PFBI 2007 Annual Meeting Proxy Statement

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(Rule 14a-101)

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PREMIER FINANCIAL BANCORP, INC.
(Name of Registrant as Specified in Its Charter)

________________________________________________________
(Name of Person Filing Proxy Statement, if other than Registrant)

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PREMIER FINANCIAL BANCORP, INC.
2883 5th Avenue
Huntington, West Virginia 25702
________________

NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD

JUNE 20, 2007
________________

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Premier Financial Bancorp, Inc. will be held at the Pullman Plaza Hotel located at 1001 3rd Avenue, Huntington, West Virginia on Wednesday, June 20, 2007 at 10:30 a.m. (EDT) for the following purposes:

(1)   To elect nine (9) directors to serve until the 2008 Annual Meeting of
Shareholders and until their successors are elected and qualified;

(2)   To ratify the appointment of Crowe Chizek and Company LLC as the
Company’s independent accountants for the 2007 fiscal year; and

(3)   To transact such other business as may properly come before the meeting. 


The Board of Directors has set the close of business on May 2, 2007 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting or any adjournment thereof. Only shareholders of record at the close of business on the record date will be entitled to notice of and to vote at the meeting.

EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR BY OTHER ACCEPTED MEANS OF EXECUTION (INTERNET, TELEPHONE, ETC). SHAREHOLDERS ATTENDING THE MEETING IN PERSON MAY VOTE IN PERSON THOUGH YOU HAVE PREVIOUSLY EXECUTED A PROXY.
 
By Order of the Board of Directors,
/s/ E. V. Holder, Jr.    
E. V. Holder, Jr.
Secretary

Huntington, West Virginia
May 17, 2007

PREMIER FINANCIAL BANCORP, INC.
2883 5th Avenue
Huntington, West Virginia 25702

________________

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD

JUNE 20, 2007
________________


INTRODUCTION

This Proxy Statement is being furnished to shareholders of Premier Financial Bancorp, Inc., a Kentucky corporation (the "Company"), in connection with the solicitation of proxies by the Board of Directors of the Company from holders of record of the Company's outstanding shares of common stock, no par value per share (the "Common Stock"), as of the close of business on May 2, 2007 for use at the Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be held on Wednesday, June 20, 2007 at 10:30 a.m. (eastern daylight time) at the Pullman Plaza Hotel, 1001 3rd Avenue, Huntington West Virginia and at any adjournment or postponement thereof. The approximate mailing date of this Proxy Statement was May 17, 2007.

PURPOSES OF THE ANNUAL MEETING

At the Annual Meeting, holders of shares of Common Stock will be asked to consider and vote upon the following matters:

 
(1)
The election of nine directors of the Company who will serve until the 2008 Annual Meeting and until their successors are elected and qualified;

 
(2)
The ratification of the appointment of Crowe Chizek and Company LLC as the Company's independent accountants for the fiscal year ending December 31, 2007; and

 
(3)
The transaction of such other business as may properly come before the Annual Meeting.


 
 

The Board of Directors has unanimously recommended that shareholders vote "FOR" the election of the Board of Directors’ nine nominees for election as directors of the Company, and "FOR" the ratification of the Audit Committee of the Board of Directors’ appointment of Crowe Chizek and Company LLC as the Company's independent accountants. As of the date of this Proxy Statement, the Board of Directors knows of no other business to come before the Annual Meeting.

VOTING RIGHTS AND PROXY INFORMATION

Only holders of record of shares of Common Stock as of the close of business on May 2, 2007 (the "Record Date") will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. Such holders of shares of Common Stock are entitled to one vote per share on any matter, other than the election of directors, that may properly come before the Annual Meeting. In the election of directors, holders of Common Stock have cumulative voting rights whereby each holder is entitled to vote the number of shares of Common Stock held multiplied by nine (the number of directors to be elected at the Annual Meeting), and each holder may cast the whole number of votes for one candidate or distribute such votes among two or more candidates. The presence, either in person or by properly executed proxy, of the holders of a majority of the outstanding shares of Common Stock as of the record date is necessary to constitute a quorum at the Annual Meeting. As of Record Date there were 5,236,899 shares of Common Stock outstanding.

Those nominees for election to the Board of Directors receiving the nine highest number of votes in the election of directors will be elected to the Board. The appointment of Crowe Chizek and Company LLC as the Company's independent accountants for 2007 will be ratified if the votes cast in favor of ratification exceed the votes cast against ratification.

All shares of Common Stock that are represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions indicated in such proxies. If no instructions are indicated, such proxies will be voted for the election of the Board of Directors’ nine nominees as directors of the Company (or, if deemed appropriate by the individuals appointed in the proxies, cumulatively voted for less than all of the Board's nominees to ensure the election of as many of the Board's nominees as possible) and for the ratification of the appointment of Crowe Chizek and Company LLC as the Company's independent accountants.

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly executing a subsequent proxy relating to the same shares of Common Stock and delivering it to the Secretary of the Company at or before the Annual Meeting or (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice revoking a proxy should be sent to the Company, to the attention of E.V. Holder, Jr., Secretary.

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The Company will bear the cost of this solicitation. In addition to solicitation by mail, the Company will request banks, brokers and other custodian nominees and fiduciaries to supply proxy material to the beneficial owners of Common Stock, and will reimburse them for their expenses in so doing. Certain directors, officers and other employees of the Company, not specially employed for this purpose, may solicit proxies, without additional remuneration therefor, by personal meeting, mail, telephone, facsimile or other electronic means.

ANNUAL REPORT

The Company's 2006 Annual Report, which includes audited consolidated financial statements, accompanies this Proxy Statement. The Company will furnish without cost to any shareholder, upon request, a copy of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Requests should be in writing and directed to the Company, to the attention of Brien M. Chase, Chief Financial Officer.

PRINCIPAL SHAREHOLDERS

As of March 31, 2007, the following individuals or entities reported beneficial ownership of Common Stock in excess of 5% of the Company's outstanding Common Stock:

NAME AND ADDRESS
OF BENEFICIAL OWNER
NUMBER OF SHARES
BENEFICIALLY OWNED(1)
PERCENTAGE OF
OUTSTANDING SHARES
Marshall T. Reynolds
P.O. Box 4040
Huntington, West Virginia 25729
562,300
10.7%
Tontine Financial Partners, L.P.
55 Railroad Avenue, 3rd Floor
Greenwich, Connecticut 06830
520,300
9.9%
Marla Braun
136 Miracle Mile
Coral Gables, Florida 33134
451,689
8.6%
Douglas V. Reynolds
703 Fifth Avenue
Huntington, West Virginia 25701
278,713
5.3%
_______________
 
(1)
The information contained in this column is based upon information furnished to the Company by the named individuals and the shareholder records of the Company. Except where otherwise indicated, this column represents the number of shares beneficially owned, which includes shares as to which a person has sole or shared voting and/or investment power.
 

