $3,479   100.0%  $3,127    100.0%  $ 2,114  100.0%  $ 1,172    100.0%

</TABLE>

There were no material changes in estimation methods or assumptions affecting
allowance allocation. Any reallocation to the allowance is primarily indicative
of changes in loan portfolio mix, not changes in loan concentrations or terms.
The Company does consider quality in regards to specific loans when determining
an adequate allowance allocation. The level of increase in nonperforming loans,
which is more specifically addressed in the nonperforming loan section, is
believed to be temporary and should not materially affect the allowance.


<PAGE>

NONINTEREST INCOME AND EXPENSES

Noninterest income is a significant component of the Company's total income. The
Company continues to develop and enhance existing products and to create new
products in order to augment fee income as trends in the financial services
industry and the economic environment continue to put pressure on the Company's
ability to increase its net interest income. Noninterest income includes deposit
service charges, fees from data processing and trust services, fees and
commissions from many other corporate and retail products and gains and losses
from the sale of investment securities.

Total fees and other income increased $758 or 32.1% in 1998 to $3,117 from
$2,359 in 1997. Service charges on deposit accounts increased 25.7% and all
other income increased 73.0%.

Total fees and other income in 1997 increased $525 or 28.6% over 1996. In 1997,
service charges on deposit accounts increased 17.7%, insurance commissions
increased 40.4% and other income increased 46.8% over the amounts recorded in
1996.

Investment securities gains in 1998 were $225 versus $2,204 in 1997 and $1 in
1996. The significant increase in 1997 was due to the unwinding of an arbitrage
investment portfolio established to maximize the utilization of the proceeds
received from the issuance of capital securities.

Premier recognized a $1.3 million finder's fee during the second quarter of
1998. Received in cash and without recourse, the fee is the Company's portion of
an agreement to assist another financial institution in connection with the
acquisition and subsequent resale of several branches of Banc One Corporation
located in West Virginia.

Noninterest expenses increased $3,105 or 25.4% in 1998, from $12,232 in 1997 to
$15,337 in 1998, and increased $3,002 or 32.5% in 1997 from $9,230 in 1996.

Salaries and employee benefits, the largest component of noninterest expense,
increased 23.4% in 1998 and 25.4% in 1997. The increases include salary
increases and reflect increases in the number of full time equivalent employees
from 146 at December 31, 1996 to 177 at December 31, 1997 and 273 at December
31, 1998, due to acquisitions and expansion of the Company's business activity.

Occupancy and equipment expense for 1998 of $2,181 was $547 or 33.5% higher than
the $1,634 for 1997. The increase in 1997 was $226 or 16.1% from $1,408 in 1996.
The increase in 1997 and 1998 are primarily attributable to the expansion in the
number of banking locations from 14 at December 31, 1996 up to 23 at December
31, 1998.

Other noninterest expense, which is the second largest category, increased $801
or 30.9% in 1998 and $544 or 26.5% in 1997. This increase includes the addition
of the purchased West Virginia branches and their respective operating expenses
as full service banks.

The Company incurred expenses relating to the acquisitions of Ohio River Bank
and the West Virginia branches of $132 in 1998. Acquisition expenses of $482
were incurred in 1997 and no acquisition expenses were incurred in 1996.
Expenses related to acquisitions are charged to expense for acquisitions
accounted for as pooling of interests while certain expenses related to
acquisitions accounted for as purchases are capitalized as a component of the
purchase price and ultimately increase the amount of goodwill included with the
purchase.


<PAGE>

Goodwill amortization increased in 1998 primarily due to the intangible cost
regarding branch acquisitions.

The Company continually seeks to develop fees and other income for services
provided while holding operating expenses to the minimum amount required to
provide quality service. In 1998, total net noninterest expenses (excluding
investment securities gains, finders fee and acquisition expenses) as a percent
of average total assets were reduced to 2.06% from 2.10% in 1997 and 2.57% in
1996.

The following table is a summary of non-interest income and expense for the
three year period indicated.

                                NON-INTEREST INCOME AND EXPENSE
                                    (Dollars in thousands)

<TABLE>
<CAPTION>
                                                               INCREASE                           INCREASE
                                                               (DECREASE)                         (DECREASE)
                                                               1998 VS.                           1997 VS.
                                           1998       1997       1997          1997      1996       1996
                                         --------   --------   ---------     --------  --------   ---------
<S>                                      <C>        <C>        <C>           <C>       <C>        <C>      
Non-Interest Income:
  Service charges on deposit accounts    $  1,585   $  1,261   $     324     $  1,261  $  1,071   $     190
  Insurance income                            468        483         (15)         483       344         139
  Other                                     1,064        615         449          615       419         196
                                         --------   --------   ---------     --------  --------   ---------
     Total fees and other income         $  3,117   $  2,359   $     758     $  2,359  $  1,834   $     525
  Investment securities gains                 225      2,204      (1,979)       2,204         1       2,203
  Finders Fee                               1,331          0       1,331            0         0           0
                                         --------   --------   ---------     --------  --------   ---------
        Total non-interest income        $  4,673   $  4,563   $     110     $  4,563  $  1,835   $   2,728

Non-Interest Expense:
  Salaries and employee benefits            7,633      6,185       1,448        6,185     4,931       1,254
  Occupancy and equipment expense           2,181      1,634         547        1,634     1,408         226
  Professional fees                           452        504         (52)         504       289         215
  Taxes, other than payroll, property
      and income                              559        445         114          445       353          92
   Acquisition related expenses               132        482        (350)         482         0         482
  Amortization of intangibles                 983        386         597          386       197         189
  Other expenses                            3,397      2,596         801        2,596     2,052         544
                                         --------   --------   ---------     --------  --------   ---------
     Total non-interest expenses         $ 15,337   $ 12,232   $   3,105     $ 12,232  $  9,230   $   3,002

Net non-interest expenses as a percent
  of average assets                          1.82%      1.71%                    1.71%     2.57%
Net non-interest expenses as a percent
  of average assets (excluding
  investment securities gains, finders
  fee, and acquisition related expenses)     2.06%      2.10%                    2.10%     2.57%

</TABLE>


<PAGE>

INCOME TAXES

Premier's provision for income taxes was $1,997 in 1998, which represented 25.9%
of pre-tax income versus $2,605 or 31.1% of pre-tax income in 1997. The decrease
is primarily due to the higher percentage of tax-exempt income in relation to
total pre-tax income and the elimination of the valuation allowance of $235 for
deferred tax assets at Ohio River Bank. Income tax expense for 1996 was $1,589
or 31.1% of pre-tax income.

                               FINANCIAL CONDITION

LENDING ACTIVITIES

Loans are the Company's primary use of financial resources and represent the
largest component of earning assets. The Company's loans are made predominantly
within the Banks' market areas and the portfolio is diversified. Credit risk is
inherent in each financial institution's loan and investment portfolio. In an
effort to minimize credit risk, the Company utilizes a credit administration
network, including specific lending authorities for each loan officer, a system
of loan committees to review and approve loans, and a loan review and credit
quality rating system. This network assists in the evaluation of the quality of
new loans and in the identification of problem or potential problem credits and
provides information to aid management in determining the adequacy of the
allowance for possible loan losses.

Total loans, net of unearned income, averaged $340,089 in 1998 compared with
$285,208 in 1997. At year end 1998, loans net of unearned income totaled
$395,620 compared to $312,102 at December 31, 1997, an increase of $83,518 or
26.8%.

The following table presents a summary of the Company's loan portfolio by
category for each of the last five years. Other than the categories noted, there
is no concentration of loans in any industry greater than 5% in the portfolio.
The Company has no foreign loans or highly leveraged transactions in its loan
portfolio.

                                    LOAN PORTFOLIO COMPOSITION

                                        LOANS OUTSTANDING
                                      (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                    DECEMBER 31
                          1998        %          1997        %          1996       %          1995       %          1994      %
<S>                     <C>          <C>       <C>          <C>       <C>         <C>       <C>         <C>       <C>        <C>   
Commercial, secured by
real estate             $ 86,010     21.57%    $ 71,818     22.83%    $ 63,179    23.61%    $ 39,724    26.79%    $ 30,643   28.55%
Commercial, other         73,982     18.56       48,309     15.36       37,609    14.06       22,115    14.92       18,850   17.56
Real estate               13,374      3.35        8,352      2.66        4,523     1.69        2,495     1.68        1,822    1.70
construction                                                                                                     
Real estate mortgage     131,212     32.91      103,664     32.96       94,844    35.45       44,215    29.82       30,067   28.01
Agricultural              15,433      3.87       13,232      4.21       11,751     4.39        6,924     4.67        3,271    3.05
Consumer                  74,215     18.61       68,461     21.77       54,160    20.24       32,362    21.83       22,397   20.87
Other                      4,502      1.13          674       .21        1,493      .56          435     0.29          279    0.26
  Total loans           $398,728    100.00%    $314,510    100.00%    $267,559   100.00%    $148,270   100.00%    $107,329  100.00%
                        --------    ------     --------    ------     --------   ------     --------   ------     --------  ------ 

  Less unearned income    (3,108)                (2,408)                (2,106)                 (949)                 (898)
                        --------               --------               --------              --------              --------
    Total loans net of
      unearned income   $395,620               $312,102               $265,453              $147,321              $106,431
</TABLE>


<PAGE>

Commercial loans generally are made to small-to-medium size businesses located
within a Bank's defined market area and typically are secured by business assets
and guarantees of the principal owners. Collateral for real estate mortgage
loans include residential properties and the loans generally do not exceed 80%
of the value of the real property securing the loan based on recent independent
appraisals. The Company's real estate mortgage loan portfolio primarily consists
of adjustable rate residential mortgage loans. The origination of these mortgage
loans can be more difficult in a low interest rate environment where there is a
significant demand for fixed rate mortgages. A number of the banks do
participate in the origination of loans into the secondary market and recognize
the referral fees into other income. Consumer loans generally are made to
individuals living in a Bank's defined market area who are known to the Bank's
staff. Consumer loans are made for terms of up to seven years on a secured or
unsecured basis. While consumer loans generally provide the Company with
increased interest income, consumer loans may involve a greater risk of default.
Loss experience in all categories has been at an acceptable level over the past
five years, with net charge-offs being .29% of loans in 1998 and .37% in 1997.
With respect to consumer loans in particular, net charge-offs for the year ended
December 31, 1998 were $460, or .62% of total consumer loans outstanding at
December 31, 1998, and $424 in 1997, or .62% of total consumer loans outstanding
at December 31, 1997.

The following table sets forth the maturity distribution and interest
sensitivity of selected loan categories at December 31, 1998. Maturities are
based upon contractual terms. The Company's policy is to specifically review and
approve any loan renewed; no loans are automatically rolled over.

                    LOAN MATURITIES AND INTEREST SENSITIVITY
                                DECEMBER 31, 1998
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                             One Year       One          Over      Total
                                             or Less      Through     Five Years   Loans
                                                         Five Years
<S>                                         <C>          <C>         <C>         <C>       
Commercial, secured by real estate          $   22,524   $   11,573  $   51,913  $   86,010

Commercial, other                               28,844       21,774      23,364      73,982

Real estate construction                        12,666          196         512      13,374

Agricultural                                     8,469        2,600       4,364      15,433
                                            ----------   ----------  ----------  ----------
   Total                                    $   72,503   $   36,143  $   80,153  $  188,799
                                            ==========   ==========  ==========  ==========


Fixed rate loans                            $   47,450   $   29,033  $   57,368  $  133,851

Floating rate loans                             25,053        7,110      22,785      54,948
                                            ----------   ----------  ----------  ----------
   Total                                    $   72,503   $   36,143  $   80,153  $  188,799
                                            ==========   ==========  ==========  ==========
</TABLE>

<PAGE>

NONPERFORMING ASSETS

Nonperforming assets consist of loans on which interest is no longer accrued,
certain restructured loans where interest rate or other terms have been
renegotiated, accruing loans past due 90 days or more and real estate acquired
through foreclosure. All loans considered impaired under SFAS 114 are included
in nonperforming loans.

The Company discontinues the accrual of interest on loans that become 90 days
past due as to principal or interest unless they are adequately secured and in
the process of collection. A loan remains in a nonaccrual status until doubts
concerning the collectibility no longer exist. A loan is classified as a
restructured loan when the interest rate is materially reduced or the term is
extended beyond the original maturity date because of the inability of the
borrower to service the loan under the original terms. Other real estate is
recorded at the lower of cost or fair value less estimated costs to sell.

A summary of the components of nonperforming assets, including several ratios
using period-end data, is shown as follows:


<PAGE>

                                       NONPERFORMING ASSETS
                                      (Dollars in thousands)

<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                            1998       1997       1996       1995       1994
<S>                                        <C>        <C>        <C>        <C>        <C>   
Nonaccrual loans                           $3,500     $  562     $  768     $  693     $  203
Accruing loans which are contractually
  past due 90 days or more                  1,322        522        594        480        261
Restructured loans                            105        356          0          0          0
                                           ------     ------     ------     ------     ------
  Total nonperforming and restructured
    Loans                                  $4,927     $1,440     $1,362     $1,173     $  464
Other real estate acquired through
  Foreclosures                                961        836        485        132        427
                                           ------     ------     ------     ------     ------
  Total nonperforming and restructured
    loans and other real estate            $5,888     $2,276     $1,847     $1,305     $  891
Nonperforming and restructured loans
  as a percentage of net loans               1.25%       .46%       .51%       .80%       .44%
Nonperforming and restructured loans
  and other real estate as a percentage
  of total assets                             .90%       .49%       .51%       .63%       .58%

</TABLE>

Nonaccrual loans increased from $562 at December 31, 1997 to $3,500 at December
31, 1998. Total nonperforming assets increased from $2,276 at December 31, 1997
to $5,888 at December 31, 1998. The percentage of nonperforming loans to total
loans increased from .46% to 1.25%

The increase in nonaccrual loans is generally related to real estate secured
loans with one loan of $1,562, accounting for 53% of the increase. This loan is
fully secured by real estate with an appraised value of $3,000 and under an
agreement with the borrower will be sold during the second quarter. No loss is
anticipated. The balance of the increase is also largely real estate secured
loans except for one loan of $282, which is currently in litigation. Potential
losses on all nonaccrual loans are not expected to be substantial.

