-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AccxYAk5ynTVniI2ty5dtJjq+r1w6uz5fMZzjzrmGhVCiVzqKYgGuAmJ/oZJJWwX ib0rUNL6A5kuu3BDMYz42w== 0000950114-97-000038.txt : 19970220 0000950114-97-000038.hdr.sgml : 19970220 ACCESSION NUMBER: 0000950114-97-000038 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19970203 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCANTILE BANCORPORATION INC CENTRAL INDEX KEY: 0000064907 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 430951744 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-17757 FILM NUMBER: 97516963 BUSINESS ADDRESS: STREET 1: P O BOX 524 STREET 2: P O BOX 524 CITY: ST LOUIS STATE: MO ZIP: 63166-0524 BUSINESS PHONE: 3144252525 MAIL ADDRESS: STREET 1: P O BOX 524 CITY: ST LOUIS STATE: MO ZIP: 63166-0524 FORMER COMPANY: FORMER CONFORMED NAME: MERCANTILE TRUST CO DATE OF NAME CHANGE: 19720229 S-4/A 1 MERCANTILE BANCORPORATION INC. FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1997 Registration No. 333-17757 =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- AMENDMENT NO. 2 to FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------------------- MERCANTILE BANCORPORATION INC. (Exact name of registrant as specified in its charter) MISSOURI 6712 43-0951744 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) P.O. Box 524 St. Louis, Missouri 63166-0524 (314) 425-2525 (Address, including ZIP code, and telephone number, including area code, of registrant's principal executive offices) ------------------------- JON W. BILSTROM, ESQ. General Counsel and Secretary Mercantile Bancorporation Inc. P.O. Box 524 St. Louis, Missouri 63166-0524 (314) 425-2525 (Name, address, including ZIP code, and telephone number, including area code, of agent for service) ------------------------- Copies to: JOHN Q. ARNOLD ROBERT M. LaROSE, ESQ. JAMES H. ERLINGER III, ESQ. Chief Financial Officer Thompson Coburn Bryan Cave LLP Mercantile Bancorporation Inc. Suite 3400 211 North Broadway P.O. Box 524 One Mercantile Center Suite 3600 St. Louis, Missouri St. Louis, Missouri St. Louis, Missouri 63166-0524 63101 63102-2750 (314) 425-2525 (314) 552-6000 (314) 259-2000 ------------------------- Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / ------------------------- CALCULATION OF REGISTRATION FEE ====================================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of securities to be registered registered offering price per unit aggregate offering price registration fee - ------------------------------------------------------------------------------------------------------------------------------------ Common stock, $5.00 par value 600,419 $19.30 $11,586,747.04 $3,511.14 shares ==================================================================================================================================== Includes one attached Preferred Share Purchase Right per share. Estimated solely for purposes of computing the registration fee pursuant to the provisions of Rule 457(f), and based upon the $23,886,676.00 aggregate book value of the 25,321 shares of common stock, $10.00 par value, of Regional Bancshares, Inc. issued and outstanding as of November 30, 1996, less $12,299,928.96, the respective portion of such aggregate book value to be paid in cash by the Registrant in connection with the exchange. The registrant previously paid $3,511.14 with the original filing on December 12, 1996.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. =============================================================================== 2 [LETTERHEAD OF REGIONAL BANCSHARES, INC.] February __, 1997 Dear Fellow Shareholder: On behalf of the Board of Directors and management of Regional Bancshares, Inc. ("Regional"), I cordially invite you to attend a Special Meeting of Shareholders of Regional to be held at 10:00 a.m., Central Time, on ______, March __, 1997, at the offices of Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri (the "Special Meeting"). At this important meeting, you will be asked to consider and vote upon the Agreement and Plan of Merger, dated as of August 23, 1996 (the "Merger Agreement"), and each of the transactions contemplated thereby, pursuant to which Regional will be merged (the "Merger") with and into Ameribanc, Inc., a Missouri corporation and wholly owned subsidiary of Mercantile Bancorporation Inc. ("MBI"). Upon consummation of the Merger, each share of Regional common stock will be converted into the right to receive as consideration in the Merger: (i) an amount in cash equal to $485.76; (ii) 23.7123 shares of MBI common stock; and (iii) 0.4838 of a share of West Pointe Bank And Trust Company common stock, all as more fully described in the accompanying Proxy Statement/Prospectus. I have enclosed the following items relating to the Special Meeting and the Merger: 1. A Proxy Statement/Prospectus; 2. A proxy card; and 3. A return envelope pre-addressed to Regional for the proxy card. The Proxy Statement/Prospectus and related proxy materials set forth, or incorporate by reference, financial data and other important information relating to Regional and MBI and describe the terms and conditions of the proposed Merger. The Board of Directors requests that you carefully review these materials before completing the enclosed proxy card or attending the Special Meeting. THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT. THE BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. --- It is very important that your shares are represented at the Special Meeting, whether or not you plan to attend in person. The affirmative vote of at least two-thirds of the outstanding Regional common stock is required for approval of the Merger Agreement. A failure to vote for approval of the Merger Agreement will have the same effect as a vote against the Merger Agreement. Therefore, I urge you to execute, date and return the enclosed proxy card in the enclosed postage-paid envelope as soon as possible to assure that your shares will be voted at the Special Meeting. The Board of Directors and management of Regional appreciate your continued support and look forward to seeing you at the Special Meeting. If you have any questions or require assistance, please contact the undersigned at (352) 846-1299. Very truly yours, DAVID B. UTTERBACK President and Chairman 3 REGIONAL BANCSHARES, INC. 1520 WASHINGTON AVE. ALTON, ILLINOIS 62002 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH __, 1997 TO THE SHAREHOLDERS OF REGIONAL: Notice is hereby given that a Special Meeting of Shareholders of Regional Bancshares, Inc., an Illinois corporation ("Regional"), will be held at the offices of Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri on March __, 1997, at 10:00 a.m., Central Time, for the following purposes: (1) To consider and vote upon the adoption and approval of the Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 23, 1996, and each of the transactions contemplated thereby, pursuant to which Regional will be merged (the "Merger") with and into Ameribanc, Inc. ("Ameribanc"), a wholly owned subsidiary of Mercantile Bancorporation Inc. ("MBI"), and the business and operations of Regional will be continued through Ameribanc, and whereby, upon consummation of the Merger, each share (other than shares held by MBI or shares as to which a shareholder has perfected dissenters' rights) of Regional common stock will be converted into the right to receive per share of Regional common stock as consideration in the Merger: (i) an amount in cash equal to $485.76; (ii) 23.7123 shares of MBI common stock; and (iii) 0.4838 of a share of West Pointe Bank And Trust Company common stock. (2) To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof. The record date for determining the shareholders entitled to receive notice of, and to vote at, the Special Meeting or any adjournments or postponements thereof has been fixed as of the close of business on _______ __, 1997. In the event the Merger is approved and consummated, each holder of Regional common stock will have the right to dissent from the Merger and demand payment of the fair value of his or her shares. The right of a shareholder to receive such payment is contingent upon strict compliance with the requirements of Section 11.70 of the Illinois Business Corporation Act of 1983, as amended, the full text of which is attached as Annex A to the accompanying ------- Proxy Statement/Prospectus. For a summary of these requirements, see "APPRAISAL RIGHTS OF SHAREHOLDERS OF REGIONAL" in the accompanying Proxy Statement/Prospectus. