<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, 1997

                                       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.)

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

   Registrants' telephone number:                            (502) 863-7500

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 24, 1998 was $107,497,472.  The number of shares
outstanding of the Registrant's Common Stock as of  March 24, 1998 was
4,985,390.

                     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 1998 annual meeting of             Part III
      shareholders


<PAGE>


                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS

                                THE COMPANY

           Premier is a multi-bank holding company that, as of March 24,
1998, operated fourteen banking offices in Kentucky and three banking offices
in Ohio through its seven bank subsidiaries (the "Affiliate Banks"), the
seventh of which was acquired on March 20, 1998. At December 31, 1997,
Premier had total consolidated assets of $425.4 million, total consolidated
deposits of $324.6 million and total consolidated shareholders' equity of
$47.8 million.

           Premier began an acquisition program in 1993 and has acquired five
commercial banks and two branches of another commercial bank 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 sources of Premier's
revenues are dividends and fees 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 120 N. Hamilton Street, Georgetown, Kentucky
40324, and its telephone number is (502) 863-7500.

                                    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 service 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. The Georgetown Bank, the Eminence Bank, and the
Vanceburg Bank also offer limited trust services and act as executor,
administrator, trustee and in various other fiduciary capacities. Through
Premier Data Services, Inc., the Company's data processing subsidiary, the
Company currently provides centralized data processing services to three of
the Banks as well as two non-affiliated banks.

           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 the Vanceburg Bank, 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. The Company anticipates expanding the business of
this consumer loan company, both in markets served by the Company's other
Banks as well as potentially in other as yet unidentified market in Kentucky
where business prospects appear favorable.

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. With
respect to the Georgetown Bank and the Germantown Bank, primary competitors
include large bank holding companies having substantially greater resources
that offer certain services that these two Banks do 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 five Affiliate Banks chartered in Kentucky are supervised,
regulated and examined by the Kentucky Department of Financial Institutions,
and the two Affiliate Banks chartered in Ohio are supervised, regulated and
examined by the Ohio Division of Financial Institutions. 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, 1997,
Premier met both requirements, with Tier I and total capital equal to 19.82%
and 25.43% 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, 1997, Premier's
leverage ratio was 13.52%.

           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

<PAGE>

subject a banking institution to capital raising requirements. 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, 1997, $7.7
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
193.5 full-time equivalent employees as of March 24, 1998. Its executive
offices are located at 120 N. Hamilton Street, Georgetown, Kentucky,
telephone number (502) 863-7500 (facsimile number (502) 863-7503).

ITEM 2.  PROPERTIES

           The Company owns the banking office of the Georgetown Bank at 120
North Hamilton Street, Georgetown, Kentucky, at which the Company's executive
offices are located. In addition, the Company owns a building at 115 North
Hamilton Street, Georgetown, Kentucky which is being remodeled for future
offices, a branch banking office of the Georgetown Bank located at 103 Finley
Drive, Georgetown, Kentucky and property at 812 South Broadway, Georgetown
Kentucky where the Georgetown Bank has a temporary branch facility. In
Sharpsburg, Kentucky, the Company owns the main banking office of the
Sharpsburg bank at 648 Main Street and a building at 652 Main Street which is
being remodeled for future offices. The Company also owns property located at
237 Frankfort Street, Brooksville, Kentucky, which was purchased as a
possible future branch site for the Germantown Bank. Except as noted, each of
the Banks owns the real property and improvements on where their banking
activities are conducted.

<PAGE>

           The Vanceburg Bank, 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 Germantown Bank, with its main
office on Highway 10, Germantown, Kentucky, has no other offices in Bracken
County, Kentucky. The Georgetown Bank, in addition to its main office has two
branches in Scott County, Kentucky. The Sharpsburg Bank has, in addition to
its main office, one branch located in Bath County, Kentucky. The Eminence
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.

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

           Prior to the Company's public offering in May, 1996, there had
been no established public trading market for the common shares of the
Company, with trading in common shares being limited and infrequent. During
the 120 days prior to the offering, the Company was aware of certain trading
transactions involving common shares at a sales price of $12.50 per share.
Sales of common shares may have occurred in private transactions at prices
that are not known to the Company. Further, these sale prices may not have
been representative of prices that might have been realized in trading
transactions in common shares following the offering. The Company's common
stock is listed on the NASDAQ under the symbol PFBI. At March 24, 1998, the
Company had approximately 608 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.

<TABLE>
<CAPTION>

                                 CASH                        SALES PRICE
                            DIVIDENDS PAID             HIGH               LOW
                            --------------            -----             ------
<S>                         <C>                       <C>               <C>
   1995:
     First Quarter           $ 0.10                   $ *                $ *
     Second Quarter            0.10                     *                  *
     Third Quarter            0.125                     *                  *
     Fourth Quarter           0.125                     *                  *
                             ------
                             $ 0.45
                             ======
   1996:
     First Quarter           $0.125                   $ *                $ *
     Second Quarter           0.125                    14.25              13.50
     Third Quarter            0.125                    14.00              12.25
     Fourth Quarter           0.125                    14.12              12.00
                             ------
                              $0.50
                             ======
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                 CASH                        SALES PRICE
                            DIVIDENDS PAID             HIGH               LOW
                            --------------            -----             ------
<S>                         <C>                       <C>               <C>
   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
                             ======
   1998:
     First Quarter          **$0.15                   $25.75            $21.56
</TABLE>

   *    No established public trading market.

   **  Dividend declared March 10, 1998 to shareholders of record as of
       March 20, 1998, payable March 31, 1998.

           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 $0.55 per share in 1997.
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, 1997, approximately $7.7 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 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,
                                    --------------------------------------------------------------------------------
                                       1997               1996             1995              1994             1993
                                    --------           --------          -------           -------           -------
<S>                                 <C>                <C>               <C>               <C>               <C>
EARNINGS
   Net interest income              $ 16,100           $ 12,426           $ 7,697           $ 7,319           $ 6,974
   Provision for loan losses           1,232                760               196               335               389
   Non-interest income                 4,367              1,721             1,018               870               936
   Non-interest expense               11,022              8,075             5,943             5,464             5,304
   Income taxes                        2,605              1,588               146               567               582
      Net income                     $ 5,608            $ 3,724           $ 2,430           $ 1,823           $ 1,635

FINANCIAL POSITION
   Total assets                    $ 425,436          $ 329,127         $ 192,273         $ 154,653         $ 151,975
   Loans, net of unearned
      income                         283,390            242,625           137,550           106,431            97,521
   Allowance for loan losses           3,144              2,854             1,997             1,172             1,192
   Goodwill and other intangibles      7,262              5,490               248                 8                16
   Securities                         69,211             52,660            33,919            30,619            35,582
   Deposits                          324,554            267,208           168,170           136,613           137,538
   Other borrowings                   20,897             14,977             1,502                 0                 0
   Debt                               28,750                  0             5,000             1,500                 0
   Stockholders equity                47,797             44,625            15,603            13,617            12,767

SHARE DATA
   Net income - basic                $  1.20             $ 0.99            $ 1.02            $ 0.77            $ 0.69
   Net income - diluted                 1.19               0.99              1.02              0.77              0.69
   Book value                          10.20               9.52              6.54              5.77              5.42
   Cash dividend                        0.55               0.50              0.45              0.36              0.28

RATIOS
   Return on average assets             1.37%              1.42%             1.48%             1.19%             1.06%
   Return on average equity            12.17%             11.39%            16.49%            13.70%            13.02%
   Dividend payout                     44.38%             53.22%            41.01%            33.60%            36.24%
   Stockholders' equity to total
      assets at period-end             11.23%             13.56%             8.12%             8.80%             8.40%
   Average stockholders' equity
      to average total assets          11.22%             12.48%             8.90%             8.69%             8.14%

CAPITAL RATIOS
   Equity to assets                    11.23%             13.56%             8.12%             8.80%             8.40%
   Leverage ratio                      13.52%             12.11%             8.13%             8.84%             8.39%
</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 beginning on page
36 of 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 1997, Premier continued to pursue its strategic plan to build a network of
independently managed community banks into a strongly capitalized, risk
controlled bank holding company with high quality earnings and shareholder
liquidity. Premier continued to post record results in three key financial
areas: earnings, total assets and shareholders' equity. For 1997, net income
rose 50.6% to $5,608 from $3,723, as restated, in 1996; total assets
increased to $425,436 from the $292,565 reported in 1996, and shareholders'
equity increased to $47,797 from the $39,863 reported in 1996.

During 1997, a number of larger financial institutions announced plans to
divest of branches. In order to take advantage of these potential
opportunities and to provide additional capital for other expansion
opportunities, Premier issued $28.75 million of capital securities of
subsidiary trust (capital securities) in June. A portion of these funds were
used in December in connection with the purchase of two branches with $23.3
million in deposits and the balance will be used to complete the acquisition
of three branches with total deposits of $148 million expected to be
completed in June 1998. In the third and fourth quarters of 1997, Premier
invested the proceeds of the capital securities in temporary investments
realizing gross investment gains of $2.2 million which were added to
earnings. At year end 1997, Premier had Tier I capital totaling $56.5 million
which will provide sufficient capital to complete the proposed acquisitions
as well as additional acquisitions which may become available.

<PAGE>

Highlights of Premier's 1997 performance and financial condition include:

     - Return on Average Assets of 1.37%
     - Return on Average Equity of 12.17%
     - Net Interest Margin 4.32%
     - Efficiency Ratio 57.3%
     - Allowance for Loan Losses to Non-Performing Loans 167%

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 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.

Also in 1997, Premier announced its intention to acquire Ohio River Bank,
Ironton, Ohio, in the first quarter of 1998, in a business combination
anticipated to be accounted for as a pooling of interests and also announced
its planned purchase of three branch offices of Banc One Corporation located
in Madison, Phillippi and Van, West Virginia, expected to be completed in the
second quarter of 1998.

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.

In 1995, Premier completed two acquisitions. On March 24, 1995, the Company
acquired Georgetown Bancorp, Inc. and its wholly owned subsidiary, Georgetown
Bank & Trust, Georgetown, Kentucky, in a business combination accounted for
as a pooling of interests.

On October 31, 1995, Premier acquired all of the outstanding shares of
Citizens Bank of Sharpsburg, Kentucky, for cash. This combination was
accounted for as a purchase.

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

CAPITAL SECURITIES OF SUBSIDIARY TRUST

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. The issuance of these securities and
resultant increase in capital has allowed the Company to pursue larger
financial institutions as potential acquisitions and to bid for branches
offered for sale by other financial institutions.

<PAGE>

RESULTS OF OPERATIONS

Earnings Summary

Premier recorded net income for 1997 of $5,608, versus $3,723 and $2,431,
respectively, in 1996 and 1995. Basic earnings per common share were $1.20 in
1997 compared to $.99 in 1996 and $1.02 in 1995. Net income increased $1,885
or 50.6% in 1997 compared to 1996. The primary factors contributing to the
higher earnings in 1997 were a 29.6% increase in net interest income from
$12,426 in 1996 to $16,100 in 1997 and an increase in the gain on the sale of
investment securities of $2,202. Offsetting these increases was an increase
in the provision for loan losses from $760 in 1996 to $1,232 in 1997, an
increase in noninterest expense of $2,947 from $8,075 in 1996 to $11,022 in
1997 and an increase of $1,016 in income taxes from $1,589 in 1996 to $2,605
in 1997. Fully diluted earnings per share increased 20.2% in 1997 compared to
1996 despite the increase in the weighted average number of shares from 3.8
million in 1996 to 4.7 million in 1997.

Net income of $3,723 in 1996 represented a 53.2% increase over the 1995
amount of $2,431. Net interest income increased 61.4% to $12,426 in 1996
versus $7,697 in 1995. Offsetting this increase was a $564 increase in the
provision for loan losses and a $1,443 increase in income taxes from $146 in
1995 to $1,589 in 1996.

In 1995, income taxes were substantially reduced as a result of the
elimination of a $504 valuation allowance related to the deferred tax assets
at Georgetown Bancorp, Inc. Per share earnings in 1996 of $0.99 were down
$0.03 or 2.9% from the $1.02 recorded in 1995. The reduced level of per share
earnings was primarily attributable to the increase in outstanding shares of
2,300,000 as a result of the Company's initial public offering in May of 1996.