The increase in accruing loans past due more than 90 days is primarily
represented by one loan of $511 secured by a portfolio of residential and
commercial properties the sale of which is expected to occur in the second
quarter.

The Company continues to follow its long-standing policy of not engaging in
international lending and not concentrating lending activity in any one
industry.

<PAGE>

Although loans may be classified as nonperforming, many continue to pay interest
irregularly or at less than original contractual rates. A summary of actual
income recognized on nonaccrual loans versus their full contractual yields for
each of the past five years is presented below.

              INTEREST INCOME ON NON-ACCRUAL AND RESTRUCTURED LOANS

                             YEAR ENDED DECEMBER 31
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                           1998      1997      1996      1995      1994
<S>                         <C>        <C>       <C>       <C>       <C>
Contractual interest        135        77        73        32        15
Interest recognized           6        62         2        22         0

</TABLE>


INVESTMENT ACTIVITIES

The securities portfolio consists of debt and equity securities, which provide
the Company with a relatively stable source of income. Additionally, the
investment portfolio provides a balance to interest rate and credit risks in
other categories of the balance sheet. The Company also uses the securities
portfolio as a secondary source of liquidity. The Company has classified the
majority of its municipal securities and certain U. S. Treasury and Agency
securities as held to maturity based on management's positive intent and ability
to hold such securities to maturity. These municipal securities provide tax-free
income and are within management's guidelines with respect to credit risk and
market risk. The municipal securities have been issued principally by Kentucky
municipalities. The U. S. Treasury and Agency securities are held as a source of
stable, long-term income, which can be used as collateral to secure municipal
deposits and repurchase agreements. All other investment securities are
classified as available for sale. The portfolio does contain holdings in GNMA
mortgage-backed securities. The securities portfolio does not contain
significant holdings in collateralized mortgage obligations or other
mortgage-related derivative products and/or structured notes.

Securities as a percentage of average interest-earning assets increased to 30.6%
in 1998 versus 27.6% in 1997 and 18.9% in 1996. The 1998 increase in securities
reflects the acquisition of deposits held in the West Virginia branches until
transferred to higher yielding loans.

At December 31, 1998 and 1997, the Company had an investment in noncumulative
perpetual preferred stock of First Guaranty Bank, Hammond, Louisiana. The market
value of this investment approximated its book value, which totaled $2 million
at December 31, 1998 and 1997. The dividend rate on the preferred stock is 2% in
excess of the prime rate as in effect from time to time.


<PAGE>



The following tables present the carrying values and maturity distribution of
investment securities.

                          CARRYING VALUE OF SECURITIES
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                          DECEMBER 31
                                                1998         1997        1996
<S>                                           <C>          <C>          <C>     
U.S. Treasury and Federal agencies:
  Available for sale                          $132,106     $ 43,088     $ 28,313
  Held to maturity                               3,530        5,588        8,387
State and municipal obligations:
  Available for sale                             3,831        3,564        4,464
  Held to maturity                              16,474       14,625       12,190
Equity securities:
  Available for sale                             2,798        2,795        2,788
  Held to maturity                                   0            0            0
Other securities:
  Available for sale                            18,405        3,600            0
  Held to maturity                                  48          149          416
Total securities:
  Available for sale                           157,140       53,047       35,565
  Held to maturity                              20,052       20,362       20,993
                                              --------     --------     --------
Total                                         $177,192     $ 73,409     $ 56,558

</TABLE>

                       MATURITY DISTRIBUTION OF SECURITIES
                                December 31, 1998
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                               ONE       FIVE
                                     YEAR    THROUGH    THROUGH     OVER
                                      OR      FIVE        TEN        TEN      OTHER                 MARKET
                                     LESS     YEARS      YEARS      YEARS   SECURITIES    TOTAL      VALUE
<S>                                 <C>      <C>        <C>         <C>      <C>         <C>        <C>     
U.S. Treasury and Federal
agencies:
   Available for sale               $11,664  $ 83,113   $ 35,779    $ 1,550  $     0     $132,106   $132,106
   Held to maturity                       0     3,530          0          0        0        3,530      3,472
State and municipal obligations:
   Available for sale                   448     2,689        412        282        0        3,831      3,831
   Held to maturity                   1,025     5,473      6,653      3,323        0       16,474     17,244
Other securities:
   Available for sale                     0         0          0          0   21,203       21,203     21,203
   Held to maturity                       0         0          0          0       48           48         48
Total securities:
   Available for sale                12,112    85,802     36,191      1,832   21,203      157,140    157,140
   Held to maturity                   1,025     9,003      6,653      3,323       48       20,052     20,764
                                    -------  --------   --------    -------  -------     --------   --------
Total                               $13,137  $ 94,805   $ 42,844    $ 5,155  $21,251     $177,192   $177,904
                                    =======  ========   ========    =======  =======     ========   ========
Percent of total                      7.41%     53.50%     24.18%      2.91%   11.99%     100.00%   
Weighted average yield*               5.49%      5.64%      5.89%      5.84%    5.96%      5.73%

</TABLE>

*   The weighted average yields are calculated on historical cost on a non
    tax-equivalent basis.


<PAGE>

DEPOSIT ACTIVITIES

Managing the mix and repricing of deposit liabilities is an important aspect of
the Company's ability to maximize its net interest margin. The strategies used
to manage interest-bearing deposit liabilities are designed to adjust as the
interest rate environment changes. In this regard, management of the Company
regularly assesses its funding needs, deposit pricing, and interest rate
outlooks.

Total deposits averaged $450,649 in 1998, a 43.7% increase over 1997. Total
deposits averaged $313,578 in 1997, an increase of $74,486 or 31.2% over 1996.
Noninterest bearing deposits averaged 12.0% of total deposits in 1998, compared
to 11.0% in 1997 and 12.5% in 1996.

At December 31, 1998, deposits totaled $523,193, compared to $358,605 at
December 31, 1997, an increase of $164,588, or 45.9%. Of this increase,
approximately $151,000 is attributable to the acquisition of the West Virginia
branches. Exclusive of the acquisitions, deposits increased $13,588 from
December 31, 1997 to December 31, 1998, representing a 3.8% increase.

The table below provides information on the maturities of time deposits of
$100,000 or more at December 31, 1998.

                                MATURITY OF TIME
                          DEPOSITS OF $100,000 OR MORE

                                                 December 31, 1998
                                                   (in thousands)

        Maturing 3 months or less                   $  13,957
        Maturing over 3 months through 6 months        10,227
        Maturing over 6 months through 12 months       19,758
        Maturing over 12 months                        17,248
                                                    ---------
        Total                                       $  61,190
                                                    =========

The following table sets forth the average amount of and average rate paid on
selected deposit categories during the past three full years.

<TABLE>
<CAPTION>

                                     1998                1997                 1996
        CATEGORY             AMOUNT      RATE(%)   AMOUNT    RATE(%)    AMOUNT      RATE(%)
                                            (Dollars in thousands)
<S>                        <C>               <C>  <C>            <C>   <C>             <C>
Demand                     $ 54,043          0%   $ 34,462       0%    $ 30,004        0%
NOW and money
  market accounts            93,741       3.49%     51,268    3.38%      38,085     3.33%
Savings                      51,818       2.94%     32,671    2.96%      25,904     2.91%
Certificates of deposit
  and other time            251,047       5.84%    195,177    5.89%     144,581     5.74%
                           --------       ----    --------    ----     --------     ---- 
     Total                 $450,649       4.32%   $313,578    4.53%    $238,574     4.33%

</TABLE>


<PAGE>

CAPITAL

Stockholders' equity increased $2,392 in 1998 to $54.4 million or 8.3% of total
assets at December 31, 1998. This compares to $52.0 million, or 11.2% of total
assets at December 31, 1997. The primary source of growth in stockholders'
equity in 1998 was the retention of net earnings of $2,635. The primary source
of growth in 1997 was the retention of net earnings of $3,378. The consolidated
statements of changes in stockholders' equity detail the changes in equity for
the last three years.

The fair value adjustment of the Company's available for sale securities
portfolio, which is recorded as a component of stockholders' equity, may change
significantly as market conditions change. At December 31, 1998 and 1997, the
adjustment resulted in a reduction of stockholders' equity of $300 and $56.
Further volatility in stockholders' equity may occur in the future as market
conditions change.

The Company's principal source of funds for dividend payments to stockholders is
dividends received from the subsidiary Banks. Banking regulations limit the
amount of dividends that may be paid without prior approval of regulatory
agencies. Under these regulations, the amount of dividends that may be paid
without prior approval of regulatory agencies in any calendar year is limited to
the current year's net profits, as defined, combined with the retained net
profits of the preceding two years, subject to regulatory capital requirement
limitations. During 1999, the Banks could, without prior approval, declare
dividends to the Company of approximately $10,956 plus any 1999 net profits
retained to the date of the dividend declaration.

The various regulatory agencies having supervisory authority over financial
institutions have adopted risk-based capital guidelines, which define the
adequacy of the capital levels of regulated institutions. These risk-based
capital guidelines require minimum levels of capital based upon the risk rating
of assets and certain off-balance-sheet items. Assets and off-balance-sheet
items are assigned regulatory-risk weights ranging from 0% to 100% depending on
their level of credit risk. The guidelines classify capital in two tiers, Tier I
and Tier 2, the sum of which is total capital. Tier I capital is essentially
common equity, less intangible assets. Tier 2 capital is essentially qualifying
long-term debt and a portion of the allowance for possible loan losses.

During 1997, the Company completed its public offering of $28.75 million of
mandatorily redeemable capital securities of a subsidiary trust. These
securities qualify as Tier I capital up to an amount not to exceed 25% of Tier I
capital and the portion that exceeds the 25% limitation qualifies as Tier 2
capital.


<PAGE>

                          SELECTED CAPITAL INFORMATION
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                   1998        1997         CHANGE
<S>                                              <C>          <C>          <C>     
Stockholders' Equity                             $ 54,399     $ 52,007     $  2,392
  Qualifying capital securities of subsidiary
    Trust                                          18,213       17,181        1,032
  Disallowed amounts of goodwill and other
    Intangibles                                   (21,555)      (7,261)     (14,294)
  Unrealized loss on securities available
    for sale                                          231          (13)         244
                                                 --------     --------     --------
Tier I capital                                   $ 51,288     $ 61,914     $(10,626)

Tier II capital adjustments:
  Qualifying capital securities of subsidiary
    Trust                                          10,537       11,569
  Allowance for loan losses                         4,363        3,478
                                                 --------     --------
Total capital                                    $ 66,188     $ 76,961

Total risk-weighted assets                       $408,245     $313,638
Ratios

Tier I capital to risk-weighted assets              12.56%       19.74%
Total capital to risk-weighted assets               16.21%       24.54%
Leverage at year-end                                 8.05%       13.58%

</TABLE>

The Company believes that its capital, together with existing credit facilities
and its ability to obtain future credit facilities, provides funds sufficient to
support the Company's current operations.

LIQUIDITY

Liquidity for a financial institution can be expressed in terms of maintaining
sufficient cash flows to meet both existing and unplanned obligations in a
cost-effective manner. Adequate liquidity allows the Company to meet the demands
of both the borrower and the depositor on a timely basis, as well as pursuing
other business opportunities as they arise. Thus, liquidity management embodies
both an asset and liability aspect. Liquidity is maintained through the
Company's ability to convert assets into cash, manage the maturities of
liabilities and generate funds through the attraction of local deposits.

As part of its liquidity management, the Company maintains funding relationships
with the Federal Home Loan Bank and other financial institutions, including a
$20 million revolving line of credit available for both general corporate
purposes and future acquisitions. The Company prefers to manage its liquidity
requirements generally through the matching of maturities of assets and
liabilities.

The consolidated statements of cash flows for the periods presented in the
financial statements provide an indication of the Company's sources and uses of
cash as well as an indication of the ability of the Company to maintain an
adequate level of liquidity.

<PAGE>

Liquidity risk is the possibility that the Company may not be able to meet its
cash requirements. Management of liquidity risk includes maintenance of adequate
cash and sources of cash to fund operations and meets the needs of borrowers,
depositors and creditors. Liquidity must be maintained at a level, which is
adequate but not excessive. Excess liquidity has a negative impact on earnings
resulting from the lower yields on short-term assets.

In addition to cash, cash equivalents and Federal funds sold, the securities
portfolio provides an important source of liquidity. The total of securities
maturing within one year along with cash, due from banks and Federal funds sold
totaled $52.7 million as of December 31, 1998. Additionally, securities
available-for-sale with maturities greater than one year and equity securities
totaled $145.0 million at December 31, 1998. These securities represent a
secondary source available to meet liquidity needs on a continuing basis.