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT TO REGIONAL IN THE ACCOMPANYING ENVELOPE. By Order of the Board of Directors SARAH E.UTTERBACK Secretary February __, 1997 4 MERCANTILE BANCORPORATION INC. PROSPECTUS ---------------------------- REGIONAL BANCSHARES, INC. PROXY STATEMENT SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH __, 1997 This Prospectus of Mercantile Bancorporation Inc., a Missouri corporation ("MBI"), relates to up to 600,419 shares of common stock, $5.00 par value (the "MBI Stock"), and attached preferred share purchase rights (the "MBI Rights"), of MBI (the MBI Stock and MBI Rights are collectively referred to herein as the "MBI Common Stock"), to be issued to the shareholders of Regional Bancshares, Inc., an Illinois corporation ("Regional"), upon consummation of the proposed merger (the "Merger") of Regional with and into Ameribanc, Inc., a Missouri corporation and wholly owned subsidiary of MBI ("Ameribanc"). Upon receipt of the requisite shareholder and regulatory approvals, the Merger will be consummated in accordance with the terms and conditions of the Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 23, 1996, by and among MBI, Ameribanc and Regional. This Prospectus also serves as the Proxy Statement for Regional in connection with the Special Meeting of Shareholders of Regional (the "Special Meeting"), which will be held on March __, 1997, at the time and place and for the purposes stated in the Notice of Special Meeting of Shareholders accompanying this Proxy Statement/Prospectus. Pursuant to the Merger Agreement, MBI will issue up to an aggregate of 600,419 shares of MBI Common Stock. Upon consummation of the Merger, the business and operations of Regional will be continued through Ameribanc and each share (other than a share held by MBI or a share as to which a shareholder of Regional has perfected dissenters' rights) of the common stock, $10.00 par value, of Regional (the "Regional Common Stock") will be converted into the right to receive as consideration in the Merger: (i) an amount in cash equal to $485.76 (the "Cash Consideration"); (ii) 23.7123 shares of MBI Common Stock (the "Stock Consideration"); and (iii) 0.4838 of a share of the common stock (the "West Pointe Common Stock") of West Pointe Bank And Trust Company ("West Pointe") (the "West Pointe Consideration") (the Cash Consideration, the Stock Consideration and the West Pointe Consideration are collectively referred to herein as the "Merger Consideration"), all as more fully described in detail at pages 21 to 32 of this Proxy Statement/Prospectus. The fair market value of the MBI Common Stock and the West Pointe Common Stock to be received pursuant to the Merger may fluctuate and at the consummation of the Merger may be more or less than the current fair market value of such shares. See "TERMS OF THE PROPOSED MERGER - General Description of the Merger." No fractional shares of MBI Common Stock or West Pointe Common Stock will be issued in the Merger, but cash will be paid in lieu of fractional shares. See "TERMS OF THE PROPOSED MERGER - Fractional Shares." The Merger is intended to qualify as a reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"), and is intended to achieve certain federal income tax tax-deferral benefits for Regional shareholders with respect to shares of MBI Common Stock received in the Merger. See "SUMMARY INFORMATION - Certain Federal Income Tax Consequences" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." MBI Common Stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "MTL." On January 31, 1997, the closing sale price for MBI Common Stock as reported on the NYSE Composite Tape was $53.375 per share. Neither the Regional Common Stock nor the West Pointe Common Stock has an established trading market. 5 This Proxy Statement/Prospectus, the Notice of Special Meeting and the form of proxy were first mailed to the shareholders of Regional on or about February __, 1997. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF MBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL AGENCY. All information contained in this Proxy Statement/Prospectus with respect to MBI has been supplied by MBI and all information with respect to Regional has been supplied by Regional. The date of this Proxy Statement/Prospectus is February __, 1997. - 2 - 6 AVAILABLE INFORMATION --------------------- MBI is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files with the Commission reports, proxy statements and other information. Such reports, proxy statements and other information filed with the Commission by MBI can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Suite 1300, Seven World Trade Center, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. The Commission maintains an Internet site on the World Wide Web containing reports, proxy and information statements and other information filed electronically by MBI with the Commission. The address of the World Wide Web site maintained by the Commission is http://www.sec.gov. MBI Common Stock is listed on the NYSE, and such reports, proxy statements and other information concerning MBI are available for inspection and copying at the offices of the NYSE, 20 Broad Street, New York, New York 10005. This Proxy Statement/Prospectus does not contain all of the information set forth in the Registration Statement on Form S-4 and exhibits thereto (the "Registration Statement") covering the securities offered hereby which has been filed by MBI with the Commission. As permitted by the rules and regulations of the Commission, this Proxy Statement/Prospectus omits certain information contained or incorporated by reference in the Registration Statement. Statements contained in this Proxy Statement/Prospectus provide a summary of the contents of any contract or other document referenced herein but are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement. For such further information, reference is made to the Registration Statement. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ------------------------------------------------- THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING TO MBI WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. IN ADDITION, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING TO MARK TWAIN BANCSHARES, INC. ("MARK TWAIN"), A MISSOURI CORPORATION AND BANK HOLDING COMPANY, AND ROOSEVELT FINANCIAL GROUP, INC. ("ROOSEVELT"), A DELAWARE CORPORATION AND SAVINGS AND LOAN HOLDING COMPANY, BOTH OF WHICH RECENTLY ENTERED INTO DEFINITIVE AGREEMENTS WITH MBI TO BE ACQUIRED BY MBI. SUCH DOCUMENTS, EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF STOCK OF MBI TO WHOM THIS PROXY STATEMENT/ PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST SHOULD BE MADE BY FEBRUARY __, 1997. The following documents filed with the Commission by MBI under the Exchange Act are incorporated herein by reference: (a) MBI's Annual Report on Form 10-K for the year ended December 31, 1995. (b) MBI's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996. (c) MBI's Current Reports on Form 8-K, dated January 16, 1996, March 11, 1996, November 6, 1996 and December 22, 1996. (d) The description of the MBI Stock set forth in Item 1 of MBI's Registration Statement on Form 8-A, dated March 5, 1993, and any amendment or report filed for the purpose of updating such description. - 3 - 7 (e) The description of the MBI Rights set forth in Item 1 of MBI's Registration Statement on Form 8-A, dated March 5, 1993, and any amendment or report filed for the purpose of updating such description. The following documents filed with the Commission by Roosevelt under the Exchange Act are incorporated herein by reference: (a) Roosevelt's Annual Report on Form 10-K for the year ended December 31, 1995, as amended by Form 10-K/A, dated July 31, 1996, and Form 10-K/A-2, dated September 13, 1996. (b) Roosevelt's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. Such