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. The level of net interest income is affected by both
the balances and mix of interest earning assets and interest bearing
liabilities, the changes in their corresponding yields and costs, by the
volume of interest earning assets funded by noninterest bearing deposits, and
the level of capital. 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%.

<PAGE>

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

<TABLE>
<CAPTION>
                                       1997       1996       1995
                                   ---------   ---------   ---------
<S>                                <C>         <C>         <C>
Interest income..................  $  33,995   $  22,401   $  13,990
Tax equivalent adjustment........        516         420         279
                                   ---------   ---------   ---------
    Interest income..............     34,511      22,821      14,269
Interest expense.................     17,894       9,975       6,294
                                   ---------   ---------   ---------
    Net interest income..........  $  16,617   $  12,846   $   7,975
                                   =========   =========   =========
</TABLE>

The table below shows, for the three year period ended December 31, 1997, 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 1997, tax
equivalent net interest income increased to $16,617 from $12,846 in 1996, an
increase of $3,771 or 29.4%. This increase was due to an increase of $141,028
or 57.8% in average earning assets and an increase of $130,897 or 65.7% in
average interest bearing liabilities. The yield on earning assets in 1997 of
8.96% was 39 basis points lower than the 9.35% earned in 1996 while the cost
of interest bearing liabilities increased 41 basis points from 5.01% in 1996
to 5.42% in 1997. Consequently, Premier's net interest spread decreased from
4.34% in 1996 to 3.54% in 1997 and the net interest margin decreased from
5.26% in 1996 to 4.32% in 1997. The decrease in net interest spread and net
interest margin is primarily attributable to the issuance of $28.75 million
of mandatorily redeemable capital securities (capital securities) at an
interest rate of 9.75% and the Company's implementation of an arbitrage
investment strategy as described below.

In an effort to minimize the adverse impact on net income until a permanent
investment can be made of the funds from the issuance of the capital
securities, the Company initiated an investment strategy at the end of the
second quarter of 1997 of selling approximately $110 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. 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 third quarter of 1997 and again during the
fourth quarter of 1997, the spread fell below 50 basis points, the Company
unwound its positions and recognized net gains of $2.2 million 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 4.28% in 1997 compared to 4.34% in 1996 and net
interest margin would have been 5.20% in 1997 versus the 5.26% achieved in
1996.

The net interest spread declined 12 basis points from 4.46% in 1995 to 4.34%
in 1996, while the net interest margin, which measure net interest income as
a percent of average earning assets, increased from 5.24% in 1995 to 5.26% in
1996. The increase in net interest margin is attributable to the higher
levels of noninterest bearing deposits and capital supporting interest
earning assets which rose from 22.5% in 1995 to 24.6% in 1996.

<PAGE>



The following table presents average balances and interest rates for the three
year period ended December 31, 1997.

<TABLE>
<CAPTION>

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

                                           1997                             1996                            1995
                                 -------------------------     ----------------------------     ---------------------------
                                  AVERAGE          AVERAGE     AVERAGE              AVERAGE     AVERAGE             AVERAGE
                                 BALANCE  INTEREST   RATE      BALANCE     INTEREST   RATE      BALANCE  INTEREST     RATE
                                 -------------------------     ----------------------------     ---------------------------
<S>                             <C>       <C>      <C>         <C>         <C>      <C>         <C>      <C>        <C>
ASSETS:
  Interest earning assets
  U.S. Treasury and federal
   agency securities            $ 85,670  $ 5,288    6.17%     $  30,559    $ 1,772    5.80%    $ 21,038    $ 1,186    5.64%
  States and municipal
   obligations(1)                 18,027    1,455    8.07         12,783      1,017    7.96        8,088        667    8.25
  Other securities (1)             5,155      507    9.84          3,716        395   10.63        2,556        280   10.95
                                --------  -------   -----      ---------    -------   -----      --------   -------   -----
     Total investment
      securities                $108,852  $ 7,250    6.66      $  47,058    $ 3,184    6.77      $ 31,682   $ 2,133    6.73
  Federal funds sold              16,694      937    5.61          7,662        415    5.42         5,222       292    5.59
  Interest-bearing deposits
   with banks                          0        0       0            376         19    5.05           436        34    7.80
  Loans, net of unearned
   income (3) (4)
    Commercial                   111,448   11,260   10.10         88,161      8,923   10.12        59,650     6,138   10.29
    Real estate mortgage         110,519   10,778    9.75         72,026      7,135    9.91        33,918     3,436   10.13
    Installment                   37,545    4,286   11.42         28,747      3,145   10.94        21,428     2,236   10.43
                                --------  -------   -----      ---------    -------   -----      --------   -------   -----
       Total loans              $259,512  $26,324   10.14      $ 188,934     19,203   10.16      $114,996   $11,810   10.27

Total interest-earning assets   $385,058  $34,511    8.96%     $ 244,030    $22,821    9.35%     $152,336   $14,269    9.37%
Allowance for loan losses         (2,975)                         (2,427)                          (1,299)
Cash and due from banks            8,961                           7,431                            5,744
Premises and equipment             5,451                           3,526                            2,341
Other assets                      14,200                           8,921                            4,800
                                --------                       ----------                        --------
   Total assets                 $410,695                       $ 261,481                         $163,922

LIABILITIES:
  Interest bearing deposits:
    NOW and money market        $ 45,135  $ 1,521    3.37%     $  32,532    $ 1,073    3.30%     $ 19,828   $   510   2.57
    Savings                       29,499      869    2.95         23,598        682    2.89        19,302       547   2.83
    Certificates of deposit
     and other time deposits     175,302   10,342    5.90        133,356      7,630    5.72        84,486     4,877   5.77
                                --------  -------   -----      ---------    -------   -----      --------   -------   ----
         Total interest-
          bearing deposits      $249,936  $12,732    5.09      $ 189,486    $ 9,385    4.95      $123,616   $ 5,934   4.80
    Other borrowings              49,358    2,721    5.51          3,983        214    5.37           994        63   6.34
    FHLB advances                 14,301      810    5.66          3,660        208    5.68           713        44   6.17
    Debt                          16,460    1,631    9.91          2,029        168    8.28         2,891       253   8.75
                                --------  -------   -----      ---------    -------   -----      --------   -------   ----
   Total interest-bearing
    liabilities                 $330,055  $17,894    5.42%     $ 199,158    $ 9,975    5.01%     $128,214   $ 6,294   4.91%
   Non-interest bearing demand
     deposits                     31,263                          27,250                           19,617
   Other liabilities               3,279                           2,373                            1,372
                                --------                       ---------                         --------
        Total liabilities       $364,597                       $ 228,781                         $149,203

SHAREHOLDERS' EQUITY:             46,098                          32,700                           14,719
                                --------                       ---------                         --------
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY           $410,695                       $ 261,481                         $163,922
NET INTEREST INCOME (1)                    16,617                            12,846                           7,975
NET INTEREST SPREAD (1)                              3.54%                            4.34%                           4.46%
NET INTEREST MARGIN (1)                              4.32%                            5.26%                           5.24%

</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 which 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 1997 and 1996.

<TABLE>
<CAPTION>

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

                                          1997 VS. 1996                 1996 VS. 1995
                                     INCREASE (DECREASE) DUE        INCREASE (DECREASE) DUE
                                          TO CHANGE IN                   TO CHANGE IN
                                   ----------------------------   ----------------------------
                                   VOLUME      RATE  NET CHANGE   VOLUME     RATE   NET CHANGE
<S>                              <C>         <C>     <C>          <C>        <C>     <C>
Interest Income:
Loans                            $  7,166    $  (45)  $  7,121    $ 7,520    $ (127)  $ 7,393
Investment securities               4,144       (78)     4,066      1,038        14     1,052
Federal funds sold                    506        16        522        133       (10)      123
Deposits with banks                   (19)                 (19)        (4)      (12)      (16)
                                 --------    ------   --------    -------    ------   -------
    Total interest income        $ 11,797    $ (107)  $ 11,690    $ 8,687    $ (135)  $ 8,552

Interest Expense:
Deposits -
  NOW and money market           $    424    $   24   $    448    $   390    $  173   $   563
  Savings                             173        14        187        124        11       135
  Certificates of deposit           2,467       245      2,712      2,796       (43)    2,753
  Other borrowings                  2,501         6      2,507        159        (8)      151
  FHLB borrowings                     603        (1)       602        168        (4)      164
  Debt                              1,424        39      1,463        (72)      (13)      (85)
                                 --------    ------   --------    -------    ------   -------
    Total interest expense       $  7,592    $  327   $  7,919    $ 3,565    $  116   $ 3,681

       Net interest income       $  4,205    $ (434)  $  3,771    $ 5,122    $ (251)  $ 4,871
</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:

      -      Past due and nonperforming assets;

      -      Specific internal analyses of loans requiring special attention;

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

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

      -      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.

<TABLE>
<CAPTION>

                                     SUMMARY OF LOAN LOSS EXPERIENCE
                                           (Dollars in Thousands)

                                                                         YEARS ENDED DECEMBER 31,
                                                        ---------------------------------------------------------

                                                           1997        1996         1995      1994         1993
                                                        --------     --------     --------   --------     -------
<S>                                                     <C>          <C>          <C>        <C>          <C>
Balance at beginning of year                            $  2,854     $  1,996     $  1,172   $  1,192     $ 1,349
Balance of allowance for loan losses of
  acquired subsidiaries at acquisition date                    0          812          803          0           0
Amounts charged off:
   Commercial                                                532          250           74        312         372
   Real estate mortgage                                      139           68           19          5          47
   Consumer                                                  513          619          180        200         279
                                                        --------     --------     --------   --------     -------
     Total loans charged off                            $  1,184     $    937     $    273   $    517     $   698

Recoveries on amounts previously charged off:
   Commercial                                                 48           89           32         94          76
   Real estate mortgage                                        0            4            2          5          64
   Consumer                                                  194          130           64         63          12
                                                        --------     --------     --------   --------     -------
     Total recoveries                                        242          223           98   $    162     $   152

Net charge-offs                                              942          714          175        355         546
Provision for loan losses                                  1,232          760          196        335         389
                                                        --------     --------     --------   --------     -------
Balance at end of year                                  $  3,144     $  2,854     $  1,996   $  1,172     $ 1,192

Total loans, net of unearned income:
   Average                                               259,512      188,934      114,996    102,515      99,464
   At December 31                                        283,390      242,625      137,550    106,431      97,521

As a percentage of average loans:
   Net charge-offs                                           .36%         .38%         .15%       .35%        .55%
   Provision for possible loan losses                        .47%         .40%         .17%       .33%        .39%
Allowance as a percentage of year-end net loans             1.11%        1.18%        1.45%      1.10%       1.22%
Allowance as a multiple of net charge-offs                     3            4           11          3           2

</TABLE>

The provision for possible loan losses for 1997 was $1,232 compared to $760
in 1996, an increase of $472. This increase resulted from loan growth, the
inclusion of Farmers Deposit Bancorp for a full year, and provisions made for
possible loan losses for certain indirect consumer loans at the consumer
finance subsidiary operated by Citizens Deposit Bank. In 1997, net
charge-offs were $942 compared to $714 in 1996, an increase of $228. This
increase was primarily attributable to the charge-off of loans acquired in
the acquisition of Farmers Deposit Bancorp. At December 31, 1997, Premier's
allowance for possible loan losses was 1.11% of period-end loans compared to
1.18% at December 31, 1996.

<PAGE>




Net charge-offs to average loans were .36% for the year 1997 compared to .38%
for the year 1996. At December 31, 1997, Premier's allowance for possible
loan losses totaled $3,144, representing an increase of $290 over the amount
reported at December 31, 1996. The allowance for possible loan losses was
167% of nonperforming loans on December 31, 1997, compared to 155% at
December 31, 1996. At year end 1997, nonperforming loans represented .50% of
total outstanding loans, down from .56% on December 31, 1996.

The provision for possible loan losses for 1996 was $760, an increase of $564
over the $196 in 1995. Net charge-offs in 1996 were $714, versus $175
charged-off in 1995.