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ELECTION OF DIRECTORS
(Item 1 on Proxy)

A board of nine directors of the Company is to be elected at the Annual Meeting, each of whom is to serve, subject to the provisions of the Company's bylaws, until the 2008 Annual Meeting of Shareholders and until his or her successor is duly elected and qualified. The names of the nominees proposed for election as directors, all of who are presently directors of the Company, are set forth below and the following information is furnished with respect to each:

 
 
Nominee
 
 
Principal Occupation or Employment(1)
 
 
Age
Director of
Company
Continuously
Since
       
Toney K. Adkins
President and Chief Operating Officer, Champion Industries, Inc. (commercial printing and office supplies) (2)
57
7/12/91
Hosmer A. Brown, III
Attorney-at-Law
86
4/18/01
Edsel R. Burns
President, CJ Hughes Construction, Inc.(3)
56
7/19/00
E.V. Holder, Jr.
Attorney-at-law
74
7/12/91
Keith F. Molihan
Retired Executive Director, Ironton/Lawrence County Area Community Action Organization
64
9/14/99
Marshall T. Reynolds
Chairman and Chief Executive Officer, Champion Industries, Inc. (4)
70
1/19/96
Neal W. Scaggs
President, Logan Auto Parts, Inc.
71
9/8/98
Robert W. Walker
President and Chief Executive Officer of the Company(5)
60
10/17/01
Thomas W. Wright
Owner and Chairman, NexQuest, Inc. (management company)
54
4/18/01
_______________
 
(1)
Except where otherwise indicated, this principal occupation or employment has continued during the past five years.

(2)
Prior to becoming President and Chief Operating Officer of Champion Industries on January 25, 2005, Mr. Adkins served as its Vice President - Administration since 1996.

(3)
Mr. Burns has served as President of C. J. Hughes Construction Company since September, 2002. He served as Chief Financial Officer of Genesis Health Systems from June 2001 until December 31, 2001. He served as Chief Financial Officer of Central City Online from March 2000 to April 2001. From January 1999 to March 2000 he was on the audit staff of Arnett and Foster, PLLC. Prior to that, he worked in various financial positions with Banc One Corporation.

(4)
Mr. Reynolds serves as the Company's Chairman of the Board. From 1985 to November 1993, Mr. Reynolds also served as Chairman of the Board of Directors of Bank One West Virginia, N.A. (and its predecessor, Key Centurion Bancshares, Inc.).

(5)
Prior to becoming the President and Chief Executive Officer of the Company, Mr. Walker was President of Boone County Bank, Inc. from September 1998 to October 2001. Prior to that, Mr. Walker was a regional president at Bank One West Virginia N.A.

The Company’s Board of Directors recommends that shareholders vote "FOR" the election of each of the Company's nominees for election as a director.

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The Board of Directors does not contemplate that any of the nominees will be unable to accept election as a director for any reason. However, in the event that one or more of such nominees is unable or unwilling to serve, the persons named in the proxies or their substitutes shall have authority, according to their judgment, to vote or to refrain from voting for other individuals as directors.

The Nominating Committee of the Board of Directors considers nominations of candidates for election as directors. The Company's bylaws establish an advance notice procedure for shareholders to make nominations of candidates for election as directors (the "Shareholder Notice Procedure"). The Shareholder Notice Procedure provides that only persons who are nominated by, or at the direction of, the Board of Directors, or by a shareholder who has given timely written notice to the Secretary of the Company prior to the meeting at which directors are to be elected, will be eligible for election as directors of the Company. Under the Shareholder Notice Procedure, to be timely, notice of shareholder nominations to be made at an annual or special meeting must be received by the Company not less than 14 days nor more than 50 days prior to the scheduled date of the meeting (or, if less than 21 days notice of the date of the meeting is given, the 7th day following the day such notice was given).

Under the Shareholder Notice Procedure, a shareholder's notice to the Company proposing to nominate a person for election as a director must contain certain information, including, without limitation, the identity and address of the nominating shareholder, the number of shares of Common Stock that are owned by such shareholder and the name and address of the proposed nominee. If the Chairman of the Board or other officer presiding at a meeting determines that a person was not nominated in accordance with the Shareholder Notice Procedure, such person will not be eligible for election as a director.

By requiring advance notice of nominations by shareholders, the Shareholder Notice Procedure affords the Nominating Committee of the Board of Directors an opportunity to consider the qualifications of the proposed nominees and, to the extent deemed necessary or desirable by the Nominating Committee, to inform shareholders about such qualifications.


CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS

Board Meetings and Committees
During 2006, the full Board of Directors met fifteen times, the Compensation Committee met once, the Nominating Committee met once, and the Audit Committee met seventeen times. In addition, the Compliance Committee met four times and dissolved in May, and the Information Technology Committee met once. Each director attended seventy-five percent or more of all meetings of the Board of Directors and committees of the Board on which he serves. The Company strongly encourages all members of the Board of Directors to attend the annual meeting of shareholders each year. At the prior year's annual shareholder meeting, all directors were in attendance.
 
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The Board of Directors consists of a majority of "independent directors" as such term is defined in the Nasdaq Stock Market Marketplace Rules. The Board of Directors has determined that Hosmer A. Brown, III, Edsel R. Burns, E.V. Holder, Jr., Keith F. Molihan, Neal W. Scaggs and Thomas W. Wright are independent directors. The independent directors met twice in executive session during 2006.

The Board of Directors has adopted a formal policy by which shareholders may communicate with members of the Board of Directors by mail addressed to an individual member of the Board, to the full Board, or to a particular committee of the Board, at the following address: c/o Premier Financial Bancorp, Inc., 2883 5th Avenue, Huntington, West Virginia 25702.

The Board of Directors has three standing committees: a Compensation Committee, a Nominating Committee and an Audit Committee.

Compensation of the Board of Directors
Directors who are not full time employees of the Company or any subsidiary receive fees of $500 a month for their services. Board members are also reimbursed for expenses incurred in connection with their services as directors. Directors receive no compensation for attending committee meetings.

Security Ownership by Directors and Officers
The following table sets forth certain information concerning ownership of Premier’s Common Stock as of March 31, 2007 by (i) each of the directors, (ii) each executive officer named in the Summary Compensation table contained herein, and (iii) all directors and executive officers as a group. Except as otherwise noted, each beneficial owner listed below has sole voting and investment power with respect to the shares listed next to the owner’s name.

 
 
 
 
Name of Beneficial Owner
  
 
Common
Stock
Beneficially
Owned as of
3/31/2007(1)
  
Exercisable
Options to
Acquire
Additional
Common
Stock as of
3/31/2007(2)
  
 
 
Percentage
Of
Outstanding
Shares
  
               
Toney K. Adkins, Director
    
6,180
          
*
  
Hosmer A. Brown, III, Director
    
59,451
          
1.1%
 
Edsel R. Burns, Director (3)
    
787
          
*
  
E.V. Holder, Jr., Director
    
16,720
          
*
  
Keith F. Molihan, Director
    
5,826
          
*
  
Marshall T. Reynolds, Chairman of the Board (4)
    
562,300
          
10.7%
 
Neal W. Scaggs, Director
    
6,825
          
*
  
Robert W. Walker, Director & Chief Executive Officer (5)
    
43,572
    
14,251
    
1.1%
 
Thomas W. Wright, Director
    
33,134
          
*
  
Brien M. Chase, Chief Financial Officer
    
240
    
6,502
    
*
  
Dennis J. Klingensmith, Vice President
    
2,758
    
9,500
    
*
  
All directors and executive officers as a group (11 in number)
    
737,793
    
30,253
    
14.7%
 


* The percentage of outstanding shares beneficially owned is less than 1%.

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(1)
The information contained in this column is based upon information furnished to the Company by the named individuals and the shareholder records of the Company. Except where otherwise indicated, this column represents the number of shares beneficially owned, which includes shares as to which a person has sole or shared voting and/or investment power.
(2)
Includes options that are exercisable or will become exercisable within 60 days of March 31, 2007.
(3)
Joint voting and investment power shared with spouse.
(4)
Includes 34,255 shares owned by a controlled corporation and 2,310 shares owned by spouse, with respect to which reporting person has no voting or investment power. 
Mr. Reynolds has pledged 406,870 shares as collateral.
(5)
Includes 6,041 shares owned by spouse, with respect to which reporting person has no voting or investment power.