incorporation by reference shall not be deemed to incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. All documents filed by MBI, Mark Twain and Roosevelt pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and until the date of the Special Meeting shall be deemed to be incorporated by reference herein and made a part hereof from the date any such document is filed. The information relating to MBI, Mark Twain and Roosevelt contained in this Proxy Statement/Prospectus does not purport to be complete and should be read together with the information in the documents incorporated by reference herein. Any statement contained herein or in a document incorporated herein by reference shall be deemed to be modified or superseded for purposes hereof to the extent that a subsequent statement contained herein or in any other subsequently filed document incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part hereof. Any statements contained in this Proxy Statement/Prospectus involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MBI OR REGIONAL. THIS PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF MBI COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO SHALL IMPLY OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MBI OR REGIONAL OR ANY OF THEIR SUBSIDIARIES OR IN THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF. - 4 - 8 TABLE OF CONTENTS -----------------
Page ---- AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 3 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . 3 SUMMARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 7 Business of MBI. . . . . . . . . . . . . . . . . . . . . . . . . 7 Business of Ameribanc. . . . . . . . . . . . . . . . . . . . . . 8 Business of Regional . . . . . . . . . . . . . . . . . . . . . . 8 Business of West Pointe. . . . . . . . . . . . . . . . . . . . . 9 The Proposed Merger. . . . . . . . . . . . . . . . . . . . . . . 9 Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 9 Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 10 Amendment; Termination . . . . . . . . . . . . . . . . . . . . . 10 Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 10 Interests of Certain Persons in the Merger . . . . . . . . . . . 11 Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 11 Special Meeting of Regional Shareholders . . . . . . . . . . . . 11 Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 11 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 12 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . 12 Certain Federal Income Tax Consequences. . . . . . . . . . . . . 13 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 13 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 13 Markets and Market Prices. . . . . . . . . . . . . . . . . . . . 14 Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 15 Summary Financial Data . . . . . . . . . . . . . . . . . . . . . 16 INFORMATION REGARDING SPECIAL MEETING. . . . . . . . . . . . . . . . 19 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Date, Time and Place . . . . . . . . . . . . . . . . . . . . . . 19 Record Date; Vote Required; Voting Agreements. . . . . . . . . . 19 Voting and Revocation of Proxies . . . . . . . . . . . . . . . . 19 Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . 20 TERMS OF THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . 21 General Description of the Merger. . . . . . . . . . . . . . . . 21 Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 22 Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 24 Amendment of Merger Agreement. . . . . . . . . . . . . . . . . . 24 Termination of Merger Agreement. . . . . . . . . . . . . . . . . 24 Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 25 Interests of Certain Persons in the Merger . . . . . . . . . . . 25 Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 26 Background of and Reasons for the Merger; Board Recommendations. 26 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 28 Surrender of Regional Stock Certificates and Receipt of Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 28 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 29 Business Pending the Merger. . . . . . . . . . . . . . . . . . . 29 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 32 - 5 - 9 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. . . . . . . . 33 RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL. . . . . . . . . . . . 37 PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . 39 Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 39 Pro Forma Combined Consolidated Financial Statements (Unaudited) 40 INFORMATION REGARDING REGIONAL . . . . . . . . . . . . . . . . . . . 50 Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . 58 Security Ownership of Certain Beneficial Owners and Management . 67 INFORMATION REGARDING MBI STOCK. . . . . . . . . . . . . . . . . . . 68 Description of MBI Common Stock and Attached Preferred Share Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . . 68 Restrictions on Resale of MBI Stock by Affiliates. . . . . . . . 70 Comparison of the Rights of Shareholders of MBI and Regional . . 70 SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . 73 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Certain Transactions with Affiliates . . . . . . . . . . . . . . 74 Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . 74 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . 74 FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . 74 Proposals to Overhaul the Savings Association Industry . . . . . 75 Support of Subsidiary Banks. . . . . . . . . . . . . . . . . . . 76 FIRREA and FDICIA. . . . . . . . . . . . . . . . . . . . . . . . 76 Depositor Preference Statute . . . . . . . . . . . . . . . . . . 77 The Interstate Banking and Community Development Legislation . . 77 RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . 77 LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . 78 CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 80 ANNEX A -- Dissenters' Rights Provisions of the Illinois Business Corporation Act . . . . . . . . . . . . . . . . . . . . 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- 6 - 10 SUMMARY INFORMATION ------------------- THE FOLLOWING SUMMARY OF THE IMPORTANT TERMS OF THE PROPOSED MERGER AND RELATED INFORMATION DISCUSSED ELSEWHERE IN THIS PROXY STATEMENT/ PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION WHICH APPEARS ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. SHAREHOLDERS OF REGIONAL ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY. ALL MBI PER SHARE DATA REFLECT A THREE-FOR-TWO STOCK SPLIT DISTRIBUTED IN THE FORM OF A STOCK DIVIDEND ON APRIL 11, 1994. BUSINESS OF MBI MBI, a Missouri corporation, was organized in 1970 and is a registered bank holding company under the federal Bank Holding Company Act of 1956, as amended (the "BHCA"). At September 30, 1996, MBI indirectly owned all of the capital stock of Mercantile Bank of St. Louis National Association ("Mercantile Bank"), 37 other commercial banks and one federally-chartered thrift, which together operated from 437 banking offices and 405 Fingertip Banking automated teller machines, including 42 off-premises machines, located throughout Missouri, Illinois, eastern Kansas, northern Arkansas and Iowa. MBI's services concentrate in four major lines of business -- consumer, corporate, investment banking and trust services. MBI also operates non-banking subsidiaries which provide related financial services, including investment management, brokerage services and asset-based lending. As of September 30, 1996, MBI had 60,163,042 shares of its Common Stock outstanding and reported, on a consolidated basis, total assets of $18.2 billion, total deposits of $14.6 billion, total loans of $12.2 billion and shareholders' equity of $1.5 billion. On January 2, 1996, MBI completed the acquisitions of (i) Hawkeye Bancorporation ("Hawkeye"), an Iowa corporation and registered bank holding company under the BHCA, located in Des Moines, Iowa, and (ii) First Sterling Bancorp, Inc. ("Sterling"), an Illinois corporation and registered bank holding company under the BHCA, located in Sterling, Illinois. These acquisitions were accounted for under the