To maintain a desired level of liquidity, the Company has several sources of
funds available. One is the cash flow generated daily from the Banks' various
loan portfolios in the form of principal and interest payments. Another source
is its deposit base. The Company maintains a relatively stable base of customer
deposits which has historically exhibited steady growth. This growth, when
combined with other sources, is expected to be adequate to meet its demand for
funds. Due to the nature of the markets served by the Company's subsidiary
banks, management believes that the majority of certificates of deposit of
$100,000 or more are no more volatile than its core deposits. Certificates of
deposits and other time deposits of $100,000 or more represented approximately
11.7% and 14.5% of total deposits at December 31, 1998 and 1997. A number of
techniques are used to measure the liquidity position, including the utilization
of ratios that are presented below. These ratios are calculated based on annual
averages for each year.

                                LIQUIDITY RATIOS

                                                1998        1997       1996

Total loans/total deposits .................   75.47%      90.95%      86.58%
Total loans/total deposits less float ......   76.31%      91.78%      88.06%


This analysis shows that the Company's loan to deposit ratio decreased in 1998
from the 1997 and 1996 levels. This is due to the acquisition of deposits held
in the West Virginia branches.

<PAGE>

Information regarding short-term borrowings for the past three years is
presented below.

                              SHORT-TERM BORROWINGS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                  1998         1997         1996
<S>                                            <C>          <C>          <C>      
Repurchase Agreements:
  Balance at year end                          $   7,772    $   6,579    $   6,014
  Weighted average rate at year end                 4.47%        5.38%        5.05%
  Average balance during the year              $  20,167    $  49,939    $   3,784
  Weighted average rate during the year             4.58%        5.51%        5.09%
  Maximum month-end balance                    $  82,755    $ 120,257    $   7,111

Other short-term borrowings:
  Balance at year end                          $  18,225    $   4,082    $   7,055
  Weighted average rate at year end                 5.74%        6.17%        5.57%
  Average balance during the year              $  14,867    $   6,914    $   3,660
  Weighted average rate during the year             5.83%        6.04%        5.68%
  Maximum month-end balance                    $  19,800    $   9,396    $   8,555

Total short-term borrowings:
  Balance at year end                          $  25,997    $  10,661    $  13,069
  Weighted average rate at year end                 5.36%        5.68%        5.33%
  Average balance during the year              $  35,242    $  56,782    $   7,444
  Weighted average rate during the year             5.12%        5.49%        5.38%
  Maximum month-end balance                    $  92,719    $ 130,348    $  15,666

</TABLE>

Substantially all federal funds purchased and repurchase agreements mature in 
one business day. Other short-term borrowings represent draws on the 
Company's line of credit and Federal Home Loan Bank (FHLB) advances to Bank 
Affiliates (with varying maturity dates) which are funding residential 
mortgage and commercial loans.

<PAGE>

INTEREST RATE SENSITIVITY

The interest spread and liability funding discussed above are directly related
to changes in asset and liability mixes, volumes, maturities and repricing
opportunities of interest-earning assets and interest-bearing liabilities.
Interest-sensitive assets and liabilities are those, which are subject to being
repriced in the near term, including either floating or adjustable rate
instruments and instruments approaching maturity. The interest sensitivity gap
is the difference between total interest-sensitive assets and total
interest-sensitive liabilities. Interest rates on the Company's various asset
and liability categories do not respond uniformly to changing market conditions.
Interest rate risk is the degree to which interest rate fluctuations in the
marketplace can affect net interest income.

The need for interest sensitivity gap management is most critical in times of a
significant change in overall interest rates. Management generally seeks to
limit the exposure of the Company to interest rate fluctuations by maintaining a
relatively balanced mix of rate sensitive assets and liabilities on a one-year
time horizon. This mix is altered periodically depending upon management's
assessment of current business conditions and the interest rate outlook.

One tool, which is used to monitor interest rate risk, is the interest
sensitivity analysis as shown in the table below. This analysis reflects the
repricing characteristics of assets and liabilities over various time periods.
The gap indicates the level of assets and liabilities that are subject to
repricing over a given time period.

As shown by the interest rate sensitivity analysis as of December 31, 1998, the
cumulative amount of the Company's interest earning assets repricing during the
first year is lower than the total amount of its interest bearing liabilities
repricing during this period. This position, which is normally termed a negative
interest sensitivity gap, generally allows for enhanced net interest income
during periods of falling interest rates. This negative gap is within the
Company's internal policy guidelines and is not expected to impact significantly
the Company's net interest income during a period of rising interest rates.


<PAGE>

The following table provides an analysis of the Company's interest rate
sensitivity at December 31, 1998.

                       INTEREST RATE SENSITIVITY ANALYSIS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                       0 - 90    91 DAYS -      1 - 5      OVER 5
                                        DAYS       1 YEAR       YEARS       YEARS       TOTAL
<S>                                   <C>        <C>         <C>          <C>        <C>       
Assets
  Loans, net of unearned income       $ 108,988  $  80,299   $  115,546   $  90,787  $  395,620
  Investment securities                  12,899     14,982       92,332      60,394     180,607
  Federal funds sold                     19,406          0            0           0      19,406
                                      ---------  ---------   ----------   ---------  ----------
      Total earning assets            $ 141,293  $  95,281   $  207,878   $ 151,181  $  595,633

Sources of Funds
   NOW, money market and
      Savings                         $  20,240  $  40,471   $  109,456   $   8,225  $  178,392
  Time deposits                          60,435    136,825       84,325         402     281,987
  Short-term borrowings                  15,772      9,934        4,334      17,631      47,671
                                      ---------  ---------   ----------   ---------  ----------
     Total interest bearing
       liabilities                    $  96,447  $ 187,230   $  198,115   $  26,258  $  508,050

Interest Sensitivity Gap
  For the period                      $  44,846  $ (91,949)  $    9,763   $ 124,923  $   87,583
  Cumulative                             44,846    (47,103)     (37,340)     87,583
  Cumulative as a percent of
    Earning assets                         7.53%     -7.91%       -6.27%      14.70%

</TABLE>



<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK MANAGEMENT

Market risk is the risk of gain or loss from changes in the fair value of
financial instruments due to changes in interest rates, exchange rates and
equity prices. Premier's market risk is composed almost exclusively with
interest rate risk. This exposure is managed primarily through the strategy of
selecting the types and terms of interest earning assets and interest bearing
liabilities which generate favorable earnings, while limiting the potential
negative effects of changes in market interest rates. Since Premier's primary
source of interest bearing liabilities is customer deposits, the ability to
manage the types and terms of such deposits may be somewhat limited by customer
preferences in the market areas in which it operates. Borrowings, which include
Federal Home Loan Bank advances, short-term borrowings and long-term borrowings,
are generally structured with specific terms, which in management's judgment,
when aggregated with the terms for outstanding deposits and matched with
interest earning assets, mitigate our exposure to interest rate risk.

The Company's Asset/Liability Committee (ALCO) is responsible for reviewing the
interest rate sensitivity of the Company and establishing policies to monitor
and limit exposure to interest rate risk. Interest rate risk is monitored
through the use of three complementary measures: static gap analysis, earnings
simulation modeling and net present value estimation. While each of the interest
rate risk measurements has limitations, taken together they represent a
reasonably comprehensive view of the magnitude of interest rate risk in the
Company, the distribution of risk along the yield curve, the level of risk
through time, and the amount of exposure to changes in certain interest rate
relationships.

STATIC GAP ANALYSIS

Premier uses interest rate sensitivity gap analysis to monitor the relationship
between the maturity and repricing of its interest earning assets and interest
bearing liabilities, while maintaining an acceptable interest rate spread. Gap
is defined as the difference between the amount of interest earnings assets
maturing or repricing within a specific time period and the amount of interest
bearing liabilities maturing or repricing within that time period. A gap is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities, and is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of
interest rate sensitive assets. Generally, during a period of rising interest
rates, a negative gap would adversely affect net interest income, while a
positive gap would result in an increase in net interest income. Conversely,
during a period of falling interest rates, a negative gap would result in an
increase in net interest income, while a positive gap would negatively affect
net interest income. It is management's goal to maintain a reasonable balance
between exposure to interest rate fluctuations and earnings.

EARNINGS SIMULATION MODELING

The earnings simulation model forecasts net interest income under different
scenarios that incorporate changes in the level of interest rates and their
relationships with each other. The most recent earnings simulation model
projects net interest income would increase by approximately 7.1% of stable rate
net interest income if rates fall by two percentage points over the next year.
It projects a decrease of 7.2% if the rates rise by two percentage points.
Management believes this reflects a slight liability sensitive rate risk
position for the one-year horizon.


<PAGE>

Within the same time frame, but assuming an additional one percentage point move
in rates, the model forecasts that net interest income would rise above that
earned in a stable rate environment by 10.7% in a falling rate scenario and
decrease by 10.8% in a rising rate scenario. The slight variance from ALCO
guidelines can be attributed to the large block of deposits held in the West
Virginia branches that have been temporarily invested in marketable securities
while the loan activities of these banks as being reestablished. Management
believes this variance to be self-correcting as the deposit base held by these
branches is reinvested in loans, which is occurring.

This simulation model includes assumptions about how the balance sheet is likely
to evolve through time. Loan prepayments are developed from industry median
estimates for prepayment speeds. Noncontractual deposit pricing and sensitivity
are assumed to follow historical patterns.

NET PRESENT VALUE

The Net Present Value (NPV) of the balance sheet, at a point in time, is defined
as the discounted present value of asset cash flows minus the discounted value
of liability cash flows. The resulting percentage change in NPV is an indication
of the longer term repricing risk imbedded in the balance sheet. At year end, a
200 basis point increase in rates is estimated to reduce NPV by 15.6%.
Additionally, NPV is projected to decrease by 15.6% if rates fall by 200 basis
points. The calculations of present value have certain shortcomings. The
discount rates utilized are based on estimated market interest rate levels for
similar loans and securities nationwide. The unique characteristics of Premier's
loans and securities may not necessarily parallel those assumed in this
calculation, and therefore, would likely result in different discount rates,
prepayment experiences and present values. The discount rates utilized for
deposits and borrowings are based upon available alternative types and sources
of funds which are not necessarily indicative of the present value of deposits
and FHLB advances since such deposits and advances are unique to, and have
certain price and customer relationship advantages for, depository institutions.
A higher or lower interest rate environment will most likely result in different
investment and borrowing strategies by Premier designed to further mitigate the
effect on the value of, and the net earnings generated from, the Company's net
assets from any change in interest rates.

Summary information about each of the three interest rate risk measures is
presented below:

<TABLE>
<CAPTION>

                                                   Year-End    Year-End     ALCO
                                                     1998        1997    Guidelines

<S>                                                   <C>        <C>       <C>
Static 1-Year Cumulative Gap                         -7.9%       5.2%      +/-10%

1-Year Net Interest Income Simulation Project
  -200 bp change vs. Stable Rate                      7.1%      -3.7%      +/-10%
  +200 bp change vs. Stable Rate                     -7.2%       3.9%      +/-10%

1-Year Net Interest Income Simulation Project

  -300 bp change vs. Stable Rate                     10.7%      -5.6%      +/-10%
  +300 bp change vs. Stable Rate                    -10.8%       5.8%      +/-10%

Static Net Present Value Change

  -200 bp Shock vs. Stable Rate                      15.6%      -7.0%      +/-10%
  +200 bp Shock vs. Stable Rate                     -15.6%       7.0%      +/-10%

</TABLE>


<PAGE>

INTEREST RATE RISK MANAGEMENT

Premier's strategy of investing primarily in loans and securities permits it to
limit its exposure to interest rate risk, together with credit risk, while at
the same time achieving a positive interest rate spread from the difference
between the income earned on interest earning assets and the cost of interest
bearing liabilities. Managing this exposure involves significant assumptions
about the relationship of various interest rate indices of certain financial
instruments. Prepayments on loans generally increase when long-term interest
rates fall or are at historically low levels relative to short-term interest
rates making fixed rate loans more desirable. Investment securities, other than
those with early call provisions, generally do not have significant imbedded
options and repay pursuant to specific terms until maturity. While savings and
checking deposits generally may be withdrawn upon the customer's request without
prior notice, a continuing relationship with customers resulting in future
deposits and withdrawals is generally predictable resulting in a dependable and
uninterruptible source of funds. Time deposits generally have early withdrawal
penalties, which discourage customer withdrawal, while term Federal Home Loan
Bank advances have prepayment penalties, which discourage prepayment prior to
maturity.

Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable rate mortgage loans,
have features that restrict changes in interest rates on a short-term basis and
over the life of the loan. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels could deviate significantly from those
assumed in calculating the table. Finally, the ability of many borrowers to
service their debt may decrease in the event of a significant interest rate
increase.

The previous table does not necessarily indicate the impact of general interest
rate movements on Premier's net interest income because the repricing of certain
categories of assets and liabilities are subject to competitive and other
pressures beyond our control. As a result, certain assets and liabilities
indicated as maturing or otherwise repricing within a stated period may in fact
mature or reprice at different times and at different volumes.

Management expects interest rates to be relatively stable during 1999 and
believes that the current modest level of liability sensitivity is appropriate.

TRADE RISK MANAGEMENT

Premier does not maintain a trading account, which would primarily provide
investment products and risk management services to its customers as well as to
take propriety risk positions.