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

                    ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
                            (Dollars in thousands)
<TABLE>
<CAPTION>
                                                       At December 31,
                    ---------------------------------------------------------------------------------------------------------
                          1997                  1996                   1995                   1994                  1993
                     Amount      %         Amount      %          Amount     %           Amount     %          Amount     %
                    ----------------       ----------------       --------------         ---------------       --------------
<S>                 <C>        <C>         <C>        <C>         <C>       <C>          <C>       <C>
Commercial          $1,186     37.7%       $1,038     36.4%       $  675    33.8%        $  560    47.8%       $  566   47.5%
Real estate            550     17.5         1,097     38.4           575    28.8            175    14.9           159   13.3
mortgage
Consumer               852     27.1           626     21.9           573    28.7            292    24.9           304   25.5
Unallocated            556     17.7            93      3.3           173     8.7            145    12.4           163   13.7
                    ------     ----        ------     ------      ------    -----        ------    ------      ------   ----
  Total             $3,144    100.0%       $2,854    100.0%       $1,996   100.0%        $1,172   100.0%       $1,192  100.0%
</TABLE>

<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.

The discussion that follows considers the impact for comparative purposes of
the acquisition of Farmers Deposit Bancorp (Farmers Deposit) on July 1, 1996.
Since the acquisition was accounted for as a purchase, only amounts from that
date through December 31, 1996 are included in the consolidated financial
statements for 1996, whereas the 1997 consolidated financial statements
include Farmers Deposit for the full year.

Total fees and other income increased $444 or 25.8% in 1997 to $2,163 from
$1,719 in 1996. Excluding Farmers Deposit, fees and other income increased
$164 or 11.3%. All categories increased in 1997, with service charges on
deposit accounts increasing 15.4%, insurance commissions increasing 32.4% and
all other income increasing 46.5%.

Total fees and other income in 1996 increased $695 or 67.9% over 1995.
Excluding Farmers Deposit, the increase would have been $427 for a 41.7%
increase. In 1996, service charges on deposit accounts increased 54.0%,
insurance commissions increased 88.4% and other income increased 94.8% over
the amounts recorded in 1995.

Investment securities gains in 1997 were $2,204 versus $1 in 1996 and losses
in 1995 of $6. 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.

Noninterest expenses increased $2,947 or 36.5% in 1997, from $8,075 in 1996
to $11,022 in 1997, and increased $2,132 or 35.9% in 1996 from $5,943 in
1995. Excluding Farmers Deposit, noninterest expense increased 25.6% in 1997
and 16.3% in 1996.

Salaries and employee benefits, the largest component of noninterest expense,
increased 27.8% in 1997 and 43.6% in 1996. Excluding Farmers Deposit, the
increases were 16.7% in 1997 and 19.4% in 1996. The increases include salary
increases and reflect increases in the number of full time equivalent
employees from 111 at December 31, 1995 to 150 at December 31, 1996 and 161
at December 31, 1997, due to acquisitions and expansion of the Company's
business activity.

Occupancy and equipment expense for 1997 of $1,421 was $224 or 18.7% higher
than the $1,197 for 1996. Excluding Farmers Deposit, the increase was $122 or
11.2%. The increase in 1996 was $208 or 21.0% from $989 in 1995. The increase
in 1996 and 1997 are primarily attributable to the expansion in the number of
banking locations from 9 at December 31, 1995 up to 16 at December 31, 1997.

Other noninterest expense, which is the second largest category, increased
$540 or 30.6% in 1997 and $384 or 27.9% in 1996.  Excluding Farmers Deposit,
the increase in 1997 would have been 36.0% and the increase in 1996 would
have been 2.7%.

The Company incurred expenses relating to the acquisition of The Sabina Bank
of $467 in 1997. No acquisition expenses were incurred in 1996, while
acquisition expenses of $110 were incurred in 1995. Expenses related to
acquisitions are charged to expense for acquisitions accounted for as pooling
of interests while expense 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 1997 primarily due to the inclusion of
Farmers Deposit for the full year versus half the year in 1996.

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 1997, total net noninterest expenses (excluding
investment securities gains and acquisition expenses) as a percent of average
total assets were reduced to 2.04% from 2.43% in 1996 and 2.93% in 1995.

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

<TABLE>
<CAPTION>

                                      NON-INTEREST INCOME AND EXPENSE
                                          (Dollars in thousands)

                                                                        INCREASE                           INCREASE
                                                                       (DECREASE)                         (DECREASE)
                                                                        1997 VS.                           1996 VS.
                                                        1997     1996     1996           1996      1995      1995
                                                      -------   ------   ------         ------    ------    ------
<S>                                                   <C>       <C>      <C>            <C>       <C>       <C>
Non-Interest Income:
   Service charges on deposit accounts                $ 1,155   $1,001   $  154         $1,001    $  650    $  351
   Insurance income                                       409      309      100            309       164       145
   Other                                                  599      409      190            409       210       199
                                                      -------   ------   ------         ------    ------    ------
       Total fees and other income                    $ 2,163   $1,719   $  444         $1,719    $1,024    $  695
   Investment securities gains (losses)                 2,204        1    2,203              2        (6)        8
                                                      -------   ------   ------         ------    -------   ------
       Total non-interest income                      $ 4,367   $1,720   $2,647         $1,721    $1,018    $  703

Non-Interest Expense:
   Salaries and employee benefits                       5,587    4,372    1,215          4,372     3,044     1,328
   Occupancy and equipment expense                      1,421    1,197      224          1,197       989       208
   Professional fees                                      472      259      213            259       209        50
   Taxes, other than payroll, property
      and income                                          387      288       99            288       210        78
   Acquisition related expenses                           467        0      467              0       110      (110)
   Amortization of intangibles                            386      197      189            197         3       194
   Other expenses                                       2,302    1,762      540          1,762     1,378       384
                                                      -------   ------   ------         ------    ------    ------
       Total non-interest expenses                    $11,022   $8,075   $2,947         $8,075    $5,943    $2,132

Net non-interest expenses as a percent
   of average assets                                     1.62%    2.43%                   2.43%     3.00%
Net non-interest expenses as a percent
   of average assets (excluding
   investment securities gains and
   losses and acquisition related
   expenses)                                             2.04%    2.43%                   2.43%     2.93%

INCOME TAXES

Premier's provision for income taxes was $2,605 in 1997, which represented
31.7% of pre-tax income versus $1,589 or 29.9% of pre-tax income in 1996. The
increase is primarily due to the lower percentage of tax-exempt income in
relation to total pre-tax income and the increase in nondeductible
amortization expense. Income tax expense for 1995 was $146 or 5.7% of pre-tax
income. The lower income tax for 1995 was attributable primarily to the
elimination of the valuation allowance of $504 for deferred tax assets at
Georgetown Bank & Trust.

<PAGE>


                           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 $259,512 in 1997 compared with
$188,934 in 1996. At year end 1997, loans net of unearned income totaled
$283,390 compared to $242,625 at December 31, 1996, an increase of $40,765 or
16.8%.

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)

                                                                         December 31
                               -------------------------------------------------------------------------------------------------
                                  1997     %         1996      %         1995      %          1994      %        1993       %
                               --------  ------   --------  ------     --------   ------    --------  ------   --------   ------
Commercial, secured by real
 estate                        $ 66,893  23.41%   $ 60,018   24.52%    $ 39,568   28.57%    $ 30,643  28.55%   $ 29,274   29.46%
Commercial, other                45,024  15.75      35,393   14.46       19,702   14.23       18,850  17.56      16,587   16.69
Real estate construction          7,857   2.75       4,138    1.69        2,377    1.72        1,822   1.70         881     .89
Real estate mortgage             93,789  32.82      87,335   35.69       41,096   29.67       30,067  28.01      27,557   27.73
Agricultural                     13,208   4.62      11,731    4.79        6,924    5.00        3,271   3.05       3,226    3.25
Consumer                         58,523  20.47      44,753   18.29       28,397   20.50       22,397  20.87      21,581   21.72
Other                               504    .18       1,363     .56          435    0.31          279   0.26         254     .26
                               --------  ------   --------  ------     --------   ------    --------  ------   --------   ------
  Total loans                  $285,798 100.00%   $244,731  100.00%    $138,499  100.00%    $107,329 100.00%   $ 99,360  100.00%
                               --------  ------   --------  ------     --------   ------    --------  ------   --------   ------
  Less unearned income           (2,408)            (2,106)                (949)                (898)            (1,839)

     Total loans net of
        unearned income        $283,390           $242,625             $137,550             $106,431           $ 97,521

</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. 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 remained low over the past five years, with net charge
offs being .36% of loans in 1997 and .38% in 1996. With respect to consumer
loans in particular, net charge offs for the year ended December 31, 1997
were $319, or .55% of total consumer loans outstanding at December 31, 1997,
and $489 in 1996, or 1.09% of total consumer loans outstanding at December
31, 1996.

The following table sets forth the maturity distribution and interest
sensitivity of selected loan categories at December 31, 1997. 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, 1997
                            (Dollars in thousands)
<TABLE>
<CAPTION>
                                     One Year   One Through      Over       Total
                                     or Less    Five Years    Five Years    Loans

<S>                                  <C>         <C>          <C>          <C>
Commercial, secured by real estate   $ 10,670    $ 12,595     $ 43,628     $ 66,893

Commercial, other                      23,535      12,596        8,893       45,024

Real estate construction                6,856         301          700        7,857

Agricultural                            7,024       3,595        2,589       13,208
                                     --------    --------     --------     --------

     Total                           $ 48,085    $ 29,087     $ 55,810     $132,982


Fixed rate loans                     $ 29,997    $ 21,446     $ 29,384     $ 80,827

Floating rate loans                    18,088       7,641       26,426       52,155
                                     --------    --------     --------     --------

     Total                           $ 48,085    $ 29,087     $ 55,810     $132,982
</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 below:

                              NONPERFORMING ASSETS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                         ----------------------------------------------------
                                           1997        1996        1995       1994     1993

<S>                                      <C>         <C>         <C>         <C>      <C>
Nonaccrual loans                         $   562     $   768     $   693     $ 203    $ 1,028
Accruing loans which are contractually
  past due 90 days or more                   490         588         480       261        543
Restructured loans                           356           0           0         0          0
                                         -------     -------     -------     -----    -------
  Total nonperforming and restructured
    loans                                $ 1,408     $ 1,356     $ 1,173     $ 464    $ 1,571
Other real estate acquired through
  foreclosures                               836         485         132       427        110
                                         -------     -------     -------     -----    -------
   Total nonperforming and restructured
     loans and other real estate         $ 2,244     $ 1,841     $ 1,305     $ 891    $ 1,681
Nonperforming and restructured loans
  as a percentage of net loans               .50%        .56%        .85%      .44%      1.61%
Nonperforming and restructured loans
  and other real estate as a percentage
  of total assets                            .53%        .56%        .44%      .58%      1.11%

</TABLE>

Nonaccrual loans decreased from $768 at December 31, 1996 to $562 at December
31, 1997. Total nonperforming assets increased from $1,841 at December 31, 1996
to $2,244 at December 31, 1997, however the percentage of nonperforming loans to
total loans decreased from .56% to .50%

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 nonperforming 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>
                        1997     1996      1995      1994      1993

<S>                      <C>      <C>       <C>       <C>       <C>
Contractual interest     77       73        32        15        49
Interest recognized      61        2        22         0         6
</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 securities portfolio is also used
as a secondary source of liquidity by the Company. The Company has classified
all 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 securities portfolio
does not contain significant holdings in mortgage-backed securities,
collateralized mortgage obligations or other mortgage-related derivative
products and/or structured notes.

Securities, exclusive of the arbitrage portfolio, as a percentage of average
interest-earning assets decreased to 15.1% in 1997 versus 19.3% in 1996 and
20.8% in 1995.. These decreases in securities reflect management's emphasis
on originating higher yielding loans and placing a lesser reliance on the
securities portfolio for sources of income.