pooling-of-interests method of accounting. As of January 2, 1996, Hawkeye and Sterling reported total assets of $2.0 billion and $168 million, respectively. On February 9, 1996 and March 7, 1996, respectively, MBI completed the acquisitions of (i) Security Bank of Conway, F.S.B. ("Conway"), a federal stock savings bank located in Conway, Arkansas, and (ii) Metro Savings Bank, F.S.B. ("Metro"), a federal stock savings bank located in Wood River, Illinois. These acquisitions were accounted for under the purchase method of accounting. As of February 9, 1996, Conway reported total assets of $103 million. As of March 7, 1996, Metro reported total assets of $81 million. In connection with the acquisition of Hawkeye, MBI restated its consolidated financial statements as of and for the years ended December 31, 1995, 1994 and 1993. MBI filed supplemental financial statements as of and for the years ended December 31, 1995, 1994 and 1993 in a Current Report on Form 8-K, dated March 11, 1996, which has been incorporated by reference into this Proxy Statement/Prospectus. Due to the immateriality of the financial condition and results of operations of Sterling to that of MBI, the supplemental consolidated financial statements of MBI do not reflect the acquisition of Sterling. On August 22, 1996, November 1, 1996 and November 7, 1996, respectively, MBI completed the acquisitions of (i) Peoples State Bank ("Peoples"), a Kansas state-chartered bank, located in Topeka, Kansas, (ii) First Financial Corporation of America ("First Financial"), a Missouri corporation and registered bank holding company under the BHCA, located in Salem, Missouri, and (iii) TODAY'S BANCORP, INC. ("TODAY'S"), a Delaware corporation and registered bank holding company under the BHCA, located in Freeport, Illinois. These acquisitions were accounted for under the purchase method of accounting. As of August 22, 1996, November 1, 1996 and November 7, 1996, respectively, Peoples, First Financial and TODAY'S reported total assets of $96 million, $88 million and $501 million. - 7 - 11 On October 27, 1996, MBI entered into an agreement to acquire Mark Twain, a Missouri corporation and registered bank holding company under the BHCA, located in St. Louis, Missouri. This acquisition will be accounted for under the pooling-of-interests method of accounting. As of September 30, 1996, Mark Twain reported total assets of $3.1 billion, total deposits of $2.4 billion, total loans and leases of $2.1 billion and shareholders' equity of $289 million. On July 15, 1996, Mark Twain entered into an agreement to acquire First City Bancshares, Incorporated of Missouri ("First City"), a Missouri corporation, located in Springfield, Missouri. Such acquisition is expected to be consummated prior to the consummation of the Merger and will be accounted for under the purchase method of accounting. As of September 30, 1996, First City reported total assets of $89 million, total deposits of $77 million, total loans and leases of $58 million and shareholders' equity of $6 million. On December 22, 1996, MBI entered into an agreement to acquire Roosevelt, a Delaware corporation and registered savings and loan holding company under the Home Owner's Loan Act of 1933, located in St. Louis, Missouri. Such acquisition will be accounted for under the purchase method of acccounting. As of September 30, 1996, Roosevelt reported total assets of $9.0 billion, total deposits of $5.1 billion, total loans and leases of $4.2 billion and shareholders' equity of $506 million. On January 2, 1997, Roosevelt announced that it will recognize in the fourth quarter of 1996 approximately $80 million of pre-tax expenses, previously deferred in accordance with generally accepted accounting principles ("GAAP"), related to historical activities with interest rate exchange agreements. The current charge results from the continuing balance sheet repositioning associated with the execution of Roosevelt's retail strategy. After a tax benefit of 35% is recorded, shareholders' equity of Roosevelt will be reduced by approximately $52 million. In addition, Roosevelt announced that it intentionally reduced its assets by approximately $1.2 billion to $7.8 billion at year end. MBI reported, on a consolidated basis, net income of $66.6 million for the fourth quarter of 1996, compared with consolidated net income of $56.6 million for the fourth quarter of 1995. Net income per share for the last quarter of 1996 was $1.09, a 22.5% increase from the $.89 per share net income for the last quarter of 1995. For the year ended December 31, 1996, net income was $191.9 million, compared with $232.7 million for 1995. As of December 31, 1996, MBI reported, on a consolidated basis, total assets of $19.0 billion, total deposits of $14.8 billion and shareholders' equity of $1.6 billion, compared with total assets of $17.9 billion, total deposits of $13.7 billion and shareholders' equity of $1.6 billion, as of December 31, 1995. MBI's principal executive offices are located at One Mercantile Center, St. Louis, Missouri 63101 and its telephone number is (314) 425-2525. BUSINESS OF AMERIBANC Ameribanc, a Missouri corporation which was organized in 1991, is a wholly owned subsidiary of MBI and registered bank holding company under the BHCA. At September 30, 1996, Ameribanc owned all of the capital stock of 38 banks, one federally-chartered thrift and one trust company, which together operated from 437 locations in Missouri, Illinois, northern Arkansas, eastern Kansas and Iowa. Ameribanc will be the surviving corporation upon consummation of the Merger. BUSINESS OF REGIONAL Regional, an Illinois corporation, was organized in 1979 and is registered as a bank holding company under the BHCA. Regional currently owns all of the issued and outstanding shares of capital stock of the Bank of Alton ("Bank of Alton"), an Illinois state-chartered bank, located in Alton, Illinois. As of September 30, 1996, 25,321 shares of Regional Common Stock were issued and outstanding and Regional reported, on a consolidated basis, total assets of $182 million, total deposits of $147 million, total loans and leases of $103 million and shareholders' equity of $23 million. See "INFORMATION REGARDING REGIONAL." Regional's principal executive offices are located at 1520 Washington Avenue, Alton, Illinois 62002 and its telephone number is (618) 474-3500. - 8 - 12 BUSINESS OF WEST POINTE West Pointe, an Illinois state-chartered bank located in Belleville, Illinois, was organized in 1990. West Pointe currently operates from two locations in Belleville and Swansea, Illinois. As of September 30, 1996, 350,000 shares of West Pointe Common Stock were issued and outstanding and West Pointe reported total assets of $125 million, total deposits of $114 million, net loans and leases of $81 million and shareholders' equity of $9.3 million. THE PROPOSED MERGER Subject to the satisfaction of the terms and conditions set forth in the Merger Agreement, Regional, an Illinois corporation, will be merged with and into Ameribanc, a Missouri corporation. Upon consummation of the Merger, Regional's corporate existence will terminate and Ameribanc will continue as the surviving entity. Simultaneously with the effectiveness of the Merger, each share of Regional Common Stock (other than (a) a share held by MBI or any MBI corporate affiliate, except a share held in a fiduciary capacity or in satisfaction of a debt previously contracted in good faith, or (b) a share as to which a Regional shareholder has perfected dissenters' rights pursuant to Section 11.70 of the Illinois Act ("Dissenting Shares")) will be converted into the right to receive as consideration in the merger: (i) the Cash Consideration (cash equal to $485.76); (ii) the Stock Consideration (23.7123 shares of MBI Common Stock); and (iii) the West Pointe Consideration (0.4838 of a share of West Pointe Common Stock). The Stock Consideration and West Pointe Consideration are subject to certain anti-dilution protections but are not adjustable based on the operating results, financial condition or other factors affecting MBI, Regional or West Pointe prior to the consummation of the Merger. The fair market value of the MBI Common Stock and West Pointe Common Stock to be