<PAGE>

DERIVATIVE INSTRUMENTS

A derivative financial instrument includes futures, forwards, interest rate
swaps, options and other financial instruments with similar characteristics.
Premier currently does not enter into futures, forwards, swaps or options.
However, the Company is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to make loans and
standby letters of credit, which involve to varying degrees elements of credit
risk and interest rate in excess of amounts recognized on the balance sheets.
Commitments to make loans are agreements to lend to a customer as long as there
is no violation of any contract condition. Commitments generally have fixed
expiration dates and may require collateral if deemed necessary. Standby letters
of credit are conditional commitments issued by Premier to guarantee the
performance of a customer to a third party up to a stipulated amount and with
specific terms and conditions. Commitments to make loans and standby letters of
credit are not recorded as an asset or liability by the Company until the
instrument is exercised.

YEAR 2000

Management has assessed the operational and financial implications of its Year
2000 needs and developed a plan to ensure that data processing systems can
properly handle the change. Management has determined that if a business
interruption as a result of the Year 2000 issue occurred, such an interruption
could be material. The primary effort required to prevent a potential business
interruption was the installation of the most current software release from the
Company's third party provider and replacement of certain system hardware. The
third party software provider has warranted that Year 2000 remediation and
testing efforts to become compliant have been successfully completed.
Non-compliant hardware has already been replaced through routine hardware
upgrades. Management locally installed and tested the current software release
before the end of 1998, which completed the Year 2000 plan for mission critical
systems. Non-mission critical systems, including systems other than data
processing with embedded technology, will continue to be evaluated and if
necessary, will be upgraded or replaced. Management projects that the cost of
Year 2000 readiness will be in a range of $40,000 to $100,000, which will be
expensed as incurred. Year 2000 expenses are subject to change and could vary
from current estimates if the final requirements for Year 2000 readiness exceed
management's expectations.


<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The Company's Financial Statements and related Independent Auditors'
Report are presented in the following pages. The financial statements filed in
this Item 8 are as follows:

        Independent Auditors' Report

        Financial Statements:
          Balance Sheets - December 31, 1998 and 1997
          Statements of Income - Years Ended December 31, 1998, 1997 and 1996
          Statements of Changes in Stockholders' Equity - Years ended December
          31, 1998, 1997 and 1996
          Statements of Cash Flows - Years ended December 31, 1998, 1997 and
          1996
          Notes to Financial Statements

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL 
         DISCLOSURE

        There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.



<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996

                                    CONTENTS

REPORT OF INDEPENDENT AUDITORS..........................................  1

FINANCIAL STATEMENTS

 Consolidated Balance Sheets............................................  2
 Consolidated Statements of Income and Comprehensive Income.............  3-4
 Consolidated Statements of Changes in Stockholders' Equity.............  5
 Consolidated Statements of Cash Flows..................................  6-7
 Notes to Consolidated Financial Statements.............................  8-32


<PAGE>

--------------------------------------------------------------------------------

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Premier Financial Bancorp, Inc.
Georgetown, Kentucky

We have audited the accompanying consolidated balance sheets of Premier
Financial Bancorp, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of income and comprehensive income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Premier Financial
Bancorp, Inc. as of December 31, 1998 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.

                                       /s/ Crowe, Chizek and Company LLP

Lexington, Kentucky
February 18, 1999

--------------------------------------------------------------------------------

<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                        1998              1997
                                                                    -------------     -------------
<S>                                                                 <C>               <C>          
ASSETS
Cash and due from banks                                             $  20,171,313     $  13,050,829
Federal funds sold                                                     19,406,000        41,246,000
Investment securities
  Available for sale                                                  157,139,714        53,047,321
  Held to maturity                                                     20,051,992        20,361,807
Loans                                                                 398,727,950       314,510,251
  Unearned income                                                      (3,108,324)       (2,408,652)
  Allowance for loan losses                                            (4,362,567)       (3,478,761)
                                                                    -------------     -------------
    Net loans                                                         391,257,059       308,622,838
Federal Home Loan Bank and Federal Reserve stock                        3,415,700         3,033,050
Premises and equipment, net                                            11,763,723         8,463,994
Real estate and other property acquired through foreclosure               991,947           836,201
Interest receivable                                                     8,053,201         5,488,339
Goodwill and other intangibles                                         21,554,909         7,261,591
Other assets                                                            3,938,665         3,477,563
                                                                    -------------     -------------

TOTAL ASSETS                                                        $ 657,744,223     $ 464,889,533
                                                                    =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Non-interest bearing                                              $  62,813,476     $  41,010,401
  Time deposits, $100,000 and over                                     61,189,879        51,891,095
  Other interest bearing                                              399,189,543       265,703,518
                                                                    -------------     -------------
    Total deposits                                                    523,192,898       358,605,014
Securities sold under agreements to repurchase                          7,772,472         6,579,132
Federal Home Loan Bank advances                                        31,898,391        15,263,339
Other borrowed funds                                                    8,000,000              --
Interest payable                                                        2,383,540         1,805,906
Other liabilities                                                       1,347,945         1,878,778
                                                                    -------------     -------------
  Total liabilities                                                   574,595,246       384,132,169

Guaranteed preferred beneficial interest in Company's debentures       28,750,000        28,750,000

Stockholders' equity
  Preferred stock, no par value; 1,000,000 shares
    authorized; none issued or outstanding                                   --                --
  Common stock, no par value; 10,000,000 shares authorized;
    5,232,257 and 4,983,230 shares issued and outstanding               1,103,374           985,286
  Surplus                                                              43,445,031        38,795,333
  Retained earnings                                                    10,150,610        12,283,199
  Accumulated other comprehensive income (loss), net of tax              (300,038)          (56,454)
                                                                    -------------     -------------
    Total stockholders' equity                                         54,398,977        52,007,364
                                                                    -------------     -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 657,744,223     $ 464,889,533
                                                                    =============     =============
</TABLE>


                             See accompanying notes.
--------------------------------------------------------------------------------
                                                                              2.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                  Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                          1998           1997           1996
                                                       -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>        
Interest income
  Loans, including fees                                $33,786,671    $28,689,594    $20,878,157
  Investment securities -
    Taxable                                              8,582,307      5,802,592      2,131,241
    Tax-exempt                                           1,179,637      1,157,751        815,821
  Federal funds sold                                     1,686,455      1,036,560        543,346
  Other interest income                                    115,258        164,689         24,711
                                                       -----------    -----------    -----------
    Total interest income                               45,350,328     36,851,186     24,393,276
Interest expense
  Deposits                                              19,458,496     14,196,047     10,314,443
  Other borrowings                                       2,931,656      3,565,542        457,433
  Debt                                                   2,852,473      1,631,467        167,413
                                                       -----------    -----------    -----------
    Total interest expense                              25,242,625     19,393,056     10,939,289
Net interest income                                     20,107,703     17,458,130     13,453,987
Provision for loan losses                                1,742,393      1,398,808        952,959
                                                       -----------    -----------    -----------
Net interest income after provision for loan losses     18,365,310     16,059,322     12,501,028
Non-interest income
  Service charges                                        1,584,980      1,260,536      1,070,851
  Insurance commissions                                    467,812        482,766        343,735
  Investment securities gains                              224,530      2,203,545          1,459
  Other income                                           2,395,744        614,648        418,752
                                                       -----------    -----------    -----------
                                                         4,673,066      4,561,495      1,834,797

Non-interest expenses
  Salaries and employee benefits                         7,633,491      6,185,092      4,930,886
  Occupancy and equipment expenses                       2,181,305      1,633,957      1,408,093
  Professional fees                                        452,358        503,685        288,916
  Taxes, other than payroll, property and income           558,607        445,204        352,334
  Acquisition related expenses                             132,208        482,056           --
  Amortization of intangibles                              982,566        386,134        197,357
  Other expenses                                         3,397,343      2,595,791      2,052,110
                                                       -----------    -----------    -----------
                                                        15,337,878     12,231,919      9,229,696

Income before income taxes                               7,700,498      8,388,898      5,106,129
Provision for income taxes                               1,996,754      2,604,939      1,588,610
                                                       -----------    -----------    -----------
NET INCOME                                             $ 5,703,744    $ 5,783,959    $ 3,517,519
                                                       ===========    ===========    ===========
</TABLE>

                                  (Continued)

                             See accompanying notes.
--------------------------------------------------------------------------------
                                                                              3.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                  Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                      1998            1997             1996
                                                  -----------     -----------     -----------
<S>                                               <C>             <C>             <C>         
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
  Unrealized gains and (losses) arising during
    the period                                    $   (95,394)    $ 1,521,393     $   (51,277)
  Reclassification of realized amount                (148,190)     (1,454,340)           (963)
                                                  -----------     -----------     -----------
    Net change in unrealized gain (loss) on
      securities                                     (243,584)         67,053         (52,240)
                                                  -----------     -----------     -----------

COMPREHENSIVE INCOME                              $ 5,460,160     $ 5,851,012     $ 3,465,279
                                                  ===========     ===========     ===========

Earnings per share                                $      1.09     $      1.11     $       .82
Earnings per share assuming dilution              $      1.09     $      1.10     $       .82

</TABLE>


                             See accompanying notes.
--------------------------------------------------------------------------------
                                                                              4.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                             Accumulated
                                                                                                Other
                                              Common                          Retained      Comprehensive
                                               Stock          Surplus         Earnings       Income (Loss)        Total
                                            ------------    ------------    ------------     ------------     ------------
<S>                                         <C>             <C>             <C>              <C>              <C>         
Balances, January 1, 1996                   $    962,286    $ 11,751,991    $  7,452,708     $    (71,267)    $ 20,095,718


Issuance of 2,300,000 shares of Company
 common stock                                     23,000      27,043,342            --               --         27,066,342

Net change in unrealized losses on
 securities available for sale                      --              --              --            (52,240)         (52,240)

Net income                                          --              --         3,517,519             --          3,517,519

Dividends paid - Company ($.50 per
 share)                                             --              --        (1,817,045)            --         (1,817,045)

Dividends paid - Sabina prior to pooling            --              --          (165,000)            --           (165,000)
                                            ------------    ------------    ------------     ------------     ------------

Balances, December 31, 1996                      985,286      38,795,333       8,988,182         (123,507)      48,645,294

Net change in unrealized losses on
 securities available for sale                      --              --              --             67,053           67,053

Net income                                          --              --         5,783,959             --          5,783,959

Dividends paid - Company ($.55 per
 share)                                             --              --        (2,406,442)            --         (2,406,442)

Dividends paid - Sabina prior to pooling            --              --           (82,500)            --            (82,500)
                                            ------------    ------------    ------------     ------------     ------------

Balances, December 31, 1997                      985,286      38,795,333      12,283,199          (56,454)      52,007,364

Net change in unrealized losses on
 securities available for sale                      --              --              --           (243,584)        (243,584)

Net income                                          --              --         5,703,744             --          5,703,744

Dividends paid - Company ($.60 per
 share)                                             --              --        (3,068,547)            --         (3,068,547)

Stock dividend                                   118,088       4,649,698      (4,767,786)            --               --
                                            ------------    ------------    ------------     ------------     ------------

BALANCES, DECEMBER 31, 1998                 $  1,103,374    $ 43,445,031    $ 10,150,610     $   (300,038)    $ 54,398,977
                                            ============    ============    ============     ============     ============
</TABLE>


                             See accompanying notes.
--------------------------------------------------------------------------------
                                                                              5.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                              1998              1997              1996
                                                          -------------     -------------     -------------
<S>                                                       <C>               <C>               <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                              $   5,703,744     $   5,783,959     $   3,517,519
  Adjustments to reconcile net income to
    net cash from operating activities
      Depreciation                                              871,646           643,696           477,849
      Amortization, net                                         591,139           377,900           374,697
      Provision for loan losses                               1,742,393         1,398,808           952,959
      FHLB stock dividends                                     (227,400)         (155,000)          (46,000)
      Investment securities gains, net                         (224,530)       (2,203,545)           (1,459)
      Changes in
        Interest receivable                                  (2,564,862)         (945,561)         (540,251)
        Other assets                                           (160,546)       (1,794,527)          875,055
        Interest payable                                        577,634           295,835          (108,263)
        Other liabilities                                      (530,833)          908,566           236,963
                                                          -------------     -------------     -------------
         NET CASH FROM OPERATING ACTIVITIES                   5,778,385         4,310,131         5,739,069

Cash flows from investing activities
  Purchases of securities available for sale               (640,534,674)     (311,372,750)      (21,071,076)
  Proceeds from sales of securities available for sale      222,749,694       277,135,191         2,499,125
  Proceeds from maturities and calls of  securities
    available for sale                                      313,670,924        18,869,544        14,388,575
  Purchases of investment securities held to maturity        (4,977,589)       (4,254,989)       (2,741,799)
  Proceeds from maturities and calls of securities
    held to maturity                                          5,276,493         4,878,764         2,241,255
  Purchases of FHLB stock                                      (155,250)       (1,072,900)         (753,300)
  Net change in federal funds sold                           21,840,000       (27,348,000)       (2,875,000)
  Net change in loans                                       (75,665,244)      (48,436,475)      (36,357,610)
  Purchases of premises and equipment, net                   (2,128,680)       (2,231,797)       (1,053,310)
  Proceeds from sale of other real estate acquired
    through foreclosure                                         398,884           367,572           156,353
  Net cash received (paid) related to acquisitions          123,970,812        20,613,412       (10,576,808)
                                                          -------------     -------------     -------------
    NET CASH FROM INVESTING ACTIVITIES                      (35,554,630)      (72,852,428)      (56,143,595)

</TABLE>

                                     See accompanying notes.