At December 31, 1997 and 1996, 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, 1997 and 1996. 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
                                                 1997        1996        1995
<S>                                           <C>          <C>         <C>
U.S. Treasury and Federal agencies:
   Available for sale                         $ 35,967     $ 22,720    $ 19,163
   Held to maturity                              5,588        8,387       2,300
State and municipal obligations:
   Available for sale                            3,564        4,464       2,864
   Held to maturity                             14,625       12,190       6,347
Equity securities:
   Available for sale                            2,795        2,788       2,819
   Held to maturity                                  0            0           0
Other securities:
   Available for sale                            3,600            0           0
   Held to maturity                                149          416          18
Total securities:
   Available for sale                           45,926       29,972      24,846
   Held to maturity                             20,362       20,993       8,665
                                              --------     --------    --------
Total                                         $ 66,288     $ 50,965    $ 33,511

</TABLE>

                      MATURITY DISTRIBUTION OF SECURITIES
                              December 31, 1997
                           (Dollars in thousands)
<TABLE>
<CAPTION>
                                                 ONE         FIVE
                                       YEAR    THROUGH     THROUGH    OVER
                                        OR       FIVE        TEN       TEN      OTHER                 MARKET
                                       LESS     YEARS       YEARS     YEARS   SECURITIES    TOTAL     VALUE
<S>                                  <C>       <C>         <C>        <C>       <C>        <C>       <C>
U.S. Treasury and Federal agencies:
    Available for sale               $20,869   $ 9,315     $ 4,403    $1,380    $    0     $35,967   $35,967
    Held to maturity                   2,300     2,986         301         0         0       5,587     5,603
State and municipal obligations:
    Available for sale                   414     2,160         613       377         0       3,564     3,564
    Held to maturity                     732     5,321       5,657     2,916         0      14,626    15,110
Other securities:
    Available for sale                     0         0           0         0     6,395       6,395     6,395
    Held to maturity                       0         0           0         0       149         149       149
Total securities:
    Available for sale                21,283    11,475       5,016     1,757     6,395      45,926    45,926
    Held to maturity                   3,032     8,307       5,958     2,916       149      20,362    20,862
                                     -------   -------     -------    ------    ------     -------   -------
Total                                $24,315   $19,782     $10,974    $4,673    $6,544     $66,288   $66,788
                                     =======   =======     =======    ======    ======     =======   =======
Percent of total                      36.68%    29.84%      16.56%     7.05%     9.87%     100.00%   100.75%
Weighted average yield*                4.85%     4.61%       5.11%     4.55%     8.52%       5.17%

</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 $281,199 in 1997, a 29.7% increase over 1996. Total
deposits averaged $216,736 in 1996, an increase of $73,503 or 51.37% over 1995.
Noninterest bearing deposits averaged 12.5% of total deposits in 1997, compared
to 14.4% in 1996 and 15.9% in 1995.

At December 31, 1997, deposits totaled $324,554, compared to $267,208 at
December 31, 1996, an increase of $57,346, or 21.5%. Of this increase,
approximately $23,300 is attributable to the acquisition of two branches during
1997. Exclusive of the acquisition, deposits increased $34,046 from December 31,
1996 to December 31, 1997, representing a 12.7% increase.

The table below provides information on the maturities of time deposits of
$100,000 or more at December 31, 1997.

                               MATURITY OF TIME
                          DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
                                             December 31, 1997
                                             -----------------
                                              (in thousands)
<S>                                             <C>
    Maturing 3 months or less                   $  9,200
    Maturing over 3 months through 6 months        8,459
    Maturing over 6 months through 12 months      12,510
    Maturing over 12 months                       16,936
                                                --------

    Total                                       $ 47,105
                                                ========
</TABLE>

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>
                                      1997                 1996                   1995
   CATEGORY                   AMOUNT     RATE (%)    AMOUNT     RATE (%)     AMOUNT     RATE (%)
                                                  (Dollars in thousands)

<S>                          <C>          <C>       <C>          <C>       <C>          <C>
Demand                       $ 31,263        0%     $ 27,250        0%     $ 19,617        0%
NOW and money
  market accounts              45,135     3.37%       32,532     3.30%       19,828     2.57%
Savings                        29,499     2.95%       23,598     2.89%       19,302     2.83%
Certificates of deposit
  and other time              175,302     5.90%      133,356     5.72%       84,486     5.57%
                             --------     -----     --------     -----     --------     -----
     Total                   $281,199     4.53%     $216,736     4.33%     $143,233     4.14%
</TABLE>

<PAGE>

CAPITAL

Stockholders' equity increased $3,172 in 1997 to $47.8 million or 11.2% of total
assets at December 31, 1997. This compares to $44.6 million, or 13.6% of total
assets at December 31, 1996. The primary source of growth in stockholders'
equity in 1997 was the retention of net earnings of $3,119. The primary sources
of growth in 1996 were the issuance of common stock in the Company's initial
public offering of $27.1 million and retention of net earnings of $1,741. The
consolidated statements of changes in stockholders' equity details 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, 1997 and 1996, the
adjustment resulted in a reduction of stockholders' equity of $65 and $118,
respectively. 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 1998, the Banks could, without prior approval, declare
dividends to the Company of approximately $7,656 plus any 1998 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. Consequently, the Company's capital ratios as of December 31, 1997
increased significantly over the ratios at December 31, 1996 as noted in the
following table:

                          SELECTED CAPITAL INFORMATION
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                      DECEMBER 31
                                                    1997         1996        CHANGE
<S>                                              <C>          <C>           <C>
Stockholders' Equity                             $ 47,797     $ 44,625      $ 3,172
  Qualifying capital securities of subsidiary
     trust                                         15,931            0       15,931
  Disallowed amounts of goodwill and other
     intangibles                                   (7,262)      (5,490)      (1,772)
  Unrealized loss on securities available
     for sale                                          (5)           6          (11)
                                                 --------     --------      -------
Tier I capital                                   $ 56,461     $ 39,141      $17,320

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                      DECEMBER 31
                                                    1997         1996        CHANGE
<S>                                              <C>          <C>           <C>
Tier II capital adjustments:
  Qualifying capital securities of subsidiary
     trust                                        12,819             0         12,819
  Allowance for loan losses                        3,144         2,854            290
                                                 --------     --------       --------
Total capital                                    $ 72,424     $ 41,995       $ 30,429

Total risk-weighted assets                       $284,846     $238,210
Ratios
Tier I capital to risk-weighted assets             19.82%       16.43%
Total capital to risk-weighted assets              25.43%       17.63%
Leverage at year-end                               13.52%       12.10%
</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.

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 meet the needs of borrowers,
depositors and creditors. Liquidity must be maintained at a level which is
adequate but not excessive. Excess liquidity has a negative impact on earnings
resulting from the lower yields on short-term assets.

In addition to cash, cash equivalents and Federal funds sold, the securities
portfolio provides an important source of liquidity. The total of securities
maturing within one year along with cash, due from banks and Federal funds sold
totaled $76.7 million as of December 31, 1997. Additionally, securities
available-for-sale with maturities greater than one year and equity securities
totaled $24.7 million at December 31, 1997. These securities represent a
secondary source available to meet liquidity needs on a continuing basis.


<PAGE>

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. During a period of
relatively stable interest rates, these balances as a percentage of total
deposits have remained relatively the same for 1997 and 1996. Certificates of
deposits and other time deposits of $100,000 or more represented approximately
14.5% and 15.0% of total deposits at December 31, 1997 and 1996, respectively. A
number of techniques are used to measure the liquidity position, including the
utilization of several ratios that are presented below. These ratios are
calculated based on annual averages for each year.

<TABLE>
<CAPTION>
                           LIQUIDITY RATIOS

                                                     1997     1996     1995

<S>                                                 <C>      <C>      <C>
   Total loans/total deposits.....................  92.29%   87.17%   80.29%
   Total loans/total deposits less float..........  93.28%   88.81%   81.41%
   Net short-term borrowings/total assets.........  13.67%    2.82%     .87%
</TABLE>

This analysis shows that the Company's loan to deposit ratios increased in 1997
and 1996 compared to the prior year due to an increase in loan demand that
exceeded the increase in deposit activity.


<PAGE>

Information regarding short-term borrowings for the past three years is
presented in the following table.

                             SHORT-TERM BORROWINGS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                             1997        1996        1995
<S>                                        <C>          <C>         <C>
Federal funds purchased and repurchase
 agreements:

   Balance at year end                     $  5,634     $ 5,599     $  747

   Weighted average rate at year end           5.38%       5.05%      3.25%

   Average balance during the year         $ 49,227     $ 3,702     $  721

   Weighted average rate during the year       5.51%       5.10%      4.91%

   Maximum month-end balance               $120,257     $ 6,696     $1,547

Other short-term borrowings:

   Balance at year end                     $  4,082     $ 7,055     $  755

   Weighted average rate at year end           6.17%       5.57%      6.05%

   Average balance during the year         $  6,914     $ 3,660     $  713

   Weighted average rate during the year       6.04%       5.68%      6.17%

   Maximum month-end balance               $  9,396     $ 8,555     $  755

Total short-term borrowings:

   Balance at year end                     $  9,716     $12,654     $1,502

   Weighted average rate at year end           5.71%       5.34%      4.88%

   Average balance during the year         $ 56,141     $ 7,362     $1,434

   Weighted average rate during the year       5.57%       5.39%      5.54%

   Maximum month-end balance               $129,653    $ 15,251     $2,302
</TABLE>

Substantially all federal funds purchased and repurchase agreements mature in
one business day. Other short-term borrowings principally represent Federal Home
Loan Bank (FHLB) advances to Georgetown Bank (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 both floating or adjustable rate
instruments and instruments approaching maturity. The interest sensitivity gap
is the difference between total interest-sensitive assets and total
interest-sensitive liabilities. Interest rates on the 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, 1997, the
cumulative amount of the Company's interest earning assets repricing during the
first year is higher than the total amount of its interest bearing liabilities
repricing during this period. This position, which is normally termed a positive
interest sensitivity gap, generally allows for enhanced net interest income
during periods of rising interest rates. This positive 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 declining interest rates.

The following table provides an analysis of the Company's interest rate
sensitivity at December 31, 1997.

                       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         $ 73,646   $ 75,375    $ 75,742    $58,627   $283,390
 Investment securities                   10,393     19,852      22,732     16,234     69,211
 Federal funds sold                      40,771          0           0          0     40,771
                                       --------   --------    --------    -------   --------
     Total earning assets              $124,810   $ 95,227    $ 98,474    $74,861   $393,372

Sources of Funds
 NOW, money market and
    savings                            $ 22,438   $ 22,713    $ 28,841    $ 1,291   $ 75,283
 Time deposits                           43,186     95,267      72,989        127    211,569
 Other                                    9,716          0      11,086         95     20,897
                                       --------   --------    --------    -------   --------
   Total interest bearing liabilities  $ 75,340   $117,980    $112,916    $ 1,513   $307,719

Interest Sensitivity Gap
 For the period                        $ 49,470   $(22,753)   $(14,442)   $73,348   $ 85,623
 Cumulative                              49,470     26,717      12,275     85,623
 Cumulative as a percent of
   earning assets                        12.58%      6.79%       3.12%      21.77%
</TABLE>

<PAGE>

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 spread 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 decrease by approximately 3.5% of stable rate
net interest income if rates fall by two percentage points over the next year.
It projects an increase of 3.4% if the rates rise by two percentage points.
Management believes this reflects a slight asset sensitive rate risk position
for the one year horizon. Within the same time frame, but assuming an additional
one percentage point move in rates, the model forecasts that net interest income
would fall below that earned in a stable rate environment by 5.3% in a falling
rate scenario and increase by 5.1% in a rising rate scenario.


<PAGE>

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 8.0%.
Additionally, NPV is projected to decrease by 7.0% 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
                                                  1997        1996      Guidelines

<S>                                              <C>         <C>           <C>
Static 1-Year Cumulative Gap                      6.8%        3.1%         +10%
                                                                           -
1-Year Net Interest Income Simulation Project
   -200 bp change vs. Stable Rate                -3.5        -4.4          +10%
                                                                           -
   +200 bp change vs. Stable Rate                 3.4         4.4          +10%
                                                                           -
1-Year Net Interest Income Simulation Project
   -300 bp change vs. Stable Rate                -5.3        -6.7          +10%
                                                                           -
   +300 bp change vs. Stable Rate                 5.1         6.6          +10%
                                                                           -
Static Net Present Value Change
   -200 bp Shock vs. Stable Rate                 -7.0        -1.7          +10%
                                                                           -
   +200 bp Shock vs. Stable Rate                 -8.0         3.0          +10%
                                                                           -
</TABLE>

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

<PAGE>

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 1998 and
believes that the current modest level of asset 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.

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.

OTHER

Year 2000 - Premier initiated the process of preparing its computer systems and
applications for the year 2000 during 1997. This process involves assessing,
then modifying or replacing certain hardware and software maintained by the
Company as well as communicating with external service providers to ensure that
they are taking the appropriate action to remedy their Year 2000 issues.
Management intends to have substantially all of the system and application
changes completed by the end of 1998 and anticipates the estimated cumulative
costs of compliance will not be material to the Company's financial statements.