received pursuant to the Merger may fluctuate and at the consummation of the Merger may be more or less than the current fair market value of such shares. MBI will select an exchange agent (the "Exchange Agent") for purposes of effecting the conversion of Regional Stock into the right to receive cash, MBI Common Stock and West Pointe Common Stock upon consummation of the Merger. Within two business days following the Effective Time (as defined below), a letter of transmittal (including instructions setting forth the procedures for exchanging certificates representing shares of Regional Common Stock for the cash, MBI Common Stock and West Pointe Common Stock payable to each holder thereof pursuant to the Merger Agreement) will be sent to each record holder as of the Effective Time (as defined below). Upon surrender to the Exchange Agent of such certificate(s), together with a duly completed and executed letter of transmittal, such holder will receive the cash, shares of MBI Common Stock and shares of West Pointe Common Stock to which such holder is entitled under the Merger Agreement, together with an amount in cash for any fractional shares of MBI Common Stock or West Pointe Common Stock which such holder would otherwise be entitled to receive. See "TERMS OF THE PROPOSED MERGER - Surrender of Stock Certificates and Receipt of Merger Consideration" and "- Fractional Shares." CONDITIONS TO THE MERGER The Merger Agreement provides that the consummation of the Merger is subject to certain terms and conditions, including the approval of the Merger Agreement by the holders of the outstanding shares of Regional Common Stock and the receipt of both the requisite regulatory approvals and an opinion of MBI Counsel regarding certain federal income tax aspects of the transaction. For a discussion of each of the conditions to the Merger, see "TERMS OF THE PROPOSED MERGER - Conditions to the Merger." - 9 - 13 EFFECTIVE TIME; CLOSING DATE The Merger will become effective on the date and at the time (the "Effective Time") of the issuance of a certificate of merger by each of the Office of the Secretary of State of the State of Missouri and the Office of the Secretary of State of the State of Illinois. Unless MBI, Ameribanc and Regional otherwise agree, the closing for the Merger (the "Closing") will occur on a date (the "Closing Date") mutually agreed upon by the parties which is no later than forty-five days following the satisfaction or waiver of the conditions to the consummation of the Merger provided in the Merger Agreement. See "TERMS OF THE PROPOSED MERGER - Effective Time; Closing Date" and "- Conditions to the Merger." AMENDMENT; TERMINATION The Merger Agreement may be amended by a subsequent writing signed by each of MBI, Ameribanc and Regional upon the approval of their respective Boards of Directors, whether before or after the approval of the Merger Agreement by the Regional shareholders at the Special Meeting; provided, however, that after such shareholder approval, no modification may, without the approval of the Regional shareholders who are affected by such modification (i) alter or change the amount or form of Merger Consideration to be received by the Regional shareholders or (ii) otherwise materially adversely affect the Regional shareholders. The Merger Agreement may be terminated at any time prior to the Effective Time by the mutual consent of the parties or unilaterally by either party (i) upon the occurrence of certain events or (ii) if the Merger is not consummated by August 23, 1997. See "TERMS OF THE PROPOSED MERGER - Conditions to the Merger" and "- Termination of the Merger Agreement." VOTING AGREEMENTS In addition to and contemporaneously with the Merger Agreement, MBI executed separate Voting Agreements (the "Voting Agreements") with certain of the executive officers and directors of Regional and the controlling shareholder of Regional, pursuant to which such officers, directors and controlling shareholder agreed that they will vote or cause to be voted all of the shares of Regional Common Stock then beneficially owned or controlled or subsequently acquired in favor of the approval of the Merger Agreement at the Special Meeting. In addition, until the earliest to occur of the Closing Date, the termination of the Merger Agreement or the abandonment of the Merger by mutual agreement of MBI and Regional, such officers, directors and controlling shareholder further agreed not to vote or cause to be voted any of such shares in favor of the approval of any other agreement relating to the merger or sale of substantially all of the assets of Regional to any person other than MBI or its affiliates. Such officers, directors and controlling shareholder also agreed not to transfer such shares unless, prior to such transfer, the transferee executes an agreement with respect to the transferred shares in substantially the same form as the Voting Agreement and reasonably satisfactory to MBI. As of the Record Date, such officers, directors and controlling shareholder owned beneficially an aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7% of the issued and outstanding shares. See "TERMS OF THE PROPOSED MERGER - Other Agreements - Voting Agreement." - 10 - 14 INTERESTS OF CERTAIN PERSONS IN THE MERGER From and after the Effective Time, MBI and Ameribanc, as applicable, have agreed to indemnify each present and former director, officer, employee and agent of Regional or Bank of Alton, to the extent provided in the Articles of Incorporation, By-Laws and applicable indemnification agreements of Regional and Bank of Alton as in effect on August 23, 1996, against amounts paid by such person in connection with any action or omission occurring prior to the Effective Time and arising from such person's position as an officer, director or other fiduciary capacity with Regional or Bank of Alton. MBI has also agreed to advance to indemnifiable persons expenses incurred in connection with indemnifiable claims upon the receipt of certain undertakings by such persons. See "TERMS OF THE PROPOSED MERGER - Interests of Certain Persons in the Merger." EFFECT ON BENEFIT PLANS The Merger Agreement provides that MBI will cause Ameribanc to honor all provisions for vested benefits earned or accrued through the Effective Time under employee benefit plans of Regional and Bank of Alton (the "Benefit Plans"); provided, however, that the provisions of any plan, program or arrangement that provide for the issuance or grant of any other interest in respect of the capital stock of Regional or Bank of Alton will be terminated as of the date of the Merger Agreement. The Benefit Plans will not be terminated by reason of the Merger but will continue after the Merger as plans of Ameribanc until such time as the employees of Regional and Bank of Alton are integrated into MBI's employee benefit plans that are available to other employees of MBI. MBI will take such steps as are necessary to integrate the former employees of Regional and Bank of Alton into such MBI employee benefit plans as soon as practicable after the Effective Time. See "TERMS OF THE PROPOSED MERGER - Effect on Benefit Plans." SPECIAL MEETING OF REGIONAL SHAREHOLDERS The Special Meeting will be held on March __, 1997, at 10:00 a.m. Central Time, at the offices of Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri. Approval by the Regional shareholders of the Merger Agreement requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Regional Common Stock. Only holders of record of Regional Common Stock at the close of business on _______ __, 1997 (the "Record Date") will be entitled to notice of, and to vote at, the Special Meeting. At such date, there were 25,321 shares of Regional Common Stock issued and outstanding. As of the Record Date, the executive officers and directors of Regional and the controlling shareholder of Regional owned beneficially an aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7% of the issued and outstanding shares of Regional Common Stock entitled to vote at the Special Meeting. Pursuant to his or her respective Voting Agreement, each of such officers, directors and controlling shareholder has committed to vote his or her shares of Regional Common Stock for the