                                                                              6.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                           1998             1997             1996
                                                       ------------     ------------     ------------
<S>                                                    <C>              <C>              <C>         
CASH FLOWS FROM FINANCING ACTIVITIES
  Net change in deposits                                 14,136,884       38,169,728       30,532,564
  Advances from Federal Home Loan Bank                   27,225,000       17,727,000        6,800,000
  Repayment of Federal Home Loan Bank advances          (10,589,948)     (11,841,117)      (2,067,206)
  Proceeds from other borrowed funds                      8,000,000             --               --
  Repayment of other borrowed funds                            --               --         (6,894,863)
  Net change in agreements to repurchase securities       1,193,340          564,712       (1,382,697)
  Proceeds from issuance of guaranteed preferred
    beneficial interests in Company's debentures               --         28,750,000             --
  Proceeds from issuance of common stock                       --               --         27,066,342
  Dividends paid                                         (3,068,547)      (2,488,942)      (1,982,045)
                                                       ------------     ------------     ------------
    NET CASH FROM FINANCING ACTIVITIES                   36,896,729       70,881,381       52,072,095
                                                       ------------     ------------     ------------

Net change in cash and cash equivalents                   7,120,484        2,339,084        1,667,569
Cash and cash equivalents at beginning
  of year                                                13,050,829       10,711,745        9,044,176
                                                       ------------     ------------     ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR               $ 20,171,313     $ 13,050,829     $ 10,711,745
                                                       ============     ============     ============

Supplemental disclosures of cash flow information:
    Cash paid during the year for -
      Interest                                         $ 24,664,991     $ 19,097,220     $ 11,047,552
      Income taxes                                        2,550,000        2,462,000        1,062,063
    Loans transferred to real estate acquired
      through foreclosure                              $    554,630     $    829,199     $    105,501

</TABLE>

                             See accompanying notes.
--------------------------------------------------------------------------------
                                                                              7.

<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly-owned
subsidiaries, Georgetown Bank & Trust Co., Georgetown, Kentucky; Citizens
Deposit Bank & Trust, Vanceburg, Kentucky; Bank of Germantown, Germantown,
Kentucky; Citizens Bank, Sharpsburg, Kentucky; Farmers Deposit Bank, Eminence,
Kentucky; The Sabina Bank, Sabina, Ohio; Ohio River Bank, Ironton, Ohio; The
Bank of Philippi, Inc., Philippi, West Virginia; and Boone County Bank, Inc.,
Madison, West Virginia (the Banks). In addition, the Company has a data
processing service subsidiary, Premier Data Services, Inc., Vanceburg, Kentucky
and PFBI Capital Trust subsidiary discussed in Note 11. All material
intercompany transactions and balances have been eliminated.

Prior period consolidated financial statements have been restated to include the
accounts of significant acquisitions accounted for using the pooling of
interests method of accounting. Business combinations accounted for as purchases
are included in the consolidated financial statements from the respective dates
of acquisition. Assets and liabilities of financial institutions accounted for
as purchases are adjusted to their fair values as of their dates of acquisition.
Certain prior amounts have been reclassified to conform with the current year
presentation.

NATURE OF OPERATIONS: The Banks operate under state bank charters and provide 
traditional banking services, including trust services, to customers 
primarily located in the counties and adjoining counties in Kentucky, Ohio, 
and West Virginia in which the Banks operate. Chartered as state banks, the 
Banks are subject to regulation by their respective state banking regulators 
and the Federal Deposit Insurance Corporation (FDIC) or the Federal Reserve 
Bank (FRB) for member banks. The Company is also subject to regulation by 
the Federal Reserve Bank.

ESTIMATES IN THE FINANCIAL STATEMENTS: The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
allowance for loan losses and fair values of financial instruments are
particularly subject to change.

CASH FLOWS: For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and amounts due from banks. Net cash flows are reported for
loans, federal funds sold, deposits, and other borrowing transactions.

INVESTMENT SECURITIES: The Company classifies its investment securities
portfolio into three categories: trading, securities available for sale and
securities held to maturity. Fair value adjustments are made to the securities
based on their classification with the exception of the held to maturity
category. The Company has no investments classified as trading.

--------------------------------------------------------------------------------
                                   (Continued)
                                                                              8.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment securities available for sale are carried at fair value. Adjustments
from amortized cost to fair value are recorded in stockholders' equity, net of
related income tax, under net unrealized gains (losses) on securities available
for sale. The adjustment is computed on the difference between fair value and
cost adjusted for amortization of premiums and accretion of discounts which are
recorded as adjustments to interest income using the constant yield method.

Investment securities for which the Banks have the positive intent and ability
to hold to maturity are stated at cost, adjusted for amortization of premiums
and accretion of discounts, which are recorded as adjustments to interest income
using the constant yield method.

Gains or losses on dispositions are based on the net proceeds and adjusted
carrying amount of the securities sold using the specific identification method.

LOANS: Loans are stated at the amount of unpaid principal, reduced by unearned
income and an allowance for loan losses. Interest income on loans is recognized
on the accrual basis except for those loans in a nonaccrual of income status.
The accrual of interest on impaired loans is discontinued when management
believes, after consideration of economic and business conditions and collection
efforts, that the borrowers' financial condition is such that collection of
interest is doubtful. When interest accrual is discontinued, interest income is
subsequently recognized only to the extent cash payments are received.

The allowance for loan losses is established through a provision for loan losses
charged to expense. The allowance is an amount that management believes will be
adequate to absorb losses on existing loans that may become uncollectible based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay. Loans are charged against the allowance for loan losses when
management believes that the collection of principal is unlikely.

A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.

Certain loan origination fees and direct origination costs are capitalized and
recognized as an adjustment of the yield on the related loan.

--------------------------------------------------------------------------------
                                   (Continued)
                                                                              9.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is recorded principally by the
straight-line method over the estimated useful lives of the premises and
equipment.

REAL ESTATE ACQUIRED THROUGH FORECLOSURE: Real estate acquired through
foreclosure is carried at the lower of the recorded investment in the property
or its fair value. The value of the underlying loan is written down to the fair
value of the real estate to be acquired by a charge to the allowance for loan
losses, if necessary. Any subsequent write-downs are charged to operating
expenses. Certain parcels of real estate are being leased to third parties to
offset holding period costs. Operating expenses of such properties, net of
related income, and gains and losses on their disposition are included in other
expenses.

GOODWILL AND OTHER INTANGIBLES: The unamortized costs in excess of the fair
value of acquired net tangible assets are included in goodwill and other
intangibles. Identifiable intangibles, except for premiums on purchased deposits
which are amortized on a straight-line method over 10 years, are amortized over
the estimated periods benefited. The remaining costs (goodwill) are amortized on
a straight-line basis over 15 to 25 years.

INCOME TAXES: The Company uses the liability method for computing deferred
income taxes. Under the liability method, deferred income taxes are based on the
change during the year in the deferred tax liability or asset established for
the expected future tax consequences of differences in the financial reporting
and tax bases of assets and liabilities. The differences relate principally to
premises and equipment, unrealized gains and losses on investment securities
available for sale, net operating loss carryforwards, changes in tax methods of
accounting, FHLB stock, and the allowance for loan losses.

EARNINGS PER COMMON SHARE: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share includes the dilutive effect of additional
potential common shares issuable under stock options. Earnings and dividends per
share are restated for all stock splits and dividends through the date of
issuance of the financial statements.

COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale which are also recognized as a separate
component of equity. The accounting standard that requires reporting
comprehensive income first applies for 1998, with prior information restated to
be comparable.

--------------------------------------------------------------------------------
                                   (Continued)
                                                                             10.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

NEW ACCOUNTING PRONOUNCEMENTS: Beginning January 1, 2000, a new accounting
standard will require all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. This is not expected to
have a material effect, but the effect will depend on derivative holdings when
this standard applies.

INDUSTRY SEGMENTS: All of the Company's operations are considered by management
to be aggregated into one reportable operating segment.

NOTE  2 - BUSINESS COMBINATIONS

On October 5, 1998, the Company entered into a definitive agreement to purchase
Mt. Vernon Bancshares, Inc., the holding company for The Bank of Mt. Vernon (Mt.
Vernon), in a cash transaction. Mt. Vernon offers full service banking in
Rockcastle and Pulaski counties and has two loan production offices in Madison
County, Kentucky. Total acquisition cost was $13.5 million which exceeded the
net assets acquired by $4.6 million. The merger was completed January 20, 1999.
Mt. Vernon had total assets of $129.5 million and earnings for the year of $863
thousand at December 31, 1998.

On June 26, 1998, the Company chartered Boone County Bank, Inc. in Madison, West
Virginia, and The Bank of Philippi, Inc. in Philippi, West Virginia, for the
purpose of acquiring three branch offices of Banc One Corporation located in
Madison, Philippi and Van, West Virginia. Included in the purchase were $150
million in deposits, $9 million in loans and $1.5 million in premises and
equipment. These branches were part of a larger group of branches acquired in
cooperation with another bank holding company headquartered in Kentucky. Certain
individual branches within the group were not retained by either company. The
gain on disposition of these branches was shared between the Company and the
other bank holding company. The Company's portion of the gain, $1,331,430, is
included in other income in the accompanying financial statements.

On March 20, 1998, the Company acquired Ohio River Bank, Ironton, Ohio, (Ohio
River) whereby the Company exchanged 297,840 shares of its common stock for all
the issued and outstanding shares of Ohio River in a business combination
accounted for as a pooling of interests. Based on the date of the acquisition
agreement, the market value of the shares exchanged was $7.7 million. The
accompanying consolidated financial statements for 1998 are based on the
assumption that the companies were combined for the full year. Prior years
presented have been restated to give effect to the combination. At the date of
acquisition, Ohio River had $40.9 million in total assets, $28.0 million in net
loans, $35.2 million in deposits, and $4.3 million in stockholders' equity.

--------------------------------------------------------------------------------
                                   (Continued)
                                                                             11.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  2 - BUSINESS COMBINATIONS (Continued)

Following is a reconciliation of interest income, non-interest income and net
income previously reported with restated amounts:

                                               Year Ended December 31
                                                1997             1996

(in thousands)
Interest income
  As previously reported                      $  33,995       $  22,401
  Ohio River                                      2,856           1,992
                                              ---------       ---------
  As restated                                 $  36,851       $  24,393
                                              =========       =========

Non-interest income
  As previously reported                      $   4,367       $   1,721
  Ohio River                                        194             114
                                              ---------       ---------
  As restated                                 $   4,561       $   1,835
                                              =========       =========

Net income
  As previously reported                      $   5,608       $   3,723
  Ohio River                                        176            (205)
                                              ---------       ---------
  As restated                                 $   5,784       $   3,518
                                              =========       =========

On November 13, 1997, the Company acquired The Sabina Bank, Sabina, Ohio
(Sabina), in a business combination accounted for as a pooling of interests. All
of the outstanding shares of Sabina were exchanged for 476,300 shares of the
Company's common stock. Based on the date of the acquisition agreement, the
market value of the shares exchanged was $7.6 million. The 1997 consolidated
financial statements are based on the assumption that the companies were
combined for a full year. Prior years presented have been restated to give the
effect of the combination. At the date of acquisition, Sabina had $23.8 million
in net loans, $36.6 million in total assets, $31.6 million in deposits, and $4.4
million in stockholders' equity.


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             12.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  2 - BUSINESS COMBINATIONS (Continued)

On December 11, 1997, Sabina completed its purchase and assumption of two branch
offices of the Fifth Third Bank of Western, Ohio. Included in the purchase was
approximately $23.3 million of deposits from the Ada and Waynesfield, Ohio
branches. The net deposits assumed exceeded the cash received by $2.1 million.

On July 1, 1996, the Company acquired all of the outstanding shares of Farmers
Deposit Bancorp, Eminence, Kentucky (Farmers Deposit), a one-bank holding
company owning all of the shares of Farmers Deposit Bank, for cash. The total
acquisition cost exceeded net assets acquired by approximately $5.4 million. The
combination was accounted for as a purchase and the results of operations of
Farmers Deposit are included in the consolidated financial statements from July
1, 1996. Included in the purchase were $19.3 million in investments, $82.0
million in net loans, $86.8 million in deposits, and $12.5 million in borrowed
funds.

NOTE  3 - RESTRICTIONS ON CASH AND DUE FROM BANKS

Included in cash and due from banks are certain non-interest bearing deposits
that are held at the Federal Reserve or maintained in vault cash in accordance
with average balance requirements specified by the Federal Reserve Board of
Governors. The average balance requirement at December 31, 1998 and 1997 was
$1,109,000 and $728,000.