Other Directorships
The Company's Chairman of the Board, Marshall T. Reynolds, serves as a director of the following publicly held companies or banks whose shares are registered under the Securities Exchange Act of 1934: Abigail Adams Bancorp, Inc., Washington, D.C.; Champion Industries, Inc., Huntington, West Virginia; First Guaranty Bank, Hammond, Louisiana; First State Financial Corporation, Sarasota, Florida; Portec Rail Products, Inc. Pittsburgh, Pennsylvania, and Energy Services Acquisition Corp., Huntington, West Virginia. Directors Neal W. Scaggs and Thomas W. Wright also serve as directors of First State Financial Corporation and Portec Rail Products, Inc. Director Scaggs and Edsel R. Burns also serve as directors of Energy Services Acquisition Corp. In addition, director Scaggs is also a director of Champion Industries, Inc.

Nominating Committee
The Nominating Committee nominates individuals to serve on the Company’s Board of Directors, to serve on other committees of the Board of Directors, and to serve on the boards of directors of the Company’s subsidiaries. The Nominating Committee currently consists of Messrs. Burns, Molihan and Scaggs, all of whom are independent directors as defined in the Nasdaq Stock Market Marketplace Rules. A copy of the Nominating Committee charter is attached to this proxy statement as Exhibit A.

When considering a potential director candidate, the Nominating Committee looks for personal and professional integrity, demonstrated ability and judgment and business experience. The Nominating Committee will review and consider director nominees recommended by shareholders. There are no differences in the manner in which the Nominating Committee evaluates director nominees based on whether the nominee is recommended by a shareholder.
 
Audit Committee
The Audit Committee meets with the Company’s financial management, internal auditors and independent auditors and reviews the accounting principles and the scope and control of the Company’s financial reporting practices. The Audit Committee makes reports and recommendations to the Board with respect to audit matters and oversees the internal audit function, reviews the internal audit reports, and provides direction for the resolution of internal audit findings and recommendations. The Audit Committee also recommends to the Board the appointment of the firm selected to be independent certified public accountants for the Company and monitors the performance of such firm;
 
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reviews and approves the scope of the annual audit and evaluates with the independent certified public accountants the Company's annual audit and annual consolidated financial statements; and reviews with management the status of internal accounting controls and internal audit procedures and results. The Audit Committee consists of Messrs. Burns, Scaggs, Wright and Molihan. The Audit Committee is required to have and will continue to have at least three members, all of whom must be "independent directors" as defined in the Marketplace Rules of the Nasdaq Stock Market.

The Board determined that Messrs. Burns, Scaggs, Molihan, and Wright are financially literate in the areas that are of concern to the Company, and are able to read and understand fundamental financial statements. The Board has also determined that Messrs. Burns, Scaggs, Molihan, and Wright each meet the independence requirements set forth in the Marketplace Rules of the Nasdaq Stock Market.

The Securities and Exchange Commission ("SEC") has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an "audit committee financial expert" serving on its audit committee. 

Based on its review of the criteria of an audit committee financial expert under the rule adopted by the SEC, the Board of Directors believes that Edsel R. Burns qualifies as an audit committee financial expert. The Board has also determined that Mr. Burns meets the independence requirements set forth in the Marketplace Rules of the Nasdaq Stock Market.

The Company’s Board of Directors has adopted a written charter for the Audit Committee of the Board. A copy of the written Audit Committee charter is attached as Exhibit B to this annual meeting proxy statement. Please review the Audit Committee Report below.

Audit Committee Report
It is the responsibility of management to prepare the financial statements and the responsibility of Crowe Chizek and Company LLC, the Company’s independent auditors, to audit the financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

In connection with its review of the Company’s financial statements for 2006, the Audit Committee:

·  
Has reviewed and discussed the audited financial statements with management;
·  
Has discussed with the independent auditors the matters required to be discussed by Statements on Auditing Standards (SAS) 61 (Codification of Statements on Auditing Standards, AU 380); and
·  
Has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), and has discussed with the independent accountant the independent accountant’s independence.
 

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The Audit Committee also discussed with management and the independent auditors the quality and adequacy of the Company’s internal controls and considered the internal audit function’s organization, responsibilities, budget and staffing. The Committee reviewed with the independent auditors their audit plans, audit scope and identification of audit risks.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Premier Financial Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006.

Members of the Audit Committee:
 
/s/ Edsel R. Burns, Chairman

/s/ Neal W. Scaggs

/s/ Keith F. Molihan

/s/ Thomas W. Wright

Compensation Committee
The Compensation Committee consists of Messrs. Wright, Burns and Molihan, all of whom are independent directors as defined in the Nasdaq Stock Market Marketplace Rules. The Committee reviews and determines salaries and other benefits for executive and senior management of the Company and its subsidiaries, reviews and determines the employees to whom stock options are to be granted and the terms of such grants, and reviews the selection of officers who participate in incentive and other compensation plans and arrangements. The Committee establishes the management compensation policy and the general compensation policies of the Company.

The Company’s Board of Directors has adopted a written charter for the Compensation Committee of the Board. A copy of the written Audit Committee charter is attached as Exhibit C to this annual meeting proxy statement. Please review the Company’s Compensation Discussion and Analysis as well as the Compensation Committee Report below.



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EXECUTIVE OFFICERS OF THE COMPANY

The individuals named in the following table are the executive officers of the Company under applicable SEC disclosure rules. Except as otherwise indicated, each executive officer has held the position indicated for the last five years.

Name
Age
Position
Marshall T. Reynolds
70
Chairman of the Board
Robert W. Walker
60
President and Chief Executive Officer
Brien M. Chase
42
Vice President and Chief Financial Officer
(Principal Accounting Officer)
Dennis Klingensmith
53
Vice President, Premier
(Chief Executive Officer, First Central Bank)

Mr. Walker has held this position since October, 2001. From September, 1998 until October, 2001 Mr. Walker was President, Boone County Bank, Inc. Prior to that time, Mr. Walker was a Regional Vice President at Bank One, West Virginia, N.A. Mr. Walker also serves on the Company’s asset/liability management committee.

Mr. Chase began his duties as CFO of the Company in April, 2002. From June 1994 to January 2001, Mr. Chase was corporate accounting manager for One Valley Bancorp, Inc. He also served as controller for four of the One Valley Bancorp subsidiaries. Prior to that time, Mr. Chase was the senior accountant for One Valley Bancorp for six years. Mr. Chase also serves on the Company’s asset/liability management committee.

Mr. Klingensmith has held this position since June, 1998 and has served as CEO of First Central Bank since November 2001. Prior to that time, Mr. Klingensmith was an area Chief Executive Officer for Bank One, West Virginia, N. A. Mr. Klingensmith was also acting CEO of Citizens’ Bank (Kentucky), Inc. from November 2002 to February 2003 and acting CEO of Farmers Deposit Bank from June 2003 to October 2003. Mr. Klingensmith also serves on the Company’s asset/liability management committee.

For additional information about Mr. Reynolds and Mr. Walker, see "ELECTION OF DIRECTORS.”