approval of the Merger Agreement. THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER. THE BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL --- TO APPROVE THE MERGER AGREEMENT. - 11 - 15 REASONS FOR THE MERGER REGIONAL. The Board of Directors of Regional believes that the Merger is in the best interest of Regional and its shareholders. In reaching the decision to recommend the Merger to the shareholders, the Board of Directors, without assigning any relative or specific weights, considered a number of factors, including (i) the Cash Consideration, Stock Consideration, West Pointe Consideration and the other terms of the Merger, (ii) the benefits expected to result from the combination of Regional and MBI and (iii) recent federal and state legislative changes affecting the banking industry in general. See "TERMS OF THE PROPOSED MERGER - Background of and Reasons for the Merger; Board Recommendations." MBI. The Board of Directors of MBI believes that the Merger will enable MBI to (i) increase its presence in southwestern Illinois through the acquisition of an established banking organization and (ii) enhance its ability to compete in the increasingly competitive banking and financial services industry. See "TERMS OF THE PROPOSED MERGER - Background of and Reasons for the Merger; Board Recommendations." FRACTIONAL SHARES No fractional shares of MBI Common Stock or West Pointe Common Stock will be issued to the shareholders of Regional in connection with the Merger. Each holder of Regional Common Stock who otherwise would have been entitled to receive a fraction of a share of MBI Common Stock shall receive in lieu thereof cash, without interest, in an amount equal to the holder's fractional share interest multiplied by $47.80, the average of the closing stock price of MBI Common Stock on the NYSE Composite Tape as reported in The Wall Street Journal for the five trading days prior to August 23, 1996, the date of execution of the Merger Agreement (the "Average MBI Stock Price"). Each holder of Regional Common Stock who otherwise would have been entitled to receive a fraction of a share of West Pointe Common Stock shall receive in lieu thereof cash, without interest, in an amount equal to such holder's fractional share interest multiplied by $30.00. Cash received by Regional shareholders in lieu of fractional shares of MBI Common Stock or West Pointe Common Stock may give rise to taxable income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." DISSENTERS' RIGHTS Under the Illinois Act, each holder of Regional Common Stock may, in lieu of receiving the Merger Consideration, seek the fair value of his or her shares of Regional Common Stock and, if the Merger is consummated, receive payment of such fair value in cash by following certain procedures set forth in Section 11.70 of the Illinois Act, the text of which is attached hereto as Annex A. Failure to follow such procedures may ------- result in a loss of such shareholder's dissenters' rights. Any Regional shareholder returning a blank executed proxy card will be deemed to have approved the Merger Agreement, thereby waiving any such dissenters' rights. See "DISSENTERS' RIGHTS OF SHAREHOLDERS OF REGIONAL." - 12 - 16 CERTAIN FEDERAL INCOME TAX CONSEQUENCES Thompson Coburn, MBI's legal counsel, has delivered its opinion to the effect that, assuming the Merger occurs in accordance with the Merger Agreement and conditioned on the accuracy of certain representations made by MBI, Regional and the majority shareholder of Regional, the Merger will constitute a "reorganization" for federal income tax purposes. Accordingly, no gain or loss will be recognized by Regional shareholders with regard to the MBI Common Stock received solely in exchange for shares of Regional Common Stock in the Merger. However, gain (but not loss) or dividend income realized as a result of the receipt of the Cash Consideration and the West Pointe Consideration (including cash received in lieu of fractional shares, if any) will be recognized up to, but not in excess of, the amount of the Cash Consideration and the fair market value of the West Pointe Consideration received. Cash received in lieu of fractional shares of MBI Common Stock also may give rise to taxable income. EACH REGIONAL SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICABILITY OF VARIOUS STATE, LOCAL, AND FOREIGN TAX LAWS. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." REGULATORY APPROVALS The Merger has been approved by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and the Illinois Commissioner of Banks and Real Estate (the "Illinois Commissioner") (the Federal Reserve Board, Illinois Commissioner and any other regulatory authority that may be necessary or appropriate are collectively referred to herein as the "Regulatory Authorities" and, individually, as a "Regulatory Authority"). In reviewing the Merger, the Federal Reserve Board and the Illinois Commissioner considered various factors, including possible anticompetitive effects of the Merger, and examined the financial and managerial resources and future prospects of the combined organization. See "TERMS OF THE PROPOSED MERGER - Regulatory Approval" and "SUPERVISION AND REGULATION." ACCOUNTING TREATMENT The Merger will be accounted for under the purchase method of accounting. See "TERMS OF THE PROPOSED MERGER - Accounting Treatment." - 13 - 17 MARKETS AND MARKET PRICES MBI Common Stock is currently traded on the NYSE under the symbol "MTL." The last sale price reported for MBI Common Stock on August 23, 1996, the last trading date preceding the public announcement of the Merger, was $47.75. As of the Record Date, Regional had eight shareholders of record. There is no established public trading market for Regional Common Stock; to the knowledge of management of Regional, there has never been a sale of Regional Common Stock. In addition, there is no established public trading market for West Pointe Common Stock. The last sale price for West Pointe Common Stock known to management of West Pointe prior to the public announcement of the Merger was $32.00 per share in 1996. Because of this lack of established trading market for shares of Regional Common Stock and West Pointe Common Stock, the respective managements of Regional and West Pointe do not have knowledge of the prices paid in all transactions involving their shares and have not necessarily verified the prices indicated in the table with the parties to the relevant transactions. Thus, the sale prices listed below may not reflect the prices that would have been paid in an active market. The following table sets forth for the periods indicated the high and low prices per share of MBI Common Stock as reported on the NYSE, of Regional Common Stock as known to management of Regional and of West Pointe as known to management of West Pointe, along with the quarterly cash dividends per share declared. The per share prices do not include adjustments for retail mark-ups, mark-downs or commissions.
MBI REGIONAL WEST POINTE ----------------------------- ------------------------- ----------------------- SALES PRICE CASH SALES PRICE CASH SALES PRICE CASH ------------------- DIVIDEND ------------- DIVIDEND ------------- DIVIDEND HIGH LOW DECLARED HIGH LOW DECLARED HIGH LOW DECLARED -------- ------- -------- ---- ----- -------- ---- ----- -------- 1994 - ---- First Quarter $34.125 $29.875 $.28 $ -- $.14 Second Quarter 38.125 31.125 .28 -- .14 Third Quarter 39.250 34.875 .28 -- .14 Fourth Quarter 36.875 29.500 .28 5.93 .14 1995 - ---- First Quarter $37.250 $31.250 $.33 $ 7.10 $.14 Second Quarter 44.875 36.000 .33 7.10 .14 Third Quarter 47.000 41.625 .33 16.97 .14 Fourth Quarter 46.500 41.500 .33 9.66 .14 1996 - ---- First Quarter $46.500 $41.500 $.41 $10.00 $.14 Second Quarter 47.875 43.500 .41 10.00 .14 Third Quarter 52.875 43.375 .41 10.00 .14 Fourth Quarter 54.000 49.000 .41 10.00 32.00 32.00 .14 1997 - ---- First Quarter (through January 31, 1997) $53.875 $50.000 -- -- -- - -------------------- For recent sale prices of MBI Common Stock, see page 2 of this Proxy Statement/Prospectus. No trades known to management of Regional for the period indicated or during any other period. No trades known to management of West Pointe.