NOTE  4 - INVESTMENT SECURITIES

Amortized cost and fair value of investment securities, by category, at December
31, 1998 are as follows:

<TABLE>
<CAPTION>

                                          Amortized       Unrealized      Unrealized         Fair
                                             Cost           Gains           Losses           Value
                                         ------------    ------------    ------------     ------------
<S>                                      <C>             <C>             <C>              <C>         
Available for sale
  U. S. Treasury securities              $  7,184,532    $     44,376    $       (112)    $  7,228,796
  U. S. agency securities                 125,371,969          45,437        (540,453)     124,876,953
  Obligations of states and political
    subdivisions                            3,691,320         141,750          (2,437)       3,830,633
  Mortgage-backed securities               18,451,999          19,580         (66,537)      18,405,042
  Preferred stock                           2,000,000            --              --          2,000,000
  Other securities                            900,006            --          (101,716)         798,290
                                         ------------    ------------    ------------     ------------

    Total available for sale             $157,599,826    $    251,143    $   (711,255)    $157,139,714
                                         ============    ============    ============     ============
</TABLE>



--------------------------------------------------------------------------------
                                   (Continued)
                                                                             13.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  4 - INVESTMENT SECURITIES (Continued)

<TABLE>
<CAPTION>
                                          Amortized      Unrealized    Unrealized         Fair
                                            Cost           Gains         Losses           Value
                                         -----------    -----------    -----------     -----------
<S>                                      <C>            <C>            <C>             <C>        
Held to maturity
  U. S. Treasury securities              $   899,400    $    16,069    $      --       $   915,469
  U. S. agency securities                  2,630,499           --          (73,346)      2,557,153
  Obligations of states and political
    subdivisions                          16,473,940        769,999           (594)     17,243,345
  Mortgage-backed securities                  48,153            232            (59)         48,326
                                         -----------    -----------    -----------     -----------
    Total held to maturity               $20,051,992    $   786,300    $   (73,999)    $20,764,293
                                         ===========    ===========    ===========     ===========
</TABLE>

Amortized cost and fair value of investment securities, by category, at December
31, 1997 are as follows:

<TABLE>
<CAPTION>
                                          Amortized      Unrealized    Unrealized         Fair
                                            Cost           Gains         Losses           Value
                                         -----------    -----------    -----------     -----------
<S>                                      <C>            <C>            <C>             <C>        
Available for sale
  U. S. Treasury securities              $16,277,679    $    19,950    $   (14,581)    $16,283,048
  U. S. agency securities                 26,867,490         29,205        (91,461)     26,805,234
  Obligations of states and political
    subdivisions                           3,457,927        109,529         (3,602)      3,563,854
  Mortgage-backed securities               3,629,753           --          (29,225)      3,600,528
  Preferred stock                          2,000,000           --             --         2,000,000
  Other securities                           900,007           --         (105,350)        794,657
                                         -----------    -----------    -----------     -----------
    Total available for sale             $53,132,856    $   158,684    $  (244,219)    $53,047,321
                                         ===========    ===========    ===========     ===========

Held to maturity
  U. S. Treasury securities              $ 1,249,985    $     5,896    $      (849)    $ 1,255,032
  U. S. agency securities                  4,337,802         15,928         (5,422)      4,348,308
  Obligations of states and political
    subdivisions                          14,625,016        499,959        (15,435)     15,109,540
  Mortgage-backed securities                 149,004            905           (420)        149,489
                                         -----------    -----------    -----------     -----------

    Total held to maturity               $20,361,807    $   522,688    $   (22,126)    $20,862,369
                                         ===========    ===========    ===========     ===========
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             14.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  4 - INVESTMENT SECURITIES (Continued)

The amortized cost and fair value of investment securities at December 31, 1998,
by category and contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                 Amortized          Fair
                                                                   Cost             Value
                                                               -------------     -------------
<S>                                                            <C>               <C>          
Available for sale
  Due in one year or less                                      $  12,089,373     $  12,112,321
  Due after one year through five years                           85,989,434        85,802,694
  Due after five years through ten years                          36,349,311        36,191,221
  Due after ten years                                              1,819,703         1,830,146
  Mortgage-backed securities                                      18,451,999        18,405,042
  Preferred stock                                                  2,000,000         2,000,000
  Other securities                                                   900,006           798,290
                                                               -------------     -------------

    Total available for sale                                   $ 157,599,826     $ 157,139,714
                                                               =============     =============

Held to maturity
  Due in one year or less                                      $   1,025,446     $   1,039,505
  Due after one year through five years                            9,003,683         9,203,825
  Due after five years through ten years                           6,653,998         6,967,024
  Due after ten years                                              3,320,712         3,505,613
  Mortgage-backed securities                                          48,153            48,326
                                                               -------------     -------------

    Total held to maturity                                     $  20,051,992     $  20,764,293
                                                               =============     =============
</TABLE>

Proceeds from sales of investment securities during 1998, 1997 and 1996 were
$222,749,694, $277,135,191 and $2,499,125. Gross gains of $232,499, $2,204,483
and $2,070, and gross losses of $7,969, $938 and $611 were realized on those
sales.

Investment securities with an approximate carrying value of $45,574,176 and
$33,991,908 at December 31, 1998 and 1997 were pledged to secure public
deposits, trust funds, securities sold under agreements to repurchase and for
other purposes as required or permitted by law.



--------------------------------------------------------------------------------
                                   (Continued)
                                                                             15.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  5 - LOANS

Major classifications of loans are summarized as follows:

<TABLE>
<CAPTION>

                                                              December 31
                                                        ------------------------
                                                          1998            1997
                                                        --------        --------
                                                             (in thousands)
<S>                                                     <C>             <C>     
Commercial, secured by real estate                      $ 86,010        $ 71,818
Commercial, other                                         73,982          48,309
Real estate construction                                  13,374           8,352
Real estate mortgage                                     131,212         103,664
Agricultural                                              15,433          13,232
Consumer and home equity                                  74,215          68,461
Other                                                      4,502             674
                                                        --------        --------
                                                        $398,728        $314,510
                                                        ========        ========
</TABLE>

Certain directors and executive officers of the Banks and companies in which
they have beneficial ownership, were loan customers of the Banks during 1998 and
1997. Such loans were made in the ordinary course of business at the Banks'
normal credit terms and interest rates. An analysis of the 1998 activity with
respect to all director and executive officer loans is as follows:

<TABLE>
<S>                                                                <C>         
Balance, December 31, 1997                                         $  4,999,373
Additions, including loans now meeting disclosure
  requirements                                                       12,199,146
Amounts collected, including loans no longer meeting
  disclosure requirements                                            (5,624,848)
                                                                   ------------
Balance, December 31, 1998                                         $ 11,573,671
                                                                   ============
</TABLE>

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>

                                                      1998            1997             1996
                                                   -----------     -----------     -----------
<S>                                                <C>             <C>             <C>        
Balance, beginning of year                         $ 3,478,761     $ 3,126,610     $ 2,114,146
Allowance related to acquired subsidiaries             115,000               -         812,000
Loans charged off                                   (1,189,665)     (1,305,215)       (977,170)
Recoveries                                             216,078         258,558         224,675
Provision for loan losses                            1,742,393       1,398,808         952,959
                                                   -----------     -----------     -----------
Balance, end of year                               $ 4,362,567     $ 3,478,761     $ 3,126,610
                                                   ===========     ===========     ===========
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             16.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


NOTE  5 - LOANS (Continued)

Impaired loans are as follows:

<TABLE>
<CAPTION>

                                                            1998          1997          1996
                                                          -------       --------       -------
<S>                                                       <C>           <C>            <C>    
Year end loans with no allocated allowance
  for loan losses                                         $ 2,562       $  1,049       $   618
Year end loans with allocated allowance for
  loan losses                                                 791              -           292
                                                          -------       --------       -------
    Total                                                 $ 3,353       $  1,049       $   910
                                                          =======       ========       =======


Amount of the allowance for loan losses allocated         $   659       $    149       $   274

Average of impaired loans during the year                 $   905       $  1,262       $   713
Interest income recognized during impairment                    6             62             2

</TABLE>


NOTE  6 - PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                         December 31
                                                -------------------------------
                                                    1998               1997
                                                ------------       ------------
<S>                                             <C>                <C>         
Land                                            $  1,682,547       $  1,289,972
Buildings and leasehold improvements               8,174,472          5,684,913
Furniture and equipment                            7,204,898          6,018,162
                                                ------------       ------------
                                                  17,061,917         12,993,047

Less: accumulated depreciation                    (5,298,194)        (4,529,053)
                                                ------------       ------------

                                                $ 11,763,723       $  8,463,994
                                                ============       ============
</TABLE>

NOTE  7 - DEPOSITS

At December 31, 1998, the scheduled maturities of time deposits are as follows:

         1999                            $ 228,492,511
         2000                               58,890,421
         2001                               18,196,660
         2002                                8,028,777
         2003 and thereafter                 2,356,469
                                         -------------
                                         $ 315,964,838
                                         =============


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             17.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


NOTE  8 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase generally mature within one to
ninety days from the transaction date. Information concerning securities sold
under agreements to repurchase is summarized as follows:

                                                           December 31
                                                  -----------------------------
                                                      1998             1997
                                                  ------------     ------------
Year-end balance                                  $  7,772,472     $  6,579,132
Average balance during the year                     20,167,213       49,939,497
Average interest rate during the year                     4.58%            5.51%
Maximum month-end balance during the year         $ 82,754,719     $120,257,123

NOTE  9 - FEDERAL HOME LOAN BANK ADVANCES

The Banks own stock of the Federal Home Loan Bank (FHLB) of Cincinnati, Ohio.
This stock allows the Banks to borrow advances from the FHLB which the Banks use
to fund loans.

At December 31, 1998 and 1997, $31,898,391 and $15,263,339 represented the
balance due on the above advances from the FHLB. All advances are paid either on
a monthly basis or at maturity, over remaining terms of one to seventeen years,
with interest rates ranging from 4.81% to 8.45%. Advances are secured by the
FHLB stock and all single family first mortgage loans of the participating
Banks. Scheduled principal payments due on advances during the five years
subsequent to December 31, 1998 are as follows: 1999 - $9,941,708; 2000 -
$3,431,285; 2001 - $566,190; 2002 - $364,921; 2003 and years thereafter -
$17,594,287.

NOTE  10 - OTHER BORROWED FUNDS

The Company has a $20 million line of credit with a financial institution for 
general corporate purposes, including acquisitions. The line of credit, 
expiring April 1999, contains certain covenants and performance terms, all of 
which have been complied with at December 31, 1998. Interest is payable 
monthly at LIBOR plus 1.125% and adjusts based on agreed term. Common stock 
of five of the Company's subsidiary Banks is pledged to secure the agreement. 
At December 31, 1998, $8 million of the line was advanced. There were no 
amounts borrowed under this agreement at December 31, 1997.

--------------------------------------------------------------------------------
                                   (Continued)
                                                                             18.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  11 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
           DEBENTURES

Guaranteed preferred beneficial interests in Company's debentures (Preferred
Securities) represent preferred beneficial interests in the assets of PFBI
Capital Trust (Trust). The Trust holds certain 9.75% junior subordinated
debentures due June 30, 2027 issued by the Company on June 9, 1997.
Distributions on the Preferred Securities will be payable at an annual rate of
9.75% of the stated liquidation amount of $25 per Capital Security, payable
quarterly. Cash distributions on the Preferred Securities are made to the extent
interest on the debentures is received by the Trust. In the event of certain
changes or amendments to regulatory requirements or federal tax rules, the
Preferred Securities are redeemable in whole. Otherwise, the Preferred
Securities are generally redeemable in whole or in part on or after June 30,
2002 at 100% of the liquidation amount. The Trust's obligations under the
Preferred Securities are fully and unconditionally guaranteed by the Company.

NOTE  12 - INCOME TAXES

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>

                                       1998            1997             1996
                                    -----------     -----------     -----------
<S>                                 <C>             <C>             <C>        
Current                             $ 2,349,608     $ 2,348,275     $ 1,599,539
Deferred                               (117,887)        316,664         (80,929)
Change in valuation allowance          (234,967)        (60,000)         70,000
                                    -----------     -----------     -----------

                                    $ 1,996,754     $ 2,604,939     $ 1,588,610
                                    ===========     ===========     ===========
</TABLE>

The Company's deferred tax assets and liabilities at December 31, 1998 and 1997
are shown below. No valuation allowance for the realization of deferred tax
assets is considered necessary at December 31, 1998.

<TABLE>
<CAPTION>

                                                         1998            1997
                                                      ----------      ----------
<S>                                                   <C>             <C>       
Deferred tax assets
  Allowance for loan losses                           $  847,640      $  500,815
  NOL carryforwards                                       95,652         301,952
  Unrealized loss on investment securities               160,074          29,083
  Other                                                  182,951         100,996
                                                      ----------      ----------
    Total deferred tax assets                          1,286,317         932,846
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             19.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


NOTE  12 - INCOME TAXES (Continued)

<TABLE>
<CAPTION>

                                                         1998            1997
                                                     ---------        ---------
<S>                                                  <C>              <C>      
Deferred tax liabilities
  Depreciation                                        (331,555)        (296,130)
  Change in accounting method                          (39,789)         (77,276)
  Federal Home Loan Bank dividends                    (181,900)        (103,764)
  Other                                                (83,584)         (55,065)
                                                     ---------        ---------
      Total deferred tax liabilities                  (636,828)        (532,235)

Valuation allowance                                       --           (234,967)
                                                     ---------        ---------

    Net deferred tax asset                           $ 649,489        $ 165,644
                                                     =========        =========
</TABLE>

At December 31, 1998, two of the subsidiary Banks had net operating loss
carryforwards totaling approximately $281,000, which begin expiring in 2003. The
utilization of these net operating loss carryforwards is subject to limitations
imposed by Section 382 of the Internal Revenue Code.