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COMPENSATION DISCUSSION AND ANALYSIS

Premier has identified only three executives that meet the definition of a “named executive officer”; the Chief Executive Officer, Robert W. Walker; the Chief Financial Officer, Brien M. Chase and Vice President, Dennis J. Klingensmith. The following discussion details the Company’s goals in how it compensates these named executive officers, analyzes how the elements in Company’s compensation programs meet these goals, discusses how the Company determines the actual amounts paid to the named executive officers and finally presents, in tabular form, the amounts of compensation paid to each named executive officer in 2006.

The objectives of Premier’s compensation program are to attract and retain qualified individuals of high integrity, to motivate them to achieve the goals set forth in the Company’s business plan; to link executive and stockholder interests through incentive-based compensation; and to enhance the Company’s performance, measured by both short-term and long-term achievements. Premier believes these goals will provide consistent, long-term shareholder value as well as build a vibrant franchise that will attract locally well known community bankers and customers.

To achieve these goals, Premier compensates its named executive officers using a base salary, a performance based annual bonus, and stock option awards. Premier believes the interests of the Company and its shareholders are served by this three-part approach. Under this approach the compensation of executive officers involves a part of their pay that is “at risk”--namely, the annual bonus and any stock option awards. The variable annual bonus permits individual performance to be recognized on an annual basis, and is based, in significant part, on the performance of the respective executive officer, whereas stock option grants typically only have value to the executive officer if there is a rise in Premier’s stock price beyond the grant date.

To attract and retain qualified individuals of high integrity, Premier pays a competitive base salary to its executive officers and offers the option to participate in customary benefits such as medical insurance and a 401k retirement plan. Salaries are commensurate with an individual’s experience; ability to lead, implement and achieve the Company’s strategic goals; capability in enhancing the Company’s performance in light of potentially adverse changes in banking regulation, interest rates, the local and/or national economy, and other factors beyond the influence of management; and the executive’s level of integrity in dealing with customers, employees, shareholders and the directorship.

To reward short-term performance, Premier pays a discretionary annual bonus to the named executive officers as well as other key employees of the Company. The bonus rewards better than anticipated financial performance, such as asset growth, income enhancing strategies, expense reduction strategies, and non-performing asset resolution. The bonus also rewards other events such as successful regulatory examinations, the ability to recruit replacement management, quality financial disclosures and controls, strategic acquisitions or dispositions and other events the Company may consider from time-to-time.

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To reward long-term performance and enhancements to long-term shareholder value, Premier offers stock options to the named executive officers as well as other key employees of the Company. Options are typically granted once a year, near the beginning of the year, in conjunction with a regularly scheduled board of directors meeting. Scheduling decisions are made without regard to anticipated earnings or other major announcements by the Company. As a matter of practice, Premier does not reprice stock options. To reward long-term performance, the options typically vest in three equal annual installments beginning on the grant date and have a maximum ten-year term. Premier believes the vesting schedule also provides incentive for the named executive officers to continue their employment with the Company.

The annual bonus, number of stock options and salary increase, if any, are determined annually. Premier uses surveys conducted by local state banking associations to assess competitive market place compensation for its executive officers and uses ranges of compensation rather than specific targets. The named executive officers do not have employment, severance or change-of-control agreements. They serve at the will of the Board of Directors, which enables Premier to terminate their employment with discretion as to the terms of any severance arrangement.

For any annual bonus, the CEO reviews the estimated full year financial results with the Board of Directors and, if appropriate, an annual bonus pool is determined. Allocations from the pool are made to Premier’s subsidiary banks whose senior management make individual award recommendations. Premier does not use rigid incentive formulas to determine the annual bonus, as simple formulas may tend to improperly favor one aspect of financial performance to the detriment of others, while complex formulas provide no real focus or are inevitably adjusted for unforeseen events. A recommendation as to the bonus to be paid to each executive officer is based on a evaluation by the Chief Executive Officer of their individual performance for the prior year and their contribution toward Premier’s performance as a whole. After reviewing the final full year results, the Compensation Committee, with input from the CEO with respect to the other named executive officers and affiliate bank presidents, uses discretion in evaluating the individual award recommendations and determining the actual bonus amount to be awarded. Premier believes that the annual bonus rewards those high-performing individuals who drive the financial results and long-term performance of the Company.

Similar to the annual bonus, the number of stock options granted to individuals is determined, with input from the CEO, by the Compensation Committee. The number of stock options granted annually is modest so as not to dilute earnings per share either through the increase in the number of shares outstanding or through recorded stock compensation expense. Stock options are granted with an exercise price equal to the closing price on the grant date and therefore only have value to the optionee if there is a rise in Premier’s stock price beyond the grant date. Premier believes it is the accumulation of options over time that provides the real incentive for the named executive officers to propel the Company’s value to ever higher levels.

The specific compensation amounts for each of Premier’s named executive officers for 2006 reflect the continued improvement in the Company’s financial performance. A more detailed analysis of Premier’s 2006 financial results is contained in the Management Discussion and Analysis section contained in the annual report to shareholders and our Form 10-K filed with the Securities and Exchange Commission.

12
In determining the named executive officers’ compensation for 2006, the Compensation Committee considered the Company’s performance during 2005. Net income from continuing operations increased from $1,963,000 in 2004 to $4,434,000 for 2005. Earnings per share from continuing operations increased from $0.37 in 2004 to $0.85 in 2005. Non-performing loans decreased from $7,824,000 at December 31, 2004 to $6,144,000 at December 31, 2005 while non-performing assets decreased from $10,071,000 at December 31, 2004 to $8,193,000 at December 31, 2005. Net loan charge-offs decreased from $5,942,000 in 2004 to $1,496,000 in 2005. Loans outstanding increased from $324,927,000 at December 31, 2004 to $328,717,000 at December 31, 2005. Outstanding bank debt at the parent company was fully repaid. Outstanding 9.75% junior subordinated debentures were reduced from $20,876,000 at December 31, 2004 to $15,722,000 at December 31, 2005. Premier was given permission from the Federal Reserve Bank of Cleveland to pay all of the ten quarters of deferred accumulated Trust Preferred dividends related to the subordinated debentures and was granted permission to pay the four current quarterly Trust Preferred dividends during 2005. The Federal Deposit Insurance Corporation and Kentucky Department of Financial Institutions jointly rescinded their cease and desist order issued to Premier’s affiliate Farmers Deposit Bank. The Company successfully converted to a third-party data processor.

Based upon an evaluation of his contributions toward these and other events in 2005, his leadership performance and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Walker a salary increase of $5,872 in 2006 to $200,000 annually. Considering the specific accomplishments achieved by Premier in 2005, the Compensation Committee awarded Mr. Walker a $20,000 cash bonus which was paid in February 2006. This was the first cash bonus paid to named executive officers during Mr. Walker’s tenure as Chief Executive Officer. To continue to incent Mr. Walker to continue with his successful turnaround of Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,000 options to buy Premier stock at $16.00 per share (the closing price on the February 15, 2006 grant date.) This grant increased Mr. Walker’s total options to buy Premier stock to 19,250. Additional information on Mr. Walker’s 2006 compensation is detailed in the tables below.

Based upon an evaluation of his contributions toward achieving the Company’s performance in 2005 as summarized above, his leadership in providing clear, concise and quality financial disclosures to the Board of Directors and shareholders through Premier’s annual and quarterly reports and this proxy statement and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Chase a salary increase of $5,250 in 2006 to $92,500 annually. Considering the specific accomplishments achieved by Premier in 2005, the Compensation Committee awarded Mr. Chase a $10,000 cash bonus which was paid in February 2006. To continue to incent Mr. Chase to continue improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 2,500 options to buy Premier stock at $16.00 per share (the closing price on the February 15, 2006 grant date.) This grant increased Mr. Chase’s total options to buy Premier stock to 9,000. Additional information on Mr. Chase’s 2006 compensation is detailed in the tables below.

