U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19370 / September 9, 2005

Securities and Exchange Commission v. William J. Covington, Civil Action No. 05-64 (KKC)(E.D. KY.)

COMMISSION CHARGES WILLIAM J. COVINGTON WITH FRAUD

The Securities and Exchange Commission ("Commission") announced that on September 9, 2005, it filed a civil action in the United States District Court for the Eastern District of Kentucky against William J. Covington, of Eminence, Kentucky, the former President and CEO of Farmers Deposit Bank ("Farmers"), a subsidiary of Premier Financial Bancorp, Inc. ("Premier"), a public company located in Huntington, West Virginia. Without admitting or denying the allegations of the Complaint, Covington has consented to the entry of a final judgment permanently enjoining him from engaging in the violations set forth below, ordering him to pay a civil penalty in the amount of $150,000, and imposing an officer and director bar.

The Commission's Complaint alleges that, from 2001 until 2003, Covington engaged in a variety of fraudulent acts designed to conceal mounting loan losses at Farmers from Farmers' board of directors and auditors, from Premier's management and board of directors, and from federal and state banking regulators. Among other things, Covington concealed substantial loan losses at the bank by recording loans under fictitious or misleading names and using the proceeds to keep earlier loans current; altering documents presented to Farmers' board of directors; altering loan documents to assign a later due date, thus making the loans appear current, a practice known as "bump-dating"; structuring loans by dividing them into smaller amounts to avoid meeting the minimum loan amount required for review by Farmers' auditors and board of directors; recording fictitious payments on loans; reassigning loan payments to unrelated accounts; and releasing collateral securing loans without requiring payment of the debt.

The Complaint further alleges that Covington's conduct caused Farmers to report false financial information to Premier. As a result, Premier filed quarterly and annual reports with the Commission containing materially false and misleading financial statements in 2001, 2002 and 2003. Specifically, Premier's net income for the fiscal year ended December 31, 2001 was overstated by 94 percent, and its net loss for 2002 was understated by 63 percent.

The Complaint alleges that Covington violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5 and 13b2-1 thereunder, and that he aided and abetted violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Complaint seeks a permanent injunction, together with civil penalties and an officer and director bar against Covington.