<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, 1997 and 1996
             Statements of Income - Years Ended December 31, 1997, 1996 and 1995
             Statements of Changes in Stockholders' Equity - Years ended
             December 31, 1997, 1996 and 1995
             Statements of Cash Flows - Years ended December 31, 1997, 1996
             and 1995
             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.


                                   CONTENTS



                                                                        Pages
INDEPENDENT AUDITORS' REPORT.............................................1

FINANCIAL STATEMENTS:
  Consolidated Balance Sheets............................................2
  Consolidated Statements of Income......................................3
  Consolidated Statements of Stockholders' Equity........................4
  Consolidated Statements of Cash Flows..................................5 - 6
  Notes to Consolidated Financial Statements.............................7 - 30

<PAGE>


INDEPENDENT AUDITORS' REPORT

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, 1997 and 1996, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997.
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, 1997 and 1996 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.

                                        /s/ Eskew & Gresham, PSC

February 3, 1998

<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                          December 31
                                                                    1997                  1996
<S>                                                             <C>               <C>
        ASSETS
Cash and due from banks                                         $ 11,609,886      $  9,303,925
Federal funds sold                                                40,771,000        10,935,000
Investment securities:
   Available for sale                                             45,925,758        29,971,958
   Held to maturity                                               20,361,807        20,993,089
Loans                                                           $285,798,438      $244,731,159
   Unearned income                                                (2,408,652)       (2,106,364)
   Allowance for loan losses                                      (3,144,142)       (2,853,725)
                                                                ------------      ------------
      Net loans                                                 $280,245,644      $239,771,070
Federal Home Loan Bank and Federal Reserve stock                   2,923,250         1,695,350
Premises and equipment, net                                        6,894,894         4,519,815
Real estate and other property acquired through foreclosure          836,201           485,003
Interest receivable                                                5,237,264         4,322,289
Income taxes refundable                                               70,974            22,319
Deferred income taxes                                                170,027           393,231
Goodwill and other intangibles                                     7,261,591         5,490,210
Other assets                                                       3,127,721         1,162,461
                                                                ------------      ------------

TOTAL ASSETS                                                    $425,436,017      $329,065,720

        LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
   Non-interest bearing                                         $ 37,702,480      $ 32,464,664
   Time deposits, $100,000 and over                               47,105,404        40,150,498
   Other interest bearing                                        239,746,157       194,592,712
                                                                ------------      ------------
      Total deposits                                            $324,554,041      $267,207,874
Securities sold under agreements to repurchase                     5,634,132         5,599,420
Federal Home Loan Bank advances                                   15,263,339         9,377,456
Interest payable                                                   1,657,599         1,394,550
Other liabilities                                                  1,779,936           861,340
                                                                ------------      ------------
   Total liabilities                                            $348,889,047      $284,440,640

Mandatorily redeemable capital securities of subsidiary trust   $ 28,750,000      $          0

Stockholders' Equity:
   Preferred stock, no par value; 1,000,000 shares
      authorized; none issued or outstanding                    $          0      $          0
   Common stock, no par value; 10,000,000 shares authorized;
      4,685,390 shares issued and outstanding                        982,308           982,308
   Surplus                                                        33,824,798        33,824,798
   Retained earnings                                              13,054,826         9,935,858
   Net unrealized losses on securities available for sale            (64,962)         (117,884)
                                                                ------------      ------------
      Total stockholders' equity                                $ 47,796,970      $ 44,625,080

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $425,436,017      $329,065,720

</TABLE>
                          See notes to consolidated financial statements.

                                                                       Page 2
<PAGE>

                         PREMIER FINANCIAL BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              Year Ended December 31
                                                      1997           1996           1995
<S>                                                <C>            <C>            <C>
INTEREST INCOME:
   Loans, including fees                           $26,324,299    $19,192,986    $11,809,666
   Investment securities -
      Taxable                                        5,411,453      1,942,904      1,302,417
      Tax-exempt                                     1,157,751        815,821        547,496
   Federal funds sold                                  936,570        424,546        292,588
   Other interest income                               164,689         24,711         38,136
                                                   -----------    -----------    -----------
      Total interest income                        $33,994,762    $22,400,968    $13,990,303

INTEREST EXPENSE:
   Deposits                                        $12,731,585    $ 9,357,130    $ 5,933,460
   Other borrowings                                  3,531,542        450,433        106,808
   Debt                                              1,631,467        167,413        252,999
                                                   -----------    -----------     ----------
      Total interest expense                       $17,894,594    $ 9,974,976    $ 6,293,267

Net interest income                                $16,100,168    $12,425,992    $ 7,697,036
Provision for loan losses                            1,232,208        759,831        195,950
                                                   -----------    -----------    -----------

Net interest income after provision
   for loan losses                                 $14,867,960    $11,666,161    $ 7,501,086

NON-INTEREST INCOME:
   Service charges                                 $ 1,154,979    $ 1,001,179    $   649,473
   Insurance commissions                               409,407        308,690        164,338
   Investment securities gains (losses)              2,203,545          1,459         (6,026)
   Other                                               598,659        409,447        210,347
                                                   -----------    -----------     ----------
                                                   $ 4,366,590    $ 1,720,775    $ 1,018,132

NON-INTEREST EXPENSES:
   Salaries and employee benefits                  $ 5,586,124    $ 4,371,715    $ 3,043,367
   Occupancy and equipment expenses                  1,421,139      1,196,731        989,052
   Professional fees                                   471,857        258,758        209,298
   Taxes, other than payroll, property and income      387,255        288,132        209,901
   Acquisition related expenses                        467,035              0        110,296
   Amortization of intangibles                         386,134        197,357          2,553
   Other expenses                                    2,302,157      1,762,416      1,378,317
                                                   -----------    -----------    -----------
                                                   $11,021,701    $ 8,075,109    $ 5,942,784

Income before income taxes                         $ 8,212,849    $ 5,311,827    $ 2,576,434
Provision for income taxes                           2,604,939      1,588,610        145,732
                                                   -----------    -----------    -----------

NET INCOME                                         $ 5,607,910    $ 3,723,217    $ 2,430,702

Earnings per share                                 $      1.20    $       .99    $      1.02
Earnings per share assuming dilution               $      1.19    $       .99    $      1.02
</TABLE>

                          See notes to consolidated financial statements.

                                                                       Page 3
<PAGE>


                                  PREMIER FINANCIAL BANCORP, INC.
                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                                                                            Net
                                                                                        Unrealized
                                                                                           Gain
                                                                                         (Loss) on
                                                                                        Securities
                                             Common                      Retained        Available
                                             Stock         Surplus       Earnings        For Sale       Total

<S>                                         <C>         <C>            <C>              <C>           <C>
Balances, January 1, 1995                   $758,127    $ 6,857,637    $ 6,760,575      $ (470,286)   $13,906,053

Issuance of 1,000 shares of Georgetown
   Bancorp, Inc. common stock                 10,272        114,728                                       125,000

Net change in unrealized losses on
  securities available for sale                                                            399,019        399,019

5-for-4 common stock split                   190,909       (190,909)

Net income                                                               2,430,702                      2,430,702

Dividends paid - Company ($.45 per
   share)                                                                 (859,091)                      (859,091)

Dividends paid - Sabina prior to pooling                                  (137,500)                      (137,500)
                                            --------    -----------    -----------      ----------    -----------
Balances, December 31, 1995                 $959,308    $ 6,781,456    $ 8,194,686      $  (71,267)   $15,864,183

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                                                            (46,617)       (46,617)
Net income                                                               3,723,217                      3,723,217

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                 $982,308    $33,824,798    $ 9,935,858      $ (117,884)   $44,625,080

Net change in unrealized losses on
  securities available for sale                                                             52,922         52,922

Net income                                                               5,607,910                      5,607,910

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                 $982,308    $33,824,798    $13,054,826      $  (64,962)   $47,796,970

</TABLE>

                          See notes to consolidated financial statements.

                                                                       Page 4
<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                       Year Ended December 31
                                                              1997            1996            1995
<S>                                                       <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                             $  5,607,910   $   3,723,217    $  2,430,702
   Adjustments to reconcile net income to
      net cash provided by operating activities:
        Depreciation                                           485,602         321,173         273,772
        Amortization, net                                      373,180         363,043         181,927
        Provision for loan losses                            1,232,208         759,831         195,950
        Deferred income taxes                                  256,664         (10,929)       (248,964)
        FHLB stock dividends                                  (155,000)        (46,000)         (4,800)
        Investment securities losses (gains), net           (2,203,545)         (1,459)          6,026
        Changes in:
           Interest receivable                                (914,975)       (385,317)       (102,508)
           Other assets                                     (2,015,799)        658,194        (376,229)
           Interest payable                                    263,049        (200,003)        330,117
           Other liabilities                                   918,596         390,745          50,854
           Income taxes refundable                             (48,655)        221,530        (281,667)
                                                         -------------    ------------    ------------
             Net cash provided by operating activities   $   3,799,235    $  5,794,025    $  2,455,180

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from maturity of deposits held in other
      banks                                              $           0    $          0    $    523,609
   Purchases of securities available for sale             (307,051,391)    (15,463,076)    (15,679,289)
   Proceeds from sales of securities available for sale    277,135,191       2,499,125       7,553,462
   Proceeds from maturities and calls of securities
      available for sale                                    16,169,544      13,388,575       9,050,000
   Purchases of investment securities held to maturity      (4,254,989)     (2,741,799)     (1,673,728)
   Proceeds from maturities and calls of securities
      held to maturity                                       4,878,764       2,241,255       1,212,544
   Proceeds from sales of investment securities held
      to maturity                                                    0               0       1,000,000
   Purchases of FHLB stock                                  (1,072,900)       (753,300)       (315,800)
   Net change in federal funds sold                        (29,836,000)     (2,145,000)     (1,495,000)
   Proceeds from sale of real estate acquired through
      foreclosure                                              290,925         131,701         340,812
   Net change in loans                                     (42,348,905)    (23,239,040)    (16,345,596)
   Purchases of premises and equipment                      (2,256,831)     (1,062,587)     (1,376,591)
   Proceeds from sale of premises and equipment                 31,575          20,085         437,132
   Net cash received (paid) related to acquisitions         20,613,412     (10,576,808)       (999,742)
                                                         -------------    ------------    ------------
        Net cash used in investing activities            $ (67,701,605)   $(37,700,869)   $(17,768,187)

</TABLE>

                          See notes to consolidated financial statements.

                                                                       Page 5

<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (CONTINUED)
<TABLE>
<CAPTION>
                                                               Year Ended December 31
                                                            1997           1996           1995
<S>                                                     <C>             <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net change in deposits                               $ 34,026,678    $12,246,554    $13,283,731
   Advances from Federal Home Loan Bank                   17,727,000      6,800,000              0
   Repayment of Federal Home Loan Bank advances          (11,841,117)    (2,067,206)             0
   Debt proceeds                                                   0              0      3,500,000
   Repayment of debt                                               0     (6,850,000)             0
   Net change in agreements to repurchase securities          34,712     (1,797,697)       (52,882)
   Proceeds from issuance of capital securities of
      subsidiary trust                                    28,750,000              0              0
   Proceeds from issuance of common stock                          0     27,066,342        125,000
   Dividends paid                                         (2,488,942)    (1,982,045)      (996,591)
                                                        ------------    -----------    -----------
      Net cash provided by financing activities         $ 66,208,331    $33,415,948    $15,859,258

Net increase in cash and cash equivalents               $  2,305,961    $ 1,509,104    $   546,251

Cash and cash equivalents at beginning of year             9,303,925      7,794,821      7,248,570
                                                        ------------    -----------    -----------

CASH AND CASH EQUIVALENTS AT END
   OF YEAR                                              $ 11,609,886    $  9,303,925   $ 7,794,821

SUPPLEMENTAL DISCLOSURES OF CASH
   FLOW INFORMATION:
      Cash paid during the year for -
        Interest                                        $ 17,631,545    $10,174,979    $ 5,963,150
        Income taxes                                       2,462,000      1,062,063        719,974

SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING ACTIVITIES:
      Non-cash transfer from securities held to
        maturity to securities available for sale       $          0    $         0    $   500,000
      Change in unrealized loss on securities
        available for sale                                    52,922        (46,617)       399,019
      Loans transferred to real estate acquired
        through foreclosure                                  730,371         80,849         16,000

</TABLE>

                          See notes to consolidated financial statements.