13
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2005 as summarized above; his banking insight as CEO of First Central Bank, Premier’s fastest growing affiliate bank; his leadership in bringing several large loan relationships to the Company and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Klingensmith a salary increase of $4,795 in 2006 to $117,500 annually. Considering the specific accomplishments achieved by Premier in 2005, the Compensation Committee awarded Mr. Klingensmith a $12,500 cash bonus which was paid in February 2006. To continue to incent Mr. Klingensmith to continue improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 3,000 options to buy Premier stock at $16.00 per share (the closing price on the February 15, 2006 grant date.) This grant increased Mr. Klingensmith’s total options to buy Premier stock to 12,500. Additional information on Mr. Klingensmith’s 2006 compensation is detailed in the tables below.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the compensation committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into Premier’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission.

Members of the Compensation Committee:

/s/ Edsel R. Burns, Chairman
 
/s/ Keith F. Molihan

/s/ Thomas W. Wright



14
 


Summary Compensation Table
The following table summarizes compensation earned in 2006 by the Company's named executive officers.


Name and principal position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards (1)
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
 (2) (3)
($)
Total
($)
Robert W. Walker
2006
200,000
20,000
---
20,747
---
---
9,030
249,777
   President and CEO
                  
                   
Brien M. Chase
2006
  92,500
10,000
---
10,373
---
---
3,346
116,219
   Vice President and CFO
                  
                   
Dennis Klingensmith
2006
117,500
12,500
---
12,480
---
---
5,432
147,912
  Vice President and
                  
  CEO First Central Bank(3)
                  
________________________ 

(1)
The amounts reported in this column represent the dollar amount recognized as expense for financial statement reporting purposes for the year ended December 31, 2006 for the fair value of stock options granted to each of the named executive officers in accordance with FAS 123R. Premier's option grants vest in three equal annual installments and therefore the amount expensed in 2006 includes the first vesting year of the 2006 option grant, the second vesting year of the 2005 option grant and the third vesting year of the 2004 option grant. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. More information about stock compensation expense, including the assumptions used in the calculation of these amounts, is included in footnote 15 to our audited financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. These amounts reflect the Company's accounting expense for these awards and do not necessarily correspond to the actual value that may be ultimately recognized by the named executive officers.

(2)
The Company provides automobiles to Mr. Walker and Mr. Klingensmith due to their extensive travel for business purposes. The Company's expense for providing the vehicle for the executive's personal use along with all other perquisites does not exceed $10,000 and therefore is not included in this table.

(3)
All other compensation consists of the Company's matching contributions to the executive's 401k plan account and premiums paid by the Company for the executive's participation in the Company’s group life insurance program.

 

15


Grants of Plan Based Awards in Fiscal Year 2006
The following table provides information about options granted to the named executive officers in 2006.
 
   
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
  
Estimated Future Payouts
Under Equity Incentive Plan
Awards
All Other
Stock
Awards:
All Other
Option
Awards:
 
 
 
Name
 
 
Grant
Date
 
 
Threshold
($)
 
 
Target
($)
 
 
Maximum
($)
  
 
 
Threshold
($)
 
 
Target
($)
 
 
Maximum
($)
Number of
Shares of
Stock or
Units
(#)
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant Date
Fair Value
of Stock and
Option Awards
($)
Robert W. Walker
Feb-15-2006
n/a
n/a
n/a
  
n/a
n/a
n/a
n/a
5,000
16.00
26,050
Brien M. Chase
Feb-15-2006
n/a
n/a
n/a
  
n/a
n/a
n/a
n/a
2,500
16.00
13,025
Dennis J. Klingensmith
Feb-15-2006
n/a
n/a
n/a
  
n/a
n/a
n/a
n/a
3,000
16.00
15,630
 
________________________       

(1)
Options awarded in 2006 vest in three equal annual installments beginning on February 15, 2007. The exercise price of the options awarded in 2006 was the closing price on February 15, 2006, the date of grant. The $5.21 per share grant date fair value of each option awarded was determined using SFAS 123R as more fully described in footnote 15 to Premier's December 31, 2006 Financial Statements.


16
 


Outstanding Equity Awards at 2006 Fiscal Year-End
The following table provides information on the current holdings of stock options by the name executive officers. This table includes unexercised and unvested option awards. Each option grant is shown separately for each named executive officer.

 
 
Option Awards
Stock Awards
Name
 
 
 
 
 
Number of
 Securities
Underlying
Options
(#)
 
 
 
 
Number of
Securities Underlying Unexercised
Options
(#)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
 
 
 
 
 
 
 
Option
Exercise
Price
 
 
 
 
 
 
 
 
Option
Expiration
 
 
 
Number of
Shares or
Units of
Stock
That Have
Not
Vested
 
 
Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested
 
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested
 
Exercisable
Unexercisable
(#)
($)
Date
(#)
($)
(#)
($)
Robert W. Walker
      0
5,000
n/a
16.00
Feb-16-2016
n/a
n/a
n/a
n/a
 
1,667
3,333
n/a
11.62
Jan-19-2015
n/a
n/a
n/a
n/a
 
2,667
1,333
n/a
  9.30
Feb-18-2014
n/a
n/a
n/a
n/a
 
3,750
      0
n/a
  7.96
Jan-15-2013
n/a
n/a
n/a
n/a
 
1,500
      0
n/a
16.50
Dec-31-2008
n/a
n/a
n/a
n/a
Brien M. Chase
      0
2,500
n/a
16.00
Feb-16-2016
n/a
n/a
n/a
n/a
 
   834
1,666
n/a
11.62
Jan-19-2015
n/a
n/a
n/a
n/a
 
1,334
  666
n/a
 9.30
Feb-18-2014
n/a
n/a
n/a
n/a
 
2,000
      0
n/a
 7.96
Jan-15-2013
n/a
n/a
n/a
n/a
Dennis J. Klingensmith
      0
3,000
n/a
16.00
Feb-16-2016
n/a
n/a
n/a
n/a
 
1,000
2,000
n/a
11.62
Jan-19-2015
n/a
n/a
n/a
n/a
 
1,667
  833
n/a
 9.30
Feb-18-2014
n/a
n/a
n/a
n/a
 
2,500
     0
n/a
 7.96
Jan-15-2013
n/a
n/a
n/a
n/a
 
1,500
     0
n/a
16.50
Dec-31-2008
n/a
n/a
n/a
n/a

 


17
 


Director Compensation
The following table summarizes compensation earned in 2006 by the Company's directors.

Name
Fees
Earned or
Paid in
Cash
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total
($)
Toney K. Adkins
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Hosmer A. Brown, III
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Edsel R. Burns
6,000
n/a
n/a
n/a
n/a
n/a
6,000
E.V. Holder, Jr.
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Keith F. Molihan
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Marshall T. Reynolds
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Neal W. Scaggs
6,000
n/a
n/a
n/a
n/a
n/a
6,000
Robert W. Walker
(1)
n/a
n/a
n/a
n/a
n/a
      0
Thomas W. Wright
6,000
n/a
n/a
n/a
n/a
n/a
6,000

________________________ 

(1)
In accordance with Company policy, as an employee of the Company, Mr. Walker does not receive any director compensation.