An analysis of the differences between the effective tax rates and the statutory
U.S. federal income tax rate is as follows:

<TABLE>
<CAPTION>
                                              1998                  1997                  1996
                                              ----                  ----                  ----
                                                               (in thousands)
<S>                                   <C>            <C>     <C>            <C>     <C>            <C>  
U. S. federal income tax rate         $ 2,618        34.0%   $ 2,852        34.0%   $ 1,736        34.0%
Changes from the statutory rate
  Tax-exempt investment income           (425)       (5.5)      (408)       (5.0)      (295)       (5.6)
  Non-deductible interest expense
    related to carrying tax-exempt
    investments                            57          .7         50          .6         34          .6
  Tax credits                            (149)       (1.9)       (70)       (0.8)       (70)       (1.3)
  Change in valuation allowance          (235)       (3.1)       (60)        (.6)        70         1.3
  Goodwill amortization                   137         1.8        131         1.6         67         1.3
  Other                                    (6)        (.1)       110         1.3         47         0.8
                                      -------        ----    -------        ----    -------        ----

                                      $ 1,997        25.9%   $ 2,605        31.1%   $ 1,589        31.1%
                                      =======                =======                =======
</TABLE>

NOTE  13 - EMPLOYEE BENEFIT PLANS

The Company has qualified profit sharing plans which cover substantially all
employees. Contributions to the plans consist of a Company match and additional
amounts are at the discretion of the Company's Board of Directors. Total
contributions to the plans were $180,135, $191,073 and $215,007 in 1998, 1997
and 1996.


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             20.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

The Company also maintains the Premier Financial Bancorp, Inc. 1996 Employee
Stock Ownership Incentive Plan (the Plan), whereby certain employees of the
Company are eligible to receive incentive stock options. The Plan is accounted
for in accordance with Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. Under
the Plan, a maximum of 100,000 shares of the Company's common stock may be
issued through the exercise of these incentive stock options. The option price
is the fair market value of the Company's shares at the date of the grant. The
options are exercisable ten years from the date of grant.

A summary of the Company's stock option activity is as follows:

<TABLE>
<CAPTION>

                                          1998                 1997                 1996
                                   -------------------   ------------------    ------------------
                                              Weighted             Weighted              Weighted
                                              Average              Average               Average
                                              Exercise             Exercise              Exercise
                                   Options     Price     Options    Price      Options    Price
                                   -------     -----     -------    -----      -------    -----
<S>                                 <C>       <C>         <C>       <C>        <C>        <C>
Outstanding at beginning of year    40,000    $  13.00    40,000    $ 13.00         --    $    --

Granted                             20,000       16.50        --         --     40,000      13.00
                                   -------               -------               -------

Outstanding at year end             60,000    $  14.17    40,000    $ 13.00     40,000    $ 13.00
                                   =======               =======               =======

Exercisable at year end             40,000                28,000                14,000

Weighted average remaining life        8.3                   8.5                   9.5

</TABLE>

Although the Company has elected to follow APB No. 25, SFAS No. 123, "Accounting
for Stock Based Compensation" requires pro forma disclosure of net income and
earnings per share as if the Company had accounted for its employee stock
options under that Statement. The fair value of each option grant was estimated
on the grant date using an option-pricing model.




--------------------------------------------------------------------------------
                                   (Continued)
                                                                             21.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  13 - EMPLOYEE BENEFIT PLANS (Continued)

Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this statement are as follows:

<TABLE>
<CAPTION>

                                                         1998           1997           1996
                                                         ----           ----           ----
<S>                                                  <C>             <C>             <C> 
     (in thousands)
Net income
  As reported                                        $   5,704       $   5,784       $   3,518
  Pro forma                                              5,649           5,731           3,493

  Earnings per share
    As reported                                      $    1.09       $    1.11       $     .82
    Pro forma                                             1.08            1.10             .81

  Earnings per share assuming dilution
    As reported                                      $    1.09       $    1.10       $     .82
    Pro forma                                             1.08            1.09             .81

Weighted averages
  Fair value of options granted                      $    4.66       $    5.77       $    2.70
  Risk free interest rate                                5.50%           6.00%           6.50%
  Expected life                                       10 years        10 years        10 years
  Expected volatility                                   17.88%          38.02%          13.97%
  Expected dividend                                  $     .60       $     .60       $     .50

</TABLE>

Future pro forma net income will be negatively impacted should the Company
choose to grant additional options.

NOTE  14 - RELATED PARTY TRANSACTIONS

During 1998, 1997 and 1996, the Company paid approximately $369,000, $233,000
and $264,000 for printing and supplies from a company affiliated by common
ownership. The Company also paid this affiliate approximately $649,000, $339,000
and $317,000 in 1998, 1997 and 1996 to permit the Company's employees to
participate in its employee medical benefit plan.

The Company has purchased and currently holds noncumulative perpetual preferred
stock with a carrying value of $2,000,000 in a Louisiana bank controlled by the
Company's largest stockholder. The dividend rate on the preferred stock is 2%
over the prevailing prime rate.


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             22.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  15 - DIVIDEND LIMITATIONS

The Company's principal source of funds for dividend payments is dividends
received from the subsidiary Banks. Banking regulations limit the amount of
dividends that may be paid without prior approval of regulatory agencies. Under
these regulations, the amount of dividends that may be paid in any calendar year
is limited to the current year's net profits, as defined, combined with the
retained net profits of the preceding two years, subject to the capital
requirements as defined below. During 1999, the Banks could, without prior
approval, declare dividends of approximately $10,956,000 plus any 1999 net
profits retained to the date of the dividend declaration.

NOTE  16 - EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the earnings per common
share and earnings per common share assuming dilution computations for 1998,
1997 and 1996 is presented below:

<TABLE>
<CAPTION>
                                                                     Year Ended
                                                     -----------------------------------------
                                                         1998          1997           1996
                                                     ----------     -----------    -----------
<S>                                                  <C>            <C>            <C>        
Earnings Per Share
  Net income available to common stockholders        $5,703,744     $ 5,783,959    $ 3,517,519
  Weighted average common shares outstanding          5,232,257       5,232,257      4,310,672
  Earnings per share                                 $     1.09     $      1.11    $       .82

Earnings Per Share Assuming Dilution

  Net income available to common stockholders        $5,703,744     $ 5,783,959    $ 3,517,519
  Weighted average common shares outstanding          5,232,257       5,232,257      4,310,672

  Add dilutive effects of assumed exercise of stock
    options                                              14,972          13,074            214
                                                     ----------     -----------    -----------

  Weighted average common and dilutive potential
    common shares outstanding                         5,247,229       5,245,331      4,310,886

    Earnings per share assuming dilution             $     1.09     $      1.10    $       .82
</TABLE>

NOTE  17 - STOCKHOLDERS' EQUITY

The Company paid a 5% stock dividend on September 30, 1998 to stockholders of
record on September 21, 1998. For comparability, prior earnings per share
information has been restated to reflect the 249,027 shares issued as a result.


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             23.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  17 - STOCKHOLDERS' EQUITY (Continued)

On May 22, 1996, the Company completed its initial public offering by selling
2,000,000 common shares at an offering price of $13.00 per share and on June 19,
1996, the Company completed the sale of an additional 300,000 common shares
(which represented the Underwriters' over-allotment option) at a price of $13.00
per share. Total proceeds to the Company, net of the underwriting discount and
issuance costs, were $27,066,342.

On March 15, 1996, the stockholders approved a 2-for-1 stock split effective
March 29, 1996, in the form of a dividend of the Company's common stock to
stockholders of record on February 22, 1996. Additionally, the stockholders
approved an increase in the number of common shares authorized from 1,800,000 to
10,000,000, approved a change in the par value of the common shares from $1 to
no par value and approved the authorization of 1,000,000 preferred shares,
without par value.

NOTE  18 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of the Company's financial instruments at December 31, 1998 and
1997 are as follows:

<TABLE>
<CAPTION>

                                                     1998                                1997
                                        -------------------------------     -------------------------------
                                          Carrying            Fair            Carrying            Fair
                                           Amount             Value            Amount             Value
<S>                                     <C>               <C>               <C>               <C>          
Financial assets
 Cash and due from banks                $  20,171,313     $  20,171,000     $  13,050,829     $  13,051,000
 Federal funds sold                        19,406,000        19,406,000        41,246,000        41,246,000
 Investment securities                    177,191,706       177,904,000        73,409,128        73,910,000
 Loans, net                               391,257,059       393,047,000       308,622,838       307,814,000
 Federal Home Loan Bank and
   Federal Reserve stock                    3,415,700         3,416,000         3,033,050         3,033,000


Financial liabilities
 Deposits                               $(523,192,898)    $(526,733,000)    $(358,605,014)    $(360,567,000)
 Securities sold under agreements
   to repurchase                           (7,772,472)       (7,772,000)       (6,579,132)       (6,579,000)
 Federal Home Loan Bank advances          (31,898,391)      (32,163,000)      (15,263,339)      (15,290,000)
 Other borrowed funds                      (8,000,000)       (8,000,000)             --                --
 Guaranteed preferred beneficial
   interests in Company's debentures      (28,750,000)      (28,750,000)      (28,750,000)      (28,750,000)
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             24.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  18 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

           (Continued)

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

CASH AND DUE FROM BANKS: For these short-term instruments, the carrying amount
is a reasonable estimate of fair value.

FEDERAL FUNDS SOLD: For these short-term instruments, the carrying amount is a
reasonable estimate of fair value.

INVESTMENT SECURITIES: For investment securities, fair values are based on
quoted market prices or dealer quotes.

LOANS: Fair value is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.

FEDERAL HOME LOAN BANK AND FEDERAL RESERVE STOCK: For FHLB and Federal Reserve
stock, carrying value is a reasonable estimate of fair value.

DEPOSIT LIABILITIES: The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated by
discounting future cash flows using the rates currently offered for deposits of
similar remaining maturities.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE: For these short-term
instruments, the carrying amount is a reasonable estimate of fair value.

FEDERAL HOME LOAN BANK ADVANCES: Rates currently available to the Company for
advances with similar terms and remaining maturities are used to estimate fair
value of existing debt.

OTHER BORROWED FUNDS: The carrying value of these borrowings is a reasonable
estimate of fair value.

GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S DEBENTURES: The carrying
value of these funds is a reasonable estimate of fair value.



--------------------------------------------------------------------------------
                                   (Continued)
                                                                             25.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  18 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
           (Continued)

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT: Commitments to
extend credit and standby letters of credit represent agreements to lend to a
customer at the market rate when the loan is extended. The fair value of
commitments and letters of credit are not considered material.

NOTE  19 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Banks are parties to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of their customers.
These financial instruments include standby letters of credit and commitments to
extend credit in the form of unused lines of credit. The Banks use the same
credit policies in making commitments and conditional obligations as they do for
on-balance sheet instruments.

At December 31, 1998 and 1997, the Banks had the following financial instruments
whose approximate contract amounts represent credit risk:

                                                          1998            1997
                                                             (in thousands)

Standby letters of credit                               $ 1,010          $ 1,099

Commitments to extend credit                            $34,254          $17,692

Standby letters of credit represent conditional commitments issued by the Banks
to guarantee the performance of a third party. The credit risk involved in
issuing these letters of credit is essentially the same as the risk involved in
extending loans to customers. Collateral held varies but primarily includes real
estate and certificates of deposit. Some letters of credit are unsecured.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Outstanding
commitments include both fixed and variable rates, substantially all of which at
year end approximate current market rates. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
The Banks evaluate each customer's creditworthiness on a case-by-case basis.
Since some of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income producing properties.


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             26.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  20 - LEGAL PROCEEDINGS

Legal proceedings involving the Company and its subsidiaries periodically arise
in the ordinary course of business, including claims by debtors and their
related interests against the Company's subsidiaries following initial
collection proceedings. These legal proceedings sometimes can involve claims for
substantial damages. At December 31, 1998, management is unaware of any legal
proceedings, of which the ultimate result would have a material adverse effect
upon the consolidated financial statements of the Company.

NOTE  21 - REGULATORY MATTERS

The Company and the subsidiary Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Banks must meet specific guidelines that involve
quantitative measures of their assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the following table) of Total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1998, the Company and the Banks meet all capital adequacy requirements to which
they are subject.

As of December 31, 1998, the most recent notification from the Federal Reserve
Bank categorized the Company as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Company
must maintain minimum Total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the following table. There are no conditions or events
since that notification that management believes have changed the Company's
category.



--------------------------------------------------------------------------------
                                   (Continued)
                                                                             27.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  21 - REGULATORY MATTERS (Continued)

The Company's and the three largest subsidiary Banks' capital amounts and ratios
as of December 31, 1998 and 1997 are presented in the table below.