                                                                       Page 6

<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A. 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; and The Sabina Bank, Sabina, Ohio (the Banks). In
addition, the Company has a data processing service subsidiary, Premier Data
Services, Inc., Vanceburg, Kentucky. 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 1995 and 1996 amounts have been
reclassified to conform with the 1997 financial reporting presentation.

     B. Nature of Operations - The Banks operate under state bank charters
and provide full banking services, including trust services. As state banks,
the Banks are subject to regulation by their respective state banking
regulators and the Federal Deposit Insurance Corporation (FDIC). The Company
is also subject to regulation by the Federal Reserve Bank.

     C. 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.

     D. Cash and Cash Equivalents - For purposes of reporting cash flows,
cash and cash equivalents include cash on hand and amounts due from banks.

     E. 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.

     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.

                                                                       Page 7

<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                           (CONTINUED)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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.

     F. 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.

     The allowance for loan losses on impaired loans is determined using the
present value of estimated future cash flows of the loan, discounted at the
loan's effective interest rate or the fair value of the underlying
collateral. A loan is considered to be impaired when it is probable that all
principal and interest amounts will not be collected according to the loan
contract. The entire change in present value of expected cash flows is
reported as provision for loan losses in the same manner in which impairment
initially was recognized or as a reduction in the amount of provision for
loan losses that otherwise would be reported.

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

     G. 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.

                                                                       Page 8

<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                           (CONTINUED)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     H. 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.

     I. 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 years.

     J. 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.

     K. Per Share Information - In the fourth quarter of 1997, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share", under which basic and diluted earnings per share are computed.
Prior amounts have been restated to be comparable. Basic earnings per share
is based on net income divided by the weighted average number of shares
outstanding during the period. Diluted earnings per share shows the dilutive
effect of additional common shares issuable under stock options.

     L. Effect of New Accounting Standards - The Financial Accounting
Standards Board has issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
provides accounting and reporting guidance regarding various financial
instruments and related transactions. The Statement was effective for
transactions occurring after December 31, 1996 and was adopted by the
Company, as required, on January 1, 1997. The effect of adopting the new
guidance was not material to the Company's consolidated financial statements.

                                                                       Page 9


<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                           (CONTINUED)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income". The Statement establishes standards
for reporting the components of comprehensive income and requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that
is displayed with the same prominence as other financial statements.
Comprehensive income includes net income as well as certain items that are
reported directly within a separate component of stockholders' equity and
bypass net income. The provisions of this Statement are effective beginning
with 1998 interim reporting. These disclosure requirements will have no
impact on financial position or results of operations.

     M. Marketing Expense - The Company charges all marketing expenses to
operations when incurred. No amounts have been established for any future
benefits relative to these expenditures.

2.   BUSINESS COMBINATIONS

     CONSUMMATED ACQUISITIONS

     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. The accompanying consolidated financial
statements for 1997 are based on the assumption that the companies were
combined for the full year, and financial statements of prior years have been
restated to give the effect of the combination.

     Summarized results of operations of the separate companies for the
period January 1, 1997 through the date of acquisition are as follows:

<TABLE>
<CAPTION>
                                                          Premier Financial     The Sabina
                                                             Bancorp, Inc.         Bank
                                                                   (in thousands)
<S>                                                           <C>                <C>
      Net interest income after provision for loan losses     $ 11,205           $ 1,321
      Other operating income                                     3,804               208
      Other operating expenses                                   8,446             1,270

      Net income                                              $  4,507           $   215
</TABLE>

                                                                       Page 10

<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                           (CONTINUED)


2.   BUSINESS COMBINATIONS (CONTINUED)

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

<TABLE>
<CAPTION>
                                      Year Ended December 31
                                         1996         1995
                                           (in thousands)
<S>                                    <C>          <C>
     Interest income:
       As previously reported          $ 19,674     $11,103
       Acquired subsidiary                2,727       2,887
                                       --------     -------
       As restated                     $ 22,401     $13,990

     Non-interest income:
       As previously reported          $  1,484     $   825
       Acquired subsidiary                  237         193
                                       --------     -------
       As restated                     $  1,721     $ 1,018

     Net income:
       As previously reported          $  3,436     $ 2,156
       Acquired subsidiary                  287         275
                                       --------     -------
       As restated                     $  3,723     $ 2,431
</TABLE>

     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. A premium of approximately $2.1 million was paid
for the purchase of these deposits.

     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 was $12,588,000, which exceeded the fair value of
tangible net assets acquired by approximately $5,400,000. 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.

     The major categories of assets acquired and liabilities assumed from
Farmers Deposit as of the acquisition date are as follows:

<TABLE>
<CAPTION>
                                             (in thousands)
<S>                                            <C>
     Cash and due from banks                   $  2,011
     Investment securities                       19,263
     Net loans                                   81,988
     Intangibles and other assets                 9,035
     Deposits                                    86,791
     Other borrowings                            10,540
     Debt                                         1,850
     Other liabilities                              528
                                               --------
        Total acquisition cost                 $ 12,588
</TABLE>

                                                                       Page 11
<PAGE>

                                  PREMIER FINANCIAL BANCORP, INC.
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                           (CONTINUED)


2.   BUSINESS COMBINATIONS (CONTINUED)

     On October 31, 1995, the Company acquired all of the outstanding shares
of Citizens Bank of Sharpsburg, Kentucky, for cash. The total acquisition
cost was $1,496,387, which exceeded the fair value of tangible net assets
acquired by approximately $248,000. This combination was accounted for as a
purchase and the results of operations of Citizens Bank are included in the
consolidated financial statements from November 1, 1995.

     The major categories of assets acquired and liabilities assumed from
Citizens Bank as of the acquisition date are as follows:

<TABLE>
<CAPTION>
                                             (in thousands)
<S>                                            <C>
     Cash and due from banks                   $   497
     Investment securities                       3,976
     Net loans                                  14,316
     Intangibles and other assets                1,365
     Deposits                                   18,273
     Other liabilities                             385
                                               -------
       Total acquisition cost                  $ 1,496
</TABLE>

     On March 24, 1995, the Company acquired Georgetown Bancorp, Inc. and its
wholly-owned subsidiary, Georgetown Bank & Trust, Georgetown, Kentucky, in a
business combination accounted for as a pooling of interests. All of the
outstanding shares of Georgetown Bancorp were exchanged for 409,090 shares,
as adjusted for subsequent stock splits, of the Company's common stock. The
accompanying consolidated financial statements for 1995 are based on the
assumption that the companies were combined for the full year.

     PENDING ACQUISITIONS

     On October 31, 1997, the Company entered into an Agreement and Plan of
Merger with Ohio River Bank (Ohio River), Ironton, Ohio, whereby the Company
will exchange 300,000 common shares for all the issued and outstanding shares
of Ohio River in a business combination anticipated to be accounted for as a
pooling of interests. At December 31, 1997, Ohio River had total assets of
$39.5 million and total stockholders' equity of $4.3 million. The share
exchange is expected to be completed in the first quarter of 1998.

     On December 30, 1997, the Company entered into a purchase and assumption
agreement to acquire three branch offices of Banc One Corporation located in
Madison, Philippi and Van, West Virginia. Included in the purchase is
approximately $148 million in deposits, $10 million in loans and $1.2 million
in facilities. The net premium to be paid for these branches is approximately
$14.3 million. The acquisition is expected to be completed in the second
quarter of 1998.

                                                                       Page 12
<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


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 was $725,000 and $999,000
at December 31, 1997 and 1996, respectively.

4.   INVESTMENT SECURITIES

     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             $ 10,070,978   $   2,837    $ (11,486)    $ 10,062,329
 U. S. agency securities                 25,965,520      29,205      (90,335)      25,904,390
 Obligations of states and political
    subdivisions                          3,457,927     109,529       (3,602)       3,563,854
 Asset-backed securities                  3,629,753           0      (29,225)       3,600,528
 Preferred  stock                         2,000,000           0            0        2,000,000
 Other securities                           900,007           0     (105,350)         794,657
                                       ------------   ---------    ---------     ------------
    Total available for sale           $ 46,024,185   $ 141,571    $(239,998)    $ 45,925,758

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
 Asset-backed securities                    149,004         905         (420)         149,489
                                       ------------   ---------    ---------     ------------
    Total held to maturity             $ 20,361,807   $ 522,688    $ (22,126)    $ 20,862,369
</TABLE>

     Amortized cost and fair value of investment securities, by category, at
December 31, 1996 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             $  5,991,476   $   4,691    $  (8,566)    $  5,987,601
 U. S. agency securities                 16,880,922      40,445     (190,296)      16,731,071
 Obligations of states and political
   subdivisions                           4,330,371     136,779       (2,165)       4,464,985
 Preferred  stock                         2,000,000           0            0        2,000,000
 Other securities                           900,007           0     (111,706)         788,301
                                       ------------   ---------    ---------     ------------
    Total available for sale           $ 30,102,776   $ 181,915    $(312,733)    $ 29,971,958
</TABLE>

                                                                       Page 13

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


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             $  2,058,469   $   5,787    $  (9,366)    $  2,054,890
 U. S. agency securities                  6,328,804      18,482      (26,209)       6,321,077
 Obligations of states and political
   subdivisions                          12,190,012     249,553      (59,327)      12,380,238
 Asset-backed securities                    415,804       3,933       (4,045)         415,692
                                       ------------   ---------    ---------     ------------
    Total held to maturity             $ 20,993,089   $ 277,755    $ (98,947)    $ 21,171,897
</TABLE>

     The amortized cost and fair value of investment securities at December
31, 1997, 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                     $ 21,336,870    $ 21,283,274
      Due after one year through five years         11,447,265      11,475,189
      Due after five years through ten years         4,971,058       5,015,370
      Due after ten years                            1,739,232       1,756,740
      Other securities                               6,529,760       6,395,185
                                                  ------------    ------------
         Total available for sale                 $ 46,024,185    $ 45,925,758

     Held to maturity:
      Due in one year or less                     $  3,032,278    $  3,038,537
      Due after one year through five years          8,307,082       8,449,812
      Due after five years through ten years         5,957,470       6,184,088
      Due after ten years                            2,915,973       3,040,443
      Asset-backed securities                          149,004         149,489
                                                  ------------    ------------
         Total held to maturity                   $ 20,361,807    $ 20,862,369
</TABLE>

     Proceeds from sales of investment securities during 1997, 1996 and 1995
were $277,135,191, $2,499,125 and $8,553,462, respectively. Gross gains of
$2,193,933, $70 and $25,650 and gross losses of $938, $611 and $31,676,
respectively, were realized on those sales. Proceeds from maturities and
calls of investment securities during 1997, 1996 and 1995 were $21,048,308,
$15,629,830 and $10,262,544, respectively. Gross gains of $10,550, $2,000 and
$0 were realized on those calls and maturities during 1997, 1996 and 1995,
respectively. No losses were realized on calls and maturities during 1997,
1996 and 1995.

                                                                       Page 14

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


4.   INVESTMENT SECURITIES (CONTINUED)

     Investment securities with an approximate carrying value of $29,616,908
and $28,136,619 at December 31, 1997 and 1996, respectively, were pledged to
secure public deposits, trust funds, securities sold under agreements to
repurchase and for other purposes as required or permitted by law.