18
 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The Company's subsidiaries have made, and expect to make in the future to the extent permitted by applicable federal and state banking laws, bank loans in the ordinary course of business to directors and officers of the Company and its subsidiaries and their affiliates and associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. In the opinion of the Company, such loans do not involve more than a normal risk of collectibility or present other unfavorable features. In addition, the Company's banking subsidiaries have engaged, and in the future may engage, in transactions with such persons and their affiliates and associates as a depositary of funds, transfer agent, registrar, fiduciary and provider of other similar services.

The Company has adopted a policy to conduct an appropriate review of all related party transactions on an ongoing basis, pursuant to which all material or related transactions with any director, officer or employee or other person or entity with which such director, officer, or employee is affiliated must be on terms no less favorable to the corporation than those that are generally available from unaffiliated third parties and must be approved and ratified by the audit committee by majority vote of its members who do not have an interest in the transaction.

During the years ended December 31, 2006, 2005, and 2004, the Company or its subsidiaries have paid approximately $228,000, $191,000 and $358,000, respectively, for commercial printing services and office supplies and furniture from Champion Industries, Inc., Huntington, West Virginia, of which the Company's Chairman of the Board, Marshall T. Reynolds, is its President and Chief Executive Officer and a principal shareholder and the Company’s director Toney K. Adkins is President and Chief Operating Officer.

The Company or its subsidiaries have paid The Harrah and Reynolds Corporation, a corporation controlled by Marshall T. Reynolds, approximately $468,000, $499,000 and $489,000 in 2006, 2005, and 2004, respectively, to permit employees of the Company and its subsidiaries to participate in a medical benefit plan sponsored and administered by The Harrah and Reynolds Corporation.

The Company leases its headquarters facility at 2883 Fifth Avenue, Huntington, West Virginia from River City Properties, LLC, an entity 12.5% owned by Chairman of the Board of Directors Marshall T. Reynolds. The lease, for 5,900 square feet, has a 5 year term commencing in September 2002 with annual rent of $8.50 per square foot the first year and thereafter inflation adjusted. The Company believes that the terms of this lease, which were approved by the Board of Directors, are no less favorable to the Company than those available from unrelated third parties.


19
 
 
    On January 31, 2006, the Company executed and delivered to First Guaranty Bank of Hammond, Louisiana a Promissory Note and Business Loan Agreement dated January 31, 2006 for the principal amount of $7,000,000, bearing interest floating daily at the “Wall Street Journal” prime rate (currently 8.25%) and requiring monthly principal payments of $50,000 until maturity on September 28, 2017. The note is secured by a pledge of Premier’s 100% interest in Boone County Bank (a wholly owned subsidiary) under Commercial Pledge Agreement dated January 31, 2006. The proceeds of this note were used to redeem $7,000,000 (280,000 shares) of Premier’s 9.75% Trust Preferred Securities as of January 31, 2006.

Premier’s chairman owns approximately 27.6% of the voting stock of First Guaranty Bank. However, Premier’s board of directors determined during its vote to authorize the company to enter into the loan transaction that the terms of the financing, including the interest rate and collateral, were no less favorable than those which could be obtained from other financial institutions.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based upon a review of filings with the SEC and representations that no other reports were required, the Company believes that all of the Company’s directors and executive officers complied during fiscal 2006 with the reporting requirements of Section 16(a) of the Securities Exchange Act except that Company vice president Dennis J. Klingensmith amended three Form 4 reports previously filed on February 18, 2004, January 19, 2005, and February 15, 2006 to include his indirect ownership of common stock and the Company’s trust preferred securities held in his 401(k) account. These holdings were reported in full on amended form Form 4’s filed on November 13, 2006.


20
 

INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2 on Proxy)

At its meeting held on April 18, 2007, the Audit Committee appointed Crowe Chizek and Company LLC to serve as the Company’s independent public accountants and auditors for the fiscal year ending December 31, 2007 Crowe Chizek and Company LLC has served as the Company’s independent public accountants and auditors since the 1995 fiscal year.

Representatives of Crowe Chizek and Company LLC are expected to be present at the annual meeting and will be available to respond to appropriate questions and will have the opportunity to make a statement if they desire to do so.

Audit Fees
Audit fees and expenses billed to the Company by Crowe Chizek and Company LLC for the audit of the Company's financial statements for the fiscal years ended December 31, 2006 and December 31, 2005, and for review of the Company's financial statements included in the Company's quarterly reports on Form 10-Q, are as follows:

Fiscal 2006
$180,000
Fiscal 2005
$180,000

Audit Related Fees
Audit related fees and expenses billed to the Company by Crowe Chizek and Company LLC for years 2006 and 2005 for services related to the performance of the audit or review of the Company's financial statements that were not included under the heading "Audit Fees", are as follows:

Fiscal 2006
$12,000
Fiscal 2005
$13,180

Tax Fees
Tax fees and expenses billed to the Company by Crowe Chizek and Company LLC for fiscal years 2006 and 2005 for services related to tax compliance, tax advice and tax planning, consisting primarily of preparing the Company's federal and state income tax returns for the previous fiscal periods and inclusive of expenses are as follows

Fiscal 2006
$28,600
Fiscal 2005
$40,040

All Other Fees
Fees and expenses billed to the Company by Crowe Chizek and Company LLC for all other services provided during fiscal years 2006 and 2005 are as follows:

Fiscal 2006
$5,375
Fiscal 2005
$5,125
 

21
 

In 2004, the Audit Committee established a policy whereby the independent auditor is required to seek pre-approval by the Committee of all audit and permitted non-audit services by providing a prior description of the services to be performed and specific estimates for each such service.

The Audit Committee approved all of the services performed by Crowe Chizek and Company LLC during fiscal 2006.

The Audit Committee of the Board of Directors has considered whether the provision of non-audit services described above is compatible with maintaining the independent accountant’s independence.

The Company’s Board of Directors recommends that shareholders vote "FOR" ratification of the appointment of Crowe Chizek and Company LLC as the Company's independent accountants for the 2007 fiscal year.



22
 

CODE OF ETHICS

The Board of Directors adopted a Code of Business Conduct and Ethics on November 19, 2003 that applies to all of the Company's officers, directors and employees and a Code of Ethics for the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer which supplements our Code of Business Conduct and Ethics (collectively the "Codes") which are intended to promote honest and ethical conduct, full and accurate reporting and compliance with laws. We have filed copies of the Codes with the SEC as an exhibit to our December 31, 2003 annual report on Form 10-K.


SHAREHOLDER PROPOSALS
 
    Any shareholder proposal intended to be presented at the 2008 Annual Meeting of Shareholders must be received by the Company by January 18, 2008 in order to be considered for inclusion in the Proxy Statement for the 2008 Annual Meeting of Shareholders. In addition, the proxy solicited by the Board of Directors for the next annual meeting of shareholders will confer discretionary authority to vote on any shareholder proposal presented at the meeting, unless the Company is provided with notice of such proposal no later than April 2, 2008. However, even if notice is timely received, the proxies may nevertheless be entitled to exercise discretionary authority on the matter to the extent permitted by Securities and Exchange Commission regulations.


OTHER MATTERS
 
    The only matters to be considered at the meeting or any adjournment thereof, so far as known to the Board of Directors, are those set forth in the Notice of Annual Meeting of Shareholders and routine matters incident to the conduct of the meeting. However, if any other matters should properly come before the meeting or any adjournment thereof, the Board of Directors intends that the persons named in the accompanying proxy form, or their substitutes, will vote the shares represented by such proxy form in accordance with their best judgment on such matters.