- 14 - 18 COMPARATIVE UNAUDITED PER SHARE DATA The following table sets forth for the periods indicated selected historical per share data of MBI and Regional and the corresponding pro forma and pro forma equivalent per share amounts, giving effect to the proposed acquisition of Regional, the completed acquisitions of First Financial and TODAY'S, and the proposed acquisitions of First City, Mark Twain and Roosevelt. The data presented is based upon the supplemental consolidated financial statements and consolidated financial statements and related notes of MBI and the consolidated financial statements and related notes of Regional, Mark Twain and Roosevelt included in this Proxy Statement/Prospectus or in documents incorporated herein by reference and the pro forma combined consolidated balance sheet and income statements, including the notes thereto, appearing elsewhere herein. This information should be read in conjunction with such historical and pro forma financial statements and related notes thereto. The assumptions used in the preparation of this table appear in the notes to the pro forma financial information appearing elsewhere in this Proxy Statement/Prospectus. See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." These data are not necessarily indicative of the results of the future operations of the combined organization or the actual results that would have occurred if the proposed acquisition of Regional, the completed acquisitions of TODAY'S and First Financial or the proposed acquisitions of First City, Mark Twain and Roosevelt had been consummated at the beginning of the periods indicated. All adjustments consisting of only normal recurring adjustments necessary for a fair statement of results of interim periods have been included.
MBI/ MBI/ MBI/All MBI/ Regional Regional Entities All Entities MBI Regional Pro Forma Pro Forma Pro Forma Pro Forma Reported Reported Combined Equivalent Combined Equivalent ---------------------------------------------------------------------------------------- Book Value per Share: September 30, 1996 $ 25.51 $924.77 $25.99 $616.23 $26.65 $631.93 December 31, 1995 26.04 913.16 26.49 628.14 28.39 673.19 Cash Dividends Declared per Share: Nine months ended September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17 Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30 Earnings per Share: Nine months ended September 30, 1996 $ 2.01 $ 79.37 $ 2.01 $ 47.66 $ 1.84 $ 43.63 Year ended December 31, 1995 3.74 108.93 3.75 88.92 2.85 67.58 Market Price per Share: At August 23, 1996 $47.750 n/a n/a n/a n/a n/a At January 31, 1997 53.375 n/a n/a n/a n/a n/a - -------------------- Includes the effect of pro forma adjustments for Regional. See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." Based on the pro forma combined per share amounts multiplied by 23.7123, the Stock Consideration. Further explanation of the assumptions used in the preparation of the pro forma combined consolidated financial statements is included in the notes to the pro forma financial statements. See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." Includes the effect of pro forma adjustments for Regional, TODAY'S, First Financial, First City, Mark Twain and Roosevelt. See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." The market price per share of MBI Common Stock was determined as of August 23, 1996 and January 31, 1997, the last trading day preceding the public announcement of the proposed Merger and as of the latest available date prior to the filing of the Registration Statement, respectively, based on the last sale price as reported on the NYSE Composite Tape. There are no publicly available quotations of Regional Common Stock.
- 15 - 19 SUMMARY FINANCIAL DATA The following table sets forth for the periods indicated certain summary historical consolidated financial information for MBI and Regional. The balance sheet data and income statement data of MBI included in the summary financial data as of and for the five years ended December 31, 1995 are taken from the audited supplemental consolidated financial statements of MBI as of the end of and for each such year. The balance sheet data and income statement data of Regional included in the summary financial data as of and for the five years ended December 31, 1995 are taken from the audited consolidated financial statements of Regional as of and for the year ended December 31, 1995 and the unaudited consolidated financial statements of Regional as of and for the years ended December 31, 1994, 1993, 1992 and 1991. The balance sheet data and income statement data included in the summary financial data as of and for the nine months ended September 30, 1996 and 1995 are taken from the unaudited consolidated financial statements of MBI and the unaudited consolidated financial statements of Regional as of and for the nine months ended September 30, 1996 and 1995. These data include all adjustments which are, in the opinion of the respective managements of MBI and Regional, necessary to present a fair statement of these periods and are of a normal recurring nature. Results for the nine months ended September 30, 1996 are not necessarily indicative of results for the entire year. The following information should be read in conjunction with the supplemental consolidated financial statements of MBI and the consolidated financial statements of Regional, and the related notes thereto, included herein or in documents incorporated herein by reference, and in conjunction with the unaudited pro forma combined consolidated financial information, including the notes thereto, appearing elsewhere in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "PRO FORMA FINANCIAL INFORMATION." - 16 - 20 MERCANTILE BANCORPORATION INC. SUMMARY FINANCIAL DATA
As of or for the Nine Months Ended As of or for the September 30 Year Ended December 31 --------------------- ---------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- PER COMMON SHARE DATA Net income $ 2.01 $ 2.85 $ 3.74 $ 3.19 $ 2.79 $ 2.41 $ 2.34 Dividends declared 1.23 .99 1.32 1.12 .99 .93 .93 Book value at period end 25.51 25.31 26.04 23.32 21.59 19.44 18.12 Average common shares outstanding (thousands) 62,161 61,498 61,884 59,757 58,751 55,050 47,159 EARNINGS (THOUSANDS) Interest income $987,701 $962,361 $1,293,944 $1,118,069 $1,094,611 $1,139,807 $1,156,821 Interest expense 465,821 459,432 620,534 450,950 444,573 549,642 668,578 -------- -------- ---------- ---------- ---------- ---------- ---------- Net interest income 521,880 502,929 673,410 667,119 650,038 590,165 488,243 Provision for possible loan losses 55,915 29,177 36,530 43,265 64,302 79,551 64,028 Other income 211,929 199,616 273,653 236,561 245,589 224,456 195,237 Other expense 482,170 407,120 553,748 555,176 570,182 529,645 486,490 Income taxes 70,407 90,164 124,109 113,165 96,074 69,681 28,418 -------- -------- ---------- ---------- ---------- ---------- ---------- Net income $125,317 $176,084 $ 232,676 $ 192,074 $ 165,069 $ 135,744 $ 104,544 ======== ======== ========== ========== ========== ========== ========== ENDING BALANCE SHEET (MILLIONS) Total assets $ 18,199 $ 18,007 $ 17,928 $ 16,724 $ 16,293 $ 16,033 $ 14,045 Earning assets 16,744 16,590 16,264 15,427 14,980 14,678 12,854 Investment securities 4,320 4,263 4,211 4,280 4,670 4,632 3,412 Loans and leases, net of unearned income 12,166 11,948 11,731 10,904 9,809 9,570 8,809 Deposits 14,610 13,552 13,714 12,865 13,243 13,260 11,685 Long-term debt 303 344 325 330 316 336 238 Shareholders' equity 1,535 1,612 1,640 1,409 1,295 1,143 939 Reserve for possible loan losses 202 209 202 216 206 199 176 SELECTED RATIOS Return on average assets .93% 1.35% 1.33% 1.17% 1.03% .89% .78% Return on average equity 10.35 15.58 15.14 14.06 13.46 12.76 11.81 Net interest rate margin 4.29 4.29 4.28 4.53 4.52 4.33 4.12 Equity to assets 8.43 8.95 9.15 8.42 7.95 7.13 6.68 Reserve for possible loan losses to: Outstanding loans 1.66 1.75 1.72 1.98 2.10 2.08 2.00 Non-performing loans 348.56 366.62 245.18 583.17 290.02 154.17 109.79 Dividend payout ratio 61.19 34.74 35.29 35.11 35.48 38.75 39.74 Based on weighted average common shares outstanding.