5.   LOANS

     Major classifications of loans are summarized as follows:

<TABLE>
<CAPTION>
                                                       December 31
                                                  1997          1996
                                                    (in thousands)
<S>                                            <C>           <C>
     Commercial, secured by real estate        $  66,893     $  60,018
     Commercial, other                            45,024        35,393
     Real estate construction                      7,857         4,138
     Real estate mortgage                         93,789        87,335
     Agricultural                                 13,208        11,731
     Consumer and home equity                     58,523        44,753
     Other                                           504         1,363
                                               ---------     ---------
                                               $ 285,798     $ 244,731
</TABLE>

     Certain directors and executive officers of the Banks and companies in
which they have beneficial ownership, were loan customers of the Banks during
1997 and 1996. Total loans to these persons at December 31, 1997 and 1996
amounted to $4,409,332 and $4,511,218, respectively. Such loans were made in
the ordinary course of business at the Banks' normal credit terms and
interest rates. An analysis of the 1997 activity with respect to all director
and executive officer loans is as follows:

<TABLE>
<CAPTION>

<S>                                                                 <C>
     Balance, December 31, 1996                                     $ 4,511,218
     Additions, including loans now
       meeting disclosure requirements                                1,880,220
     Amounts collected, including loans
       no longer meeting disclosure requirements                     (1,982,106)
                                                                     ----------
     Balance, December 31, 1997                                     $ 4,409,332
</TABLE>

     Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
                                         1997           1996            1995

<S>                                   <C>            <C>            <C>
     Balance, beginning of year       $ 2,853,725    $ 1,997,042    $ 1,171,704
     Allowance related to acquired
       subsidiaries                             0        812,000        803,177
     Loans charged off                 (1,184,093)      (938,019)      (272,393)
     Recoveries                           242,302        222,871         98,604
     Provision for loan losses          1,232,208        759,831        195,950
                                      -----------    -----------    -----------
     Balance, end of year             $ 3,144,142    $ 2,853,725    $ 1,997,042

</TABLE>

                                                                       Page 15

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


5.   LOANS (CONTINUED)

     The Company's recorded investment in impaired loans was approximately
$1,049,308 and $910,305 at December 31, 1997 and 1996, respectively, as
measured using the value of the underlying collateral. Of those amounts,
$1,049,308 and $617,799 represent loans for which an allowance for loan
losses, in the amount of $149,486 and $274,409, respectively, has been
established. The average recorded investment of impaired loans was
approximately $1,261,561 and $712,500 for the years ended December 31, 1997
and 1996, respectively. Interest income recognized on impaired loans totaled
approximately $60,660 and $2,000 for the years ended December 31, 1997 and
1996, respectively, which represented actual cash payments received on
impaired loans.

6.   PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                       December 31
                                                  1997              1996

<S>                                           <C>               <C>
     Land                                     $  1,221,962      $  1,190,628
     Buildings and leasehold improvements        4,667,550         3,193,754
     Furniture and equipment                     5,175,463         3,832,485
                                              ------------      ------------
                                              $ 11,064,975      $  8,216,867
     Less: accumulated depreciation             (4,170,081)       (3,697,052)
                                              ------------      ------------
                                              $  6,894,894      $  4,519,815
</TABLE>

     Depreciation expense was $485,602, $321,173 and $273,772 in 1997, 1996
and 1995, respectively.

7.   DEPOSITS

     At December 31, 1997, the scheduled maturities of time deposits are as
follows:

<TABLE>
<CAPTION>
<S>                                          <C>
     1998                                    $ 138,452,753
     1999                                       53,510,697
     2000                                       12,240,618
     2001                                        5,524,855
     2002 and thereafter                         1,839,200
                                             -------------
                                             $ 211,568,123
</TABLE>

     Certain directors and executive officers of the Banks and companies in
which they have beneficial ownership are deposit customers of the Banks. The
amount of these deposits was approximately $6,174,000 and $7,902,000 at
December 31, 1997 and 1996, respectively.

                                                                       Page 16

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


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:

<TABLE>
<CAPTION>
                                                             December 31
                                                      1997             1996
<S>                                               <C>               <C>
     Year-end balance                             $  5,634,132      $ 5,599,420
     Average balance during the year                49,226,593        5,599,420
     Average interest rate during the year               5.51%           5.14%
     Maximum month-end balance during the year    $  5,955,482      $ 6,495,743
</TABLE>

     U. S. Treasury and agency securities underlying the agreements are as
follows:

<TABLE>
<CAPTION>
                                                             December 31
                                                      1997             1996
<S>                                               <C>               <C>
     Carrying value                               $ 6,385,288       $ 6,221,104
     Estimated fair value                         $ 6,397,694       $ 6,216,000
</TABLE>

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, 1997 and 1996, $15,263,339 and $9,377,456, respectively,
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 nineteen years, with interest rates ranging from 5.55% to 7.95%.
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, 1997 are as
follows: 1998 -$10,568,765; 1999 - $2,575,264; 2000 - $529,331; 2001 -
$564,048; 2002 and years thereafter - $1,025,931.

10.  CAPITAL SECURITIES OF SUBSIDIARY TRUST

     Mandatorily Redeemable Capital Securities of Subsidiary Trust (Capital
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 Capital 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 Capital 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 Capital Securities are redeemable in whole. Otherwise, the Capital
Securities are generally redeemable in whole or in part on or after June 30,
2002 at 100% of the liquidation amount.

                                                                       Page 17

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


11.  LINE OF CREDIT

     In February 1997, the Company received approval for a two year, $20
million revolving line of credit from a financial institution. The line of
credit is available for general corporate purposes, including acquisitions.
The credit agreement contains certain covenants and performance terms. The
common stock of the Banks is pledged to secure the revolving line of credit.
As of December 31, 1997, there have been no borrowings under this line of
credit.

12.  INCOME TAXES

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

<TABLE>
<CAPTION>
                                          1997             1996           1995
<S>                                    <C>             <C>             <C>
     Current                           $ 2,348,275     $ 1,599,539     $ 394,696
     Deferred                              256,664         (10,929)      255,211
     Change in valuation allowance               0               0      (504,175)
                                       -----------     -----------     ---------
                                       $ 2,604,939     $ 1,588,610     $ 145,732
</TABLE>

     The Company's deferred tax assets and liabilities at December 31, 1997
and 1996 are shown below.  No valuation allowance for the realization of
deferred tax assets is considered necessary.

<TABLE>
<CAPTION>
                                                       1997             1996
<S>                                                 <C>              <C>
     Deferred tax assets:
        Allowance for loan losses                   $  419,567       $  423,871
        NOL carryforwards                              198,573          330,426
        Unrealized loss on investment securities        33,466           13,382
        Other                                           39,900           33,093
                                                    ----------       ----------
            Total deferred tax assets               $  691,506       $  800,772

     Deferred tax liabilities:
        Depreciation                                $ (285,374)      $ (197,755)
        Change in accounting method                    (77,276)         (93,874)
        Federal Home Loan Bank dividends              (103,764)         (45,520)
        Other                                          (55,065)         (70,392)
                                                    ----------       ----------
            Total deferred tax liabilities          $  521,479       $ (407,541)

            Net deferred tax asset                  $  170,027       $  393,231
</TABLE>

     At December 31, 1997, two of the subsidiary Banks had net operating loss
carryforwards totaling approximately $584,000, which begin expiring in 2005.
The utilization of these net operating loss carryforwards is subject to
limitations imposed by Section 382 of the Internal Revenue Code.

                                                                       Page 18

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)



12.  INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                             1997                1996               1995
                                                           (in thousands)
<S>                                    <C>        <C>       <C>        <C>       <C>      <C>
U. S. federal income tax rate          $ 2,792    34.0%     $ 1,806    34.0%     $ 876    34.0%

Changes from the statutory rate:
   Tax-exempt investment income           (408)   (5.0)        (295)   (5.6)      (194)   (7.5)

   Non-deductible interest expense
     related to carrying tax-exempt
     investments                            50     0.6           34     0.6         21     0.8

   Tax credits                             (70)   (0.8)         (70)   (1.3)       (69)   (2.7)

   Change in valuation allowance             0     0.0            0     0.0       (504)  (19.5)

   Goodwill amortization                   131     1.6           67     1.3          1     0.0

   Other                                   110     1.3           47     0.9         15     0.6
                                       -------    ----      -------     ----     -----    ----
                                       $ 2,605    31.7%     $ 1,589     29.9%    $ 146     5.7%
</TABLE>

     Income taxes (benefits) applicable to investment securities gains
(losses) were $749,205,  $496 and $(2,049) for 1997, 1996 and 1995,
respectively.

13.  OPERATING LEASE COMMITMENTS

     The Company has entered into lease agreements for certain premises and
equipment.

     Future minimum lease payments under the leases during the five years
subsequent to December 31, 1997 are as follows:

<TABLE>
<CAPTION>
<S>                            <C>
     1998                      $ 157,602
     1999                        155,721
     2000                        151,456
     2001                         12,856
     2002 and thereafter          10,178
</TABLE>

     Total rental expense incurred amounted to approximately $199,000,
$156,000 and $19,000 in 1997, 1996 and 1995, respectively.

                                                                       Page 19

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


14.  EMPLOYEE BENEFIT PLANS

     The Company has qualified profit sharing plans which cover substantially
all employees. Profit sharing contributions are at the discretion of the
Company's Board of Directors. Profit sharing contributions were $176,347,
$202,500 and $132,744 in 1997, 1996 and 1995, respectively.

     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. At December 31, 1997, the Company had granted options to certain key
employees to purchase 40,000 shares at an option price of $13.00 per share,
of which 28,000 are currently eligible for exercise. Options outstanding at
December 31, 1997, have a remaining contractual life of 8.5 years.

     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.

     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 1997 and 1996 net income and
earnings per share of this statement are as follows:

<TABLE>
<CAPTION>
                                               1997              1996
                                                 (in thousands)
<S>                                          <C>               <C>
     Net income
       As reported                           $ 5,608           $ 3,723
       Pro forma                             $ 5,555           $ 3,698

     Earnings per share
       As reported                           $  1.20           $  0.99
       Pro forma                             $  1.19           $  0.98

     Earnings per share assuming dilution
       As reported                           $  1.19           $  0.99
       Pro forma                             $  1.18           $  0.98
</TABLE>

                                                                       Page 20

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


14.  EMPLOYEE BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
                                                1997             1996
                                                    (in thousands)
<S>                                           <S>             <S>
     Weighted averages
       Fair value of options granted          $    5.77       $    2.70
       Risk free interest rate                     6.00%           6.50%
       Expected life                           10 years        10 years
       Expected volatility                        38.02%          13.97%
     Expected dividend                        $    0.60       $     .50
</TABLE>

15.  RELATED PARTY TRANSACTIONS

     During the years ended December 31, 1997, 1996 and 1995, the Company
paid approximately $211,000, $241,000 and $65,000, respectively, for printing
and supplies from a company affiliated by common ownership. The Company also
paid this affiliate approximately $339,000, $317,000 and $223,000 in 1997,
1996 and 1995, respectively, 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 bank in Louisiana
controlled by the Company's largest stockholder. The dividend rate on the
preferred stock is 2% over the prevailing prime rate.

16.  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 1998, the Banks
could, without prior approval, declare dividends of approximately $7,656,000
plus any 1998 net profits retained to the date of the dividend declaration.

17.  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
1997, 1996 and 1995 is presented below:

<TABLE>
<CAPTION>
                                                               Year Ended
                                                     1997         1996         1995
<S>                                              <C>          <C>          <C>
     Earnings Per Share
       Net income available to common
         stockholders                            $ 5,607,910  $ 3,723,217  $ 2,430,702

     Weighted average common shares
         outstanding                               4,685,390    3,763,805    2,379,560

     Earnings per share                          $      1.20  $       .99  $      1.02
</TABLE>

                                                                       Page 21

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


17.  EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                   Year Ended
                                                         1997         1996         1995
<S>                                                  <C>          <C>          <C>
     Earnings Per Share Assuming Dilution
       Net income available to common
          stockholders                               $ 5,607,910  $ 3,723,217  $ 2,430,702

       Weighted average common shares
          outstanding                                  4,685,390    3,763,805    2,379,560

       Add dilutive effects of assumed exercise of
          stock options                                   13,074          214            0
                                                     -----------  -----------  -----------

       Weighted average common and dilutive
          potential common shares outstanding          4,698,464    3,764,019    2,379,560

       Earnings per share assuming dilution          $      1.19   $      .99   $     1.02
</TABLE>

18.  STOCKHOLDERS' EQUITY

     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.

     On September 12, 1995, the Board of Directors approved a 5-for-4 stock
split effective September 30, 1995, in the form of a dividend of the
Company's common stock to stockholders of record on September 15, 1995. All
references in the accompanying financial statements to the number of average
shares and per share data have been restated to reflect the stock splits.

                                                                       Page 22

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


19.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     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.

     Federal Home Loan Bank and Federal Reserve Stock - For FHLB and Federal
Reserve stock, carrying value is a reasonable estimate of fair value.

     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.

     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.

     Mandatorily Redeemable Capital Securities of Subsidiary Trust - The
carrying value of these funds is a reasonable estimate of fair value.

     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, thus the
commitments and letters of credit are not considered to have a fair value.