By Order of the Board of Directors,

/s/ E. V. Holder, Jr.
E.V. Holder, Jr.
           Secretary


Huntington, West Virginia
May 17, 2007



23
 

EXHIBIT A

NOMINATING COMMITTEE CHARTER

The nominating committee of the board of directors shall consist of a minimum of three directors. Members of the committee shall be appointed and may be removed by the board of directors. All members of the committee shall be independent directors as defined in the Nasdaq Manual.

The purpose of the committee shall be to assist the board in identifying qualified individuals to become board members and in determining the composition of the board of directors and its committees.

In furtherance of this purpose, the committee shall have the following authority and responsibilities:

1.
To lead the search for individuals qualified to become members of the board of directors and to select director nominees to be recommended to the board for its approval and to be presented for shareholder approval at the annual meeting. The committee shall select individuals as director nominees who shall have the highest personal and professional integrity, who shall have demonstrated exceptional ability and judgment and who shall be most effective, in conjunction with the other nominees to the board, in collectively serving the long-term interests of the shareholders.

2.
To review the board of directors' committee structure and to recommend to the board for its approval directors to serve as members of each committee. The committee shall review and recommend committee slates annually and shall recommend additional committee members to fill vacancies as needed.

3.
To review on an annual basis director compensation and benefits.

The committee shall have the authority to delegate any of its responsibilities to subcommittees as the committee may deem appropriate in its sole discretion.

The committee shall have the authority to retain any search firm engaged to assist in identifying director candidates, and to retain outside counsel and any other advisors as the committee may deem appropriate in its sole discretion. The committee shall have sole authority to approve related fees and retention terms.

The committee shall report its actions and recommendations to the board after each committee meeting. The committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the board for approval.






Exhibit A Page 1 of 1

24
 

EXHIBIT B

PREMIER FINANCIAL BANCORP, INC. BOARD OF DIRECTORS

Revised as of March 17, 2004

AUDIT COMMITTEE CHARTER
 
I.     PURPOSE

The primary function of the Audit Committee is to act on behalf of the Board of Directors and oversee all material aspects of the Corporation’s reporting, control, and audit functions, particularly the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation, including reviewing: the financial reports and other financial information provided by the Corporation to any governmental body or the public; the Corporation's systems of internal controls regarding finance, accounting, legal compliance and ethics that management, the Committee and the Board have established; and the Corporation's auditing, accounting and financial reporting processes generally. Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the corporation's policies, procedures and practices at all levels. The Audit Committee's primary duties and responsibilities are to:
    
•  Be directly responsible for the appointment, compensation, retention and oversight of the work of the external auditors engaged by the Corporation (including resolution of disagreements between management of the Corporation and such auditors regarding financial reporting for the purpose of preparing or issuing an audit report or performing other audit services). The external auditors shall report directly to the audit committee.

•  Serve as an independent and objective party to monitor the Corporation's financial reporting process and internal control system.

•  Review and appraise the audit efforts of the Corporation's independent accountants and internal auditing department.

•  Provide an open avenue of communication among the independent accountants, financial and senior management, the internal auditing department and the Board of Directors.

The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.



Exhibit B Page 1 of 7

25
 

II. COMPOSITION

The Audit Committee shall be comprised of three or more directors appointed by the Board, each of whom shall meet the independence and experience requirements of the NASD Manual and other applicable laws and regulations. Those requirements on the date of revision of this charter are listed in Exhibit A (to the Audit Charter) attached hereto and incorporated herein by reference.

The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee shall designate a Chair by majority vote of the full Committee membership.
 
III. MEETINGS

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communications, the Committee should meet at least annually with management, the director of the internal auditing department and the independent accountants in separate executive sessions to discuss any matters the Committee or each of these groups believe should be discussed privately. In addition, the Committee, or at least its Chair, should meet with the independent accountants and management quarterly to review the Corporation's financial statements consistent with IV.4 below.
 
IV. RESPONSIBILITIES AND DUTIES
 
To fulfill its responsibilities and duties the Audit Committee shall:
 
Documents/Reports Review
 
1.
Review and update this Charter periodically, at least annually, as conditions dictate.

2.
Review the organization's annual financial statements and any reports of other financial information submitted to any governmental body or the public, including any certification, report, opinion, or review rendered by the independent accountants.

3.
Review the regular internal reports to management prepared by the internal auditing department and management's response.

4.
Review with financial management and the independent accountants the 10-Q prior to its filing or prior to the release of earnings. The Chair of the Committee may represent the entire Committee for purposes of this review.

 

Exhibit B Page 2 of 7
 
 
26
 
Independent Accountants

5.
Be directly responsible for the appointment, retention, compensation and oversight of the external auditors. The external auditors, in their capacity as independent public accountants, shall be responsible to the board of directors and directly to the audit committee as representatives of the shareholders.

6.
On an annual basis, ensure receipt of a formal written statement from the external auditors consistent with standards set by the Independence Standards Board. Additionally, the Committee shall discuss with the auditor relationships or services that may affect auditor objectivity or independence. If the Committee is not satisfied with the auditors’ assurances of independence, it shall take or recommend to the full board appropriate action to ensure the independence of the external auditor.

7.
At least annually, review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant.
 
8.
Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the organization's financial statements.

9.
At least annually preapprove all auditing services and non-auditing services provided by an external auditor (and shall disclose to investors in periodic reports required by Section 13(a) of the Securities Exchange Act of 1934 any approved non-audit services).

Financial Reporting Processes
 
10.
In consultation with the independent accountants and the internal auditors, review the integrity of the organization's financial reporting processes, both internal and external, and review any reports of the chief executive officer, chief financial officer or other officers disclosing (i) significant deficiencies in the design or operation of internal controls which could adversely affect the company’s ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controls.

11.
Consider the independent accountants' judgment about the quality and appropriateness of the Corporation's accounting principles as applied in its financial reporting.

12.
Consider and approve, if appropriate, major changes to the Corporation's auditing and accounting principles and practices as suggested by the independent accountants, management or the internal auditing department.



Exhibit B Page 3 of 7

27
 

Process Improvement

13.
Establish regular and separate systems of reporting to the Audit Committee by each of management, the independent accountants and the internal auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments.
 
14.
Following completion of the annual audit, review separately with each of management, the independent accountants and the internal auditing department any significant difficulties encountered during the course of the audit, including any restrictions of the scope of work or access to required information.
 
15.
Review any significant disagreement among management and the independent accountants or the internal auditing department in connection with the preparation of the financial statements.
 
16.
Review with the independent accountants, the internal auditing department and management the extent to which changes or improvements to financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)

Ethical and Legal Compliance

17.
Establish, review and update periodically a Code of Ethical conduct and ensure that management has established a system to enforce this code.

18.
Review management's monitoring of the Corporation's compliance with the organization's Ethical Code, and ensure management has the proper review system in place to ensure Corporation's financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements.
 
19.
Review activities, organizational structure, and qualifications of the internal audit department.
 
20.
Review, with the organization's counsel, legal compliance matters including corporate securities trading policies.

21.
Review, with the organization's counsel, any legal matter that could have a significant impact on the organization's financial statements.






Exhibit B Page 4 of 7

28
 

22. Establish procedures for:
 
(A)
the receipt, retention, and treatment of complaints received by the Corporation regarding accounting, internal accounting controls, or auditing matters; and

 
(B)
the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

23.
Perform any other activities consistent with this Charter, the Corporation's By-laws and governing law, as the Committee or the Board deem necessary or appropriate.
 