- 17 - 21 REGIONAL BANCSHARES, INC. SUMMARY FINANCIAL DATA
As of or for the Nine Months Ended As of or for the September 30 Year Ended December 31 --------------------- ---------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- PER SHARE DATA Net income $ 79.37 $ 78.94 $ 108.93 $ 100.55 $ 119.21 $ 105.92 $ 2.37 Dividends declared 30.00 31.17 40.83 5.93 -- -- -- Book value at period end 924.77 883.02 913.16 777.42 724.06 604.83 498.83 Average common shares outstanding 25,321 25,321 25,321 25,321 25,321 25,321 25,321 EARNINGS (THOUSANDS) Interest income $ 9,682 $ 8,707 $ 11,840 $ 10,311 $ 9,609 $ 10,594 $ 12,386 Interest expense 4,826 3,833 5,318 4,048 3,742 4,744 6,837 Net interest income 4,856 4,874 6,522 6,263 5,867 5,850 5,549 Provision for possible loan losses 75 42 42 (280) (960) 1,040 3,130 Other income 798 840 1,108 829 1,269 1,769 992 Other expense 3,128 2,973 3,897 4,030 4,437 3,390 3,397 Income taxes 441 700 933 796 1,158 507 (46) Cumulative effect adjustment of accounting change -- -- -- -- 518 -- -- -------- -------- ---------- ---------- ---------- ---------- ---------- Net income $ 2,010 $ 1,999 $ 2,758 $ 2,546 $ 3,019 $ 2,682 $ 60 ======== ======== ========== ========== ========== ========== ========== ENDING BALANCE SHEET (THOUSANDS) Total assets $182,082 $162,268 $ 167,680 $ 148,140 $ 143,063 $ 133,149 $ 131,479 Earning assets 169,741 153,450 156,733 138,476 134,890 124,798 122,737 Investment and mortgage-backed securities 66,077 55,991 56,424 45,735 55,068 44,807 46,088 Loans and leases, net of unearned income 103,169 96,259 96,684 91,316 75,922 75,091 76,649 Borrowings and advances from Federal Home Loan Bank 10,000 -- -- -- -- -- -- Shareholders' equity 23,416 22,359 23,122 19,685 18,334 15,315 12,631 Reserve for possible loan losses 1,473 1,383 1,350 1,825 1,897 2,322 1,600 SELECTED RATIOS Return on average assets 1.54% 1.74% 1.74% 1.73% 2.24% 2.03% 0.04% Return on average equity 11.53 12.85 11.93 12.77 16.47 17.51 0.48 Net interest rate margin 4.35 4.89 4.83 5.05 5.19 5.35 4.79 Equity to assets 12.86 13.78 13.79 13.29 12.82 11.50 9.61 Reserve for possible loan losses to: Outstanding loans 1.43 1.44 1.40 2.00 2.50 3.09 2.09 Non-performing loans 162.05 131.59 130.31 73.74 69.77 186.51 173.91 Cash dividend payout 37.79 39.48 37.49 5.90 -- -- -- Based on interest income on a fully tax-equivalent basis.
- 18 - 22 INFORMATION REGARDING SPECIAL MEETING ------------------------------------- GENERAL This Proxy Statement/Prospectus is being furnished to holders of Regional Common Stock in connection with the solicitation of proxies by the Board of Directors of Regional for use at the Special Meeting and any adjournments or postponements thereof at which the shareholders of Regional will consider and vote upon a proposal to approve the Merger Agreement and each of the transactions contemplated thereby and any other business which may properly be brought before the Special Meeting or any adjournments or postponements thereof. Each copy of this Proxy Statement/Prospectus is accompanied by a Notice of Special Meeting of Shareholders, a proxy card and a return envelope pre- addressed to Regional for the proxy card. This Proxy Statement/Prospectus is also furnished by MBI to each holder of Regional Common Stock as a prospectus in connection with the issuance by MBI of shares of MBI Common Stock upon the consummation of the Merger. This Proxy Statement/ Prospectus and the Notice of Special Meeting and proxy card are being first mailed to shareholders of Regional on February __, 1997. DATE, TIME AND PLACE The Special Meeting will be held at the offices of Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri, on ______, March __, 1997, at 10:00 a.m., Central Time. RECORD DATE; VOTE REQUIRED; VOTING AGREEMENTS On the Record Date, there were 25,321 shares of Regional Common Stock outstanding and entitled to vote at the Special Meeting. Each such share is entitled to one vote on each matter properly brought before the Special Meeting. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Regional Common Stock is required to approve the Merger Agreement. As of the Record Date, certain of the executive officers and directors of Regional and certain of the other shareholders of Regional owned beneficially an aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7% of the outstanding shares of Regional Common Stock entitled to vote at the Special Meeting. Such shareholders, pursuant to the terms of their respective Voting Agreements, have committed to vote or cause to be voted all of the shares of Regional Common Stock beneficially owned or controlled or subsequently acquired in favor of the approval of the Merger Agreement at the Special Meeting. VOTING AND REVOCATION OF PROXIES Shares of Regional Common Stock which are represented by a properly executed proxy card received prior to the vote at the Special Meeting will be voted at such Special Meeting in the manner directed on the proxy card, unless such proxy designation is revoked in the manner set forth herein in advance of the vote at the Special Meeting. ANY REGIONAL SHAREHOLDER RETURNING AN EXECUTED PROXY CARD WHICH DOES NOT PROVIDE INSTRUCTIONS TO VOTE AGAINST THE APPROVAL OF THE MERGER AGREEMENT WILL BE DEEMED TO HAVE APPROVED THE MERGER AGREEMENT. Failure to return a properly executed proxy card or to vote in person at the Special Meeting will have the practical effect of a vote against the approval of the Merger Agreement. - 19 - 23 Shares subject to abstentions will be treated as shares that are present and voting at the Special Meeting for purposes of determining the presence of a quorum and as voted for the purposes of determining the base number of shares voting on the proposal. Such shares will, therefore, have the effect of votes against the approval of the Merger Agreement. Broker "non-votes