                                                                       Page 23

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


19.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
     (CONTINUED)

     The fair values of the Company's financial instruments at December 31,
1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                 1997                            1996
                                     Carrying            Fair         Carrying           Fair
                                      Amount            Value          Amount           Value
<S>                               <C>              <C>              <C>              <C>
Financial assets:
   Cash and due from banks        $  11,609,886    $  11,610,000    $   9,303,925    $   9,304,000
   Federal funds sold                40,771,000       40,771,000       10,935,000       10,935,000
   Investment securities             66,287,565       66,788,000       50,965,047       51,144,000
   Federal Home Loan Bank
      and Federal Reserve stock       2,923,250        2,923,000        1,695,350        1,695,000
   Loans                            283,389,786      282,655,000      242,624,795      242,656,000
   Less:  allowance for loan
      losses                         (3,144,142)      (3,144,000)      (2,853,725)      (2,854,000)
                                  -------------    -------------    -------------    -------------
                                  $ 401,837,345    $ 401,603,000    $ 312,670,392    $ 312,880,000

Financial liabilities:
   Deposits  $                     (324,554,041)   $(326,330,000)   $(267,207,874)   $(268,988,000)
   Securities sold under
      agreements to repurchase       (5,634,132)      (5,634,000)      (5,599,420)      (5,600,000)
   Federal Home Loan Bank
      advances                      (15,263,339)     (15,290,000)      (9,377,456)      (9,412,000)
   Mandatorily redeemable
      capital securities of
      subsidiary trust              (28,750,000)     (28,750,000)               0                0
                                  -------------    -------------    -------------    -------------
                                $  (374,201,512)   $(376,004,000)   $(282,184,750)   $(284,000,000)
</TABLE>

20.  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.

                                                                       Page 24

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


20.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
     (CONTINUED)

     At December 31, 1997 and 1996, the Banks had the following financial
instruments whose approximate contract amounts represent credit risk:

<TABLE>
<CAPTION>
                                             1997             1996
<S>                                     <C>               <C>
     Standby letters of credit          $  1,099,300      $  1,081,875

     Commitments to extend credit       $ 17,692,415      $ 11,367,341
</TABLE>

     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.
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.

21.  CONCENTRATION OF CREDIT RISK

     The Banks grant residential, commercial and consumer related loans to
customers primarily located in the counties and adjoining counties in
Kentucky and Ohio in which the Banks operate. Although they have diverse loan
portfolios, a substantial portion of their debtors' ability to perform is
somewhat dependent on the economic conditions of the counties in which they
operate.

22.  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, 1997, 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.

                                                                       Page 25

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


23.  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 table below) of Total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1997, the Company and the Banks meet all capital adequacy requirements to
which they are subject.

     As of December 31, 1997, 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.

     The Company's and the two largest subsidiary Banks' capital amounts and
ratios as of December 31, 1997 and 1996 are presented in the table below.

<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                                                       Capitalized
                                                                                                       Under Prompt
                                                                                   For Capital          Corrective
                                                            Actual             Adequacy Purposes     Action Provisions
                       1997                           Amount     Ratio          Amount     Ratio      Amount    Ratio
                                                                            (amounts in thousands)
<S>                                                  <C>         <C>           <C>         <C>       <C>        <C>
Total Capital (to Risk-Weighted Assets):
   Consolidated                                      $ 72,424    25.43%        $ 22,788    8.0%      $ 28,485   10.0%
   Farmers Deposit Bank                                13,019    13.65            7,632    8.0          9,540   10.0
   Citizens Deposit Bank                                9,864    12.98            6,078    8.0          7,599   10.0

Tier I Capital (to Risk-Weighted Assets):
   Consolidated                                      $ 56,461    19.82%        $ 11,394    4.0%      $ 16,428    6.0%
   Farmers Deposit Bank                                12,009    12.59            3,816    4.0          5,223    6.0
   Citizens Deposit Bank                                9,036    11.89            3,039    4.0          4,559    6.0

Tier I Capital (to Average Assets):
   Consolidated                                      $ 56,461    13.52%        $ 17,091    4.0%      $ 20,535    5.0%
   Farmers Deposit Bank                                12,009     9.70            4,793    4.0          5,991    5.0
   Citizens Deposit Bank                                9,036     8.75            3,885    4.0          4,856    5.0
</TABLE>

                                                                       Page 26

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


23.  REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                                                       Capitalized
                                                                                                       Under Prompt
                                                                                   For Capital          Corrective
                                                            Actual             Adequacy Purposes     Action Provisions
                       1997                           Amount     Ratio          Amount     Ratio      Amount    Ratio
                                                                            (amounts in thousands)
<S>                                                  <C>         <C>           <C>         <C>       <C>        <C>
Total Capital (to Risk-Weighted Assets):
   Consolidated                                      $ 41,995    17.63%        $ 19,057    8.0%      $ 23,821   10.0%
   Farmers Deposit Bank                                10,878    13.20            7,012    8.0          8,765   10.0
   Citizens Deposit Bank                                8,085    11.75            5,505    8.0          6,882   10.0

Tier I Capital (to Risk-Weighted Assets):
   Consolidated                                      $ 39,141    16.43%        $  9,528    4.0%      $ 14,293    6.0%
   Farmers Deposit Bank                                10,003    12.14            3,506    4.0          5,259    6.0
   Citizens Deposit Bank                                7,375    10.72            2,753    4.0          4,129    6.0

Tier I Capital (to Average Assets):
   Consolidated                                      $ 39,141    12.10%        $ 12,885    4.0%      $ 16,106    5.0%
   Farmers Deposit Bank                                10,003     8.95            4,685    4.0          5,857    5.0
   Citizens Deposit Bank                                7,375     8.73            3,379    4.0          4,223    5.0
</TABLE>

                                                                     Page 27

<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


24.  PARENT COMPANY FINANCIAL STATEMENTS


                         Condensed Balance Sheets
<TABLE>
<CAPTION>
                                                                  December 31
                                                             1997            1996
                                                                 (in thousands)
<S>                                                       <C>             <C>
        ASSETS
Cash                                                      $  1,584        $  1,654
Interest bearing deposits in subsidiary banks                4,371           4,047
                                                          --------        --------
   Total cash and cash equivalents                        $  5,955        $  5,701

Federal funds sold                                          16,340               0
Investment in subsidiaries                                  42,833          35,750
Investment securities available for sale                     2,000           2,000
Loans                                                        5,621               0
Premises and equipment                                       2,419           1,186
Other assets                                                 1,546             114
                                                          --------        --------

TOTAL ASSETS                                              $ 76,714        $ 44,751

        LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred income taxes                                     $     12        $      0
Other liabilities                                              155             126
                                                          --------        --------
   Total liabilities                                      $    167        $    126

Mandatorily redeemable capital securities of subsidiary
   trust                                                  $ 28,750        $      0

Stockholders' Equity:
   Preferred stock, no par value; 1,000,000 shares
      authorized; none issued or outstanding              $      0        $      0
   Common stock, no par value; 10,000,000 shares
      authorized; 4,685,390 shares issued and outstanding      982             982
   Surplus                                                  33,825          33,825
   Retained earnings                                        13,055           9,936
   Net unrealized losses on securities
      available for sale                                       (65)           (118)
                                                          --------        --------
        Total stockholders' equity                        $ 47,797        $ 44,625

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 76,714        $ 44,751
</TABLE>

                                                                     Page 28
<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


24.  PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)

                         Condensed Statements of Income
<TABLE>
<CAPTION>
                                                       Year Ended December 31
                                               1997           1996          1995
                                                         (in thousands)
<S>                                           <C>            <C>           <C>
Income:
   Dividends from subsidiary banks            $     0        $   597       $ 1,825
   Interest and dividend income                 4,049            361           166
   Gain on sale of investment securities        2,183              0             0
   Other income                                    16             73            11
                                               ------        -------       -------
      Total income                            $ 6,248        $ 1,031       $ 2,002

Expenses:
   Interest expense                           $ 4,037        $   167       $   253
   Salaries and employee benefits                 465            287            71
   Other expenses                                 804            186           271
                                               ------        -------       -------
      Total expenses                          $ 5,306        $   640       $   595
Income before income taxes and
   equity in undistributed income of
   subsidiaries                               $   942        $   391       $ 1,407

Income tax expense (benefit)                      326            (95)         (178)
                                              -------        -------       -------

Income before equity in undistributed
   income of subsidiaries                     $   616        $   486       $ 1,585

Equity in undistributed income of
   subsidiaries                                 4,992          3,237           846
                                               ------        -------       -------

NET INCOME                                    $ 5,608        $ 3,723       $ 2,431
</TABLE>
                                                                         Page 29
<PAGE>

                        PREMIER FINANCIAL BANCORP, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                (CONTINUED)


24.  PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)

                    Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
                                                             Year Ended December 31
                                                        1997         1996         1995
                                                               (in thousands)
<S>                                                   <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                         $   5,608    $  3,723     $  2,431
   Adjustments to reconcile net income to net
      cash provided by operating activities:
        Depreciation                                         74          28           11
        Investment securities gains                      (2,183)          0            0
        Equity in undistributed income of
           subsidiaries                                  (4,992)     (3,237)        (846)
        Change in other assets                           (1,453)        286         (259)
        Change in other liabilities                          41          30           89
                                                      ---------    --------     --------
           Net cash (used in) provided by operating
             activities                               $  (2,905)   $    830     $  1,426

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of subsidiary banks                       $       0    $(12,622)    $ (1,496)
   Capital contributed to subsidiaries                   (2,100)     (2,500)      (1,401)
   Purchase of securities available for sale           (273,500)          0         (500)
   Proceeds from sale of securities                     275,683           0            0
   Net change in federal funds sold                     (16,340)          0            0
   Net change in loans                                   (5,621)          0            0
   Purchase of premises and equipment                    (1,307)       (618)        (608)
                                                      ---------    --------     --------
      Net cash used in investing activities           $ (23,185)   $(15,740)    $ (4,005)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid                                     $  (2,406)   $ (1,817)    $   (859)
   Proceeds from issuance of common stock                     0      27,066            0
   Proceeds from issuance of capital securities
      of subsidiary trust                                28,750           0            0
   Proceeds from debt                                         0           0        3,500
   Repayment of debt                                          0      (5,000)           0
                                                      ---------    --------     --------
      Net cash provided by financing activities       $  26,344    $ 20,249     $  2,641

Net increase in cash and cash equivalents             $     254    $  5,339     $     62
Cash and cash equivalents at beginning of year            5,701         362          300
                                                      ---------    --------     --------

CASH AND CASH EQUIVALENTS AT END                      $   5,955    $  5,701     $    362
   OF YEAR
</TABLE>
                                                                        Page 30
<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, 1997 and 1996
             Statements of Loss - Years Ended December 31, 1997, 1996 and 1995
             Statements of Changes in Stockholders' Equity - Years Ended
             December 31, 1997, 1996 and 1995
             Statements of Cash Flows - Years Ended December 31, 1997, 1996
             and 1995
             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.

<TABLE>
<CAPTION>
<S>           <C>
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 Eskew & Gresham, P.S.C.

   27         Financial Data Schedule for year ended December 31, 1997

<PAGE>

(b      Reports on Form 8-K

     Form 8-K dated December 19, 1997 reporting consummation of the Company's
acquisition of The Sabina Bank, Sabina, Ohio, consummation of the acquisition
of two branch banks and earnings through December 15, 1997.

                              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, 1998.

                                   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.

                                             Principal Executive, Financial and
March 26, 1998   /s/ J. Howell Kelly         Accounting Officer, Director
                 --------------------------
                 J. Howell Kelly


March 26, 1998   /s/ Toney K. Adkins         Director
                 --------------------------
                 Toney K. Adkins


March 26, 1998   /s/ Gardner E. Daniel       Director
                 --------------------------
                 Gardner E. Daniel


March 26, 1998   /s/ E. V. Holder, Jr.       Director
                 --------------------------
                 E. V. Holder, Jr.


March 26, 1998   /s/ Wilbur M. Jenkins       Director
                 --------------------------
                 Wilbur M. Jenkins


March 26, 1998   /s/ Benhamin T. Pugh        Director
                 --------------------------
                 Benjamin T. Pugh


March 26, 1998   /s/ Marshall T. Reynolds    Director
                 --------------------------
                 Marshall T. Reynolds
</TABLE>