V. EXTERNAL RESOURCES

The committee shall be authorized to access internal and external resources, as the committee requires, to carry out its responsibilities. The committee may engage and shall have access to its own independent counsel and other advisors at the committee’s sole discretion. The Corporation shall provide for appropriate funding, as determined by the committee, for payment of compensation of the external auditor and any independent counsel and other advisors engaged by the committee.





























Exhibit B Page 5 of 7

29
 
 
EXHIBIT A to AUDIT CHARTER

INDEPENDENCE

(14)
“Family Member” means a person’s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home.

(15)
“Independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The following persons shall not be considered independent:
 
 
(A)
a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company for the current year or any of the past three years;
 
 
(B)
a director who accepts or who has a Family Member who has accepted any payments from the company or any parent or subsidiary of the company in excess of $60,000 during the current or any of the past three fiscal years, other than the following: (i) compensation for board or board committee service; (ii) payments arising solely from investments in the company’s securities; (iii) compensation paid to a Family Member who is a non-executive employee of the company or a parent or subsidiary of the company; (iv) benefits under a tax-qualified retirement plan, or non-discretionary compensation; (v) loans permitted under Section 13(k) of the Securities and Exchange Act of 1934. (provided, however, that audit committee members are subject to heightened requirements under NASD Rule 4350(d) (see (G) below);
 
 
(C)
a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company as an executive officer;
 
 
(D)
director who is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:
    (i)  payments arising solely from investments in the company’s securities; or
    (ii) payments under non-discretionary charitable contribution matching programs.
 
 
(E)
a director of the listed company who is, or has a Family Member who is employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the listed company serve on the compensation committee of such other entity; or
 

Exhibit B Page 6 of 7

30
 
 
 
 
(F)
a director who is or has a Family Member who is a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.
 
 
 
(G)
a director who, other than in his capacity as a member of the audit committee, the board of directors or any other board committee of the corporation, accepts directly or indirectly any consulting, advisory or other compensatory fee from the company or any subsidiary, or is an affiliated person of the company or any subsidiary.
 
 
EXPERIENCE

All audit committee members must be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement at the time they join the board. In addition, at least one audit committee member must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.




























 
Exhibit B Page 7 of 7
 
31
 
EXHIBIT C

COMPENSATION COMMITTEE CHARTER

The compensation committee of the board of directors shall consist of a minimum of three directors. Members of the committee shall be appointed by the board of directors upon the recommendation of the nominating committee and may be removed by the board of directors in its discretion. All members of the committee shall be independent directors as defined in the Nasdaq Manual and “non-employee directors” as defined by Rule 16b-3 under the Securities Exchange Act of 1934.

The purpose of the committee shall be to assist the board in carrying out the board of directors' overall responsibility relating to executive compensation.

In furtherance of this purpose, the committee shall have the following authority and responsibilities:

1.
To assist the board in developing and evaluating potential candidates for executive positions and to oversee the development of executive succession plans.

2.
To recommend to the board of directors for approval the chief executive officer's annual compensation, including salary, bonus, incentive and equity compensation. The chief executive officer may not be present during the committee's deliberations or voting on his compensation.

3.
To review and recommend to the board of directors for approval on an annual basis the evaluation process and compensation structure for the company's officers. The committee shall evaluate the performance of the company's senior executive officers and shall recommend to the board of directors the annual compensation, including salary, bonus, incentive and equity compensation, for such senior executive officers. The committee shall also provide oversight of management's decisions concerning the performance and compensation of other company officers.

4.
To review the company's incentive compensation and other stock-based plans and recommend changes in such plans to the board as needed. The committee shall have and shall exercise all the authority of the board of directors with respect to the administration of such plans.

5.
To prepare and publish an annual executive compensation report in the company's proxy statement.

The committee shall have the authority to delegate any of its responsibilities to subcommittees as the committee may deem appropriate in its sole discretion.

The committee shall have authority to retain such compensation consultants, outside counsel and other advisors as the committee may deem appropriate in its sole discretion. The committee shall have sole authority to approve related fees and retention terms.

The committee shall report its actions and any recommendations to the board after each committee meeting. The committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the board for approval.
 

 
Exhibit C Page 1 of 1
 
32
 
T
PLEASE MARK VOTES
PROXY
                                                         With-         For All
                                       For             hold          Except
AS IN THIS EXAMPLE
PREMIER FINANCIAL BANCORP, INC.
PROXY FOR 2007 ANNUAL MEETING
OF SHAREHOLDERS
1. ELECTION OF DIRECTORS:
    To elect as directors the following nine (9) nominees:
£ £ £
KNOW ALL MEN BY THESE PRESENTS, the undersigned shareholder of PREMIER FINANCIAL BANCORP, INC. (“Company”), Huntington, West Virginia, does hereby nominate, constitute and appoint
E.V. HOLDER, JR. and KEITH F. MOLIHAN
or any of them (with full power to act alone), my true and lawful attorney(s) and proxy(ies) with full power of substitution, for me and in my name, place and stead, to vote all of the Common Stock of the company standing in my name on its books at the close of business on May 2, 2007, at the Annual Meeting of Shareholders to be held at the Pullman Plaza Hotel, 1001 3rd Avenue, Huntington, West Virginia, on June 20, 2007, at 10:30 a.m. (eastern daylight time), and at any adjournment thereof, with all the powers the undersigned would possess if personally present as follows:
 
Toney K. Adkins            Hosmer A. Brown, III             Edsel R. Burns
E.V. Holder, Jr.              Keith F. Molihan            Marshall T. Reynolds
Neal W. Scaggs             Robert W. Walker           Thomas W. Wright
 
INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.
 
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. To ratify the appointment of Crowe Chizek and Company LLC as the Company’s independent auditors for the fiscal year ending December 31, 2007.
Fo   For           Against        Abstain
 £ £ £
   
 
3. OTHER BUSINESS.
To transact such other matters as may properly be brought before the Annual Meeting or any adjournment thereof. (The Board of Directors does not know of any such other matters).
 
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL OF THE NOMINEES LISTED IN ITEM 1 AND A VOTE “FOR” ITEM 2.
 
Information regarding the matters to be acted upon at the meeting is contained in the Notice of Annual Meeting of Shareholders and the Proxy Statement accompanying this proxy.
 
 
Please be sure to sign and date
 this Proxy in the box below.
Date
  
   
This proxy is solicited by the Board of Directors and will be voted as specified and in accordance with the accompanying proxy statement. If no instruction is indicated, then the above named proxies, or any one of them, will vote the shares represented “FOR” all of the nominees listed in Item #1 and “FOR” Item #2 and in accordance with their discretion on any other business that may properly come before the meeting.
Stockholder sign above                Co-holder (if any) sign above
  
   
à Detach above card, sign, date and mail in postage paid envelope provided. Ã
PREMIER FINANCIAL BANCORP, INC.
HUNTINGTON, WEST VIRGINIA
Please sign above exactly as your name(s) appear(s) on your stock certificate(s). When signing as attorney, executor, administrator, trustee or guardian, please give full title. If more than one trustee, all should sign. All joint owners must sign.
An addressed, postage prepaid envelope is enclosed for your convenience in promptly returning your proxy to the Company. The prompt return of your proxy will help the Company avoid additional costs in soliciting proxies.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
 
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

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