<TABLE>
<CAPTION>

                                                                                  To Be Well
                                                                                  Capitalized
                                                                                 Under Prompt
                                                              For Capital         Corrective
                                             Actual        Adequacy Purposes   Action Provisions
                1998                    Amount     Ratio     Amount    Ratio    Amount     Ratio
                ----                                     (dollars in thousands)

<S>                                      <C>       <C>       <C>         <C>    <C>         <C>  
Total Capital (to Risk-Weighted Assets):
  Consolidated                           $66,188   16.2%     $32,660     8.0%   $40,825     10.0%
  Farmers Deposit Bank                    15,297   15.6        7,833     8.0      9,792     10.0
  Boone County Bank                       10,975   17.3        5,068     8.0      6,336     10.0
  Citizens Deposit Bank                   11,730   13.5        6,948     8.0      8,685     10.0

Tier I Capital (to Risk-Weighted Assets):

           Consolidated                  $51,288   12.6%     $16,330     4.0%   $24,495      6.0%
  Farmers Deposit Bank                    14,075   14.4        3,917     4.0      5,875      6.0
  Boone County Bank                       10,817   17.1        2,534     4.0      3,801      6.0
  Citizens Deposit Bank                   10,800   12.4        3,474     4.0      5,211      6.0

Tier I Capital (to Average Assets):
  Consolidated                           $51,288    8.1%     $25,483     4.0%   $31,854      5.0%
  Farmers Deposit Bank                    14,075   10.5        5,350     4.0      6,687      5.0
  Boone County Bank                       10,817    9.3        4,649     4.0      5,812      5.0
  Citizens Deposit Bank                   10,800    9.0        4,775     4.0      5,969      5.0

                1997
                ----

Total Capital (to Risk-Weighted Assets):
  Consolidated                           $76,961   24.5%     $25,091     8.0%   $31,364     10.0%
  Farmers Deposit Bank                    13,019   13.7        7,632     8.0      9,540     10.0
  Citizens Deposit Bank                    9,864   13.0        6,078     8.0      7,599     10.0

Tier I Capital (to Risk-Weighted Assets):
  Consolidated                           $61,914   19.7%     $12,546     4.0%   $18,818      6.0%
  Farmers Deposit Bank                    12,009   12.6        3,816     4.0      5,223      6.0
  Citizens Deposit Bank                    9,036   11.9        3,039     4.0      4,559      6.0

Tier I Capital (to Average Assets):
  Consolidated                           $61,914   13.6%     $18,243     4.0%   $22,804      5.0%
  Farmers Deposit Bank                    12,009    9.7        4,793     4.0      5,991      5.0
  Citizens Deposit Bank                    9,036    8.8        3,885     4.0      4,856      5.0
                                                    9.30
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             28.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  21 - REGULATORY MATTERS (Continued)

Pro forma capital amounts, in millions, and ratios of the Company assuming the
acquisition of Mt. Vernon (Note 2) was completed as of December 31, 1998 are
approximately as follows:

<TABLE>
<CAPTION>

                                                                                  To Be Well
                                                                                  Capitalized
                                                                                 Under Prompt
                                                               For Capital         Corrective
                                              Actual        Adequacy Purposes   Action Provisions
                1998                     Amount    Ratio     Amount    Ratio    Amount     Ratio
                ----
<S>                                      <C>       <C>        <C>        <C>     <C>         <C>
Total Capital (to Risk-Weighted Assets)  $  61.6   12.3%      $ 40.0     8%      $ 50.1      10%
Tier I Capital (to Risk-Weighted Assets)    46.7    9.3         20.0     4         30.0       6
Tier I Capital (to Average assets)          46.7    6.1         30.7     4         38.3       5

</TABLE>















--------------------------------------------------------------------------------
                                   (Continued)
                                                                             29.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------



NOTE  22 - PARENT COMPANY FINANCIAL STATEMENTS

                            Condensed Balance Sheets
                           December 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                            1998         1997
                                                          --------     --------
                                                              (in thousands)
<S>                                                       <C>          <C>     
ASSETS
Cash                                                      $    317     $  1,584
Interest bearing deposits in subsidiary banks                 --          4,371
                                                          --------     --------
  Total cash and cash equivalents                              317        5,955

Federal funds sold                                            --         16,340
Investment in subsidiaries                                  83,297       47,043
Investment securities available for sale                     2,000        2,000
Loans                                                         --          5,621
Premises and equipment                                       3,594        2,419
Other assets                                                 2,080        1,546
                                                          --------     --------

TOTAL ASSETS                                              $ 91,288     $ 80,924
                                                          ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities                                         $    139     $    167
Other borrowed funds                                         8,000         --
                                                          --------     --------
  Total liabilities                                          8,139          167

Guaranteed preferred beneficial interests in Company's
  debentures                                                28,750       28,750

Stockholders' equity
  Preferred stock                                             --           --
  Common stock                                               1,103          985
  Surplus                                                   43,445       38,795
  Retained earnings                                         10,151       12,283
  Accumulated other comprehensive income (loss),
    net of tax                                                (300)         (56)
                                                          --------     --------
      Total stockholders' equity                            54,399       52,007
                                                          --------     --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 91,288     $ 80,924
                                                          ========     ========
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             30.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


NOTE  22 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                         Condensed Statements of Income
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                    1998        1997      1996
                                                  -------     -------    -------
                                                          (in thousands)
<S>                                               <C>         <C>        <C>    
Income
  Dividends from subsidiary banks                 $  --       $  --      $   597
  Interest and dividend income                      1,748       4,049        361
  Gain on sale of investment securities               136       2,183       --
  Other income                                      1,620          16         73
                                                  -------     -------    -------
    Total income                                    3,504       6,248      1,031

Expenses
  Interest expense                                  3,593       4,037        167
  Salaries and employee benefits                      461         465        287
  Other expenses                                      684         804        186
                                                  -------     -------    -------
    Total expenses                                  4,738       5,306        640

Income (loss) before income taxes and equity
  in undistributed income of subsidiaries          (1,234)        942        391

Income tax expense (benefit)                         (516)        326        (95)
                                                  -------     -------    -------

Income (loss) before equity in undistributed
  income of subsidiaries                             (718)        616        486

Equity in undistributed income of subsidiaries      6,422       5,168      3,031
                                                  -------     -------    -------

NET INCOME                                        $ 5,704     $ 5,784    $ 3,517
                                                  =======     =======    =======
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)
                                                                             31.
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

NOTE  22 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                       Condensed Statements of Cash Flows
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                      1998          1997          1996
                                                    ---------     ---------     ---------
                                                                (in thousands)
<S>                                                 <C>           <C>           <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                        $   5,704     $   5,784     $   3,517
  Adjustments to reconcile net income to net
    cash from operating activities
      Depreciation                                        134            74            28
      Investment securities gains                        (136)       (2,183)         --
      Equity in undistributed income of
        subsidiaries                                   (6,422)       (5,168)       (3,031)
      Change in other assets                             (534)       (1,453)          286
      Change in other liabilities                         (28)           41            30
                                                    ---------     ---------     ---------
        NET CASH FROM OPERATING ACTIVITIES             (1,282)       (2,905)          830

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of subsidiary banks                        (15,168)         --         (12,622)
  Capital contributed to subsidiaries                 (14,908)       (2,100)       (2,500)
  Purchase of securities available for sale           (87,687)     (273,500)         --
  Proceeds from sale of securities                     87,823       275,683          --
  Net change in federal funds sold                     16,340       (16,340)         --
  Net change in loans                                   5,621        (5,621)         --
  Purchase of premises and equipment                   (1,309)       (1,307)         (618)
                                                    ---------     ---------     ---------
    NET CASH FROM INVESTING ACTIVITIES                 (9,288)      (23,185)      (15,740)

CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends paid                                       (3,068)       (2,406)       (1,817)
  Proceeds from issuance of common stock                 --            --          27,066
  Proceeds from issuance of guaranteed preferred
    beneficial interests in Company's debentures         --          28,750          --
  Proceeds from other borrowed funds                    8,000          --            --
  Repayment of other borrowed funds                      --            --          (5,000)
                                                    ---------     ---------     ---------
    NET CASH FROM FINANCING ACTIVITIES                  4,932        26,344        20,249

Net change in cash and cash equivalents                (5,638)          254         5,339

Cash and cash equivalents at beginning of year          5,955         5,701           362
                                                    ---------     ---------     ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR            $     317     $   5,955     $   5,701
                                                    =========     =========     =========
</TABLE>


<PAGE>
                                    PART III

ITEM 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
     EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
     MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by these Items is omitted because the Corporation
is filing a definitive proxy statement pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report which includes
the required information. The required information contained in the
Corporation's proxy statement is incorporated herein by reference.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report:

     1.   Financial Statements:

          Independent Auditors Report
          Balance Sheets - December 31, 1998 and 1997
          Statement of Income - Years Ended December 31, 1998, 1997 and 1996
          Statements of Changes in Stockholders' Equity - Years Ended December
          31, 1998, 1997 and 1996
          Statements of Cash Flows - Years Ended December 31, 1998, 1997 and
          1996 Notes to Financial Statements

     2.   Financial Statement Schedules:

          No financial statement schedules have been included as part of this
          report because they are either not required or the information is
          otherwise included.

     3.   List of Exhibits:

          The following is a list of exhibits required by Item 601 of Regulation
          S-K and by paragraph (c) of this Item 14.

         EXHIBIT
          NUMBER            DESCRIPTION OF DOCUMENT

          3.1  Form of Articles of Incorporation of registrant (included as
               Exhibit 3.1 to registrant's Registration Statement on Form S-1,
               Registration No. 333-1702, filed on February 28, 1996 with the
               Commission and incorporated herein by reference).

          3.2  Form of Articles of Amendment to Articles of Incorporation
               effective March 15, 1996 re: amendment to Article IV (included as
               Exhibit 3.2 to registrant's Amendment No. 1 to Registration
               Statement on Form S-1, Registration No. 333-1702, filed on March
               25, 1996 with the Commission and incorporated herein by
               reference).


<PAGE>

          3.3  Bylaws of registrant (included as Exhibit 3.2 to registrant's
               Registration Statement on Form S-1, Registration No. 333-1702,
               filed on February 28, 1996 with the Commission and incorporated
               herein by reference).

          4.1  Form of Junior Subordinated Indenture dated as of June 6, 1997
               between Registrant and Bankers Trust Company, as Trustee, with
               respect to 9.75% Junior Subordinated Deferrable Interest
               Debentures due June 30, 2027 (incorporated by reference to
               Exhibit 4.1 to the Registration Statement on Form S-1 of
               Registrant filed May 28, 1997 with the Commission (Registration
               No. 333-27943)).

          4.2  Form of 9.75% Junior Subordinated Deferrable Interest Debenture
               Certificate (incorporated by reference to Exhibit 4.2 to the
               Registration Statement on Form S-1 of Registrant filed May 28,
               1997 with the Commission (Registration No. 333-27943)).

          4.3  Form of Amended and Restated Trust Agreement dated as of June 6,
               1997 among Registrant, as Depositor, Bankers Trust Company, as
               Property Trustee, and Bankers Trust (Delaware), as Delaware
               Trustee (incorporated by reference to Exhibit 4.4 to the
               Registration Statement on Form S-1 of Registrant filed May 28,
               1997 with the Commission (Registration No. 333-27943)).

          4.4  Form of Guarantee Agreement dated as of June 6, 1997 between
               Registrant and Bankers Trust Company (incorporated by reference
               to Exhibit 4.6 to the Registration Statement on Form S-1 of
               Registrant filed May 28, 1997 with the Commission (Registration
               No. 333-27943)).

          10.1 Amended and Restated Preferred Stock Purchase Agreement dated as
               of September 29, 1994 between First Guaranty Bank, Hammon,
               Louisiana, and registrant (included as Exhibit 10.3 to
               registrant's Registration Statement on Form S-1, Registration No.
               333-1702, filed on February 28, 1996 with the Commission and
               incorporated herein by reference).

          10.2 Employment Agreement dated March 16, 1992, between Georgetown
               Bank & Trust Company and Gardner E. Daniel (included as Exhibit
               10.4 to registrant's Registration Statement on Form S-1,
               Registration No. 333-1702, filed on February 28, 1996 with the
               Commission and incorporated herein by reference).

          10.3 Deferred Compensation Agreement dated December 17, 1992, between
               Georgetown Bank & Trust Company and Gardner E. Daniel (included
               as Exhibit 10.5 to registrant's Registration Statement on Form
               S-1, Registration No. 333-1702, filed on February 28, 1996 with
               the Commission and incorporated herein by reference).

          10.4 Premier Financial Bancorp, Inc. 1996 Employee Stock Ownership
               Incentive Plan (included as Exhibit 10.6 to registrant's
               Registration Statement on Form S-1, Registration No. 333-1702,
               filed on February 28, 1996 with the Commission and incorporated
               herein by reference).

          21   Subsidiaries of registrant

          23.1 Consent of Crowe, Chizek and Company, LLP


<PAGE>

(b)   REPORTS ON FORM 8-K

      Form 8-K dated November 13, 1998 reporting consummation of the Company's
acquisition from Bank One West Virginia NA, three branches located in Madison,
Van and Philippi, West Virginia.

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Georgetown,
Commonwealth of Kentucky, on the 26th day of March, 1999.

                                       PREMIER FINANCIAL BANCORP, INC.

                                       By: /s/ J. Howell Kelly, President
                                          --------------------------------------
                                          J. Howell Kelly, President

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated.


March 26, 1999   /s/ J. Howell Kelly           Principal Executive, Financial 
                 ----------------------------  and Accounting Officer, Director
                 J. Howell Kelly

March 26, 1999   /s/ Toney K. Adkins           Director
                 ----------------------------
                 Toney K. Adkins

March 26, 1999   /s/ Gardner E. Daniel         Director
                 ----------------------------
                 Gardner E. Daniel

March 26, 1999   /s/ E. V. Holder, Jr.         Director
                 ----------------------------
                 E. V. Holder, Jr.

March 26, 1999   /s/ Wilbur M. Jenkins         Director
                 ----------------------------
                 Wilbur M. Jenkins

March 26, 1999   /s/ Benjamin T. Pugh          Director
                 ----------------------------
                 Benjamin T. Pugh

March 26, 1999   /s/ Marshall T. Reynolds      Director
                 ----------------------------
                 Marshall T. Reynolds

March 26, 1999   /s/ Neal Scaggs               Director
                 ----------------------------
                 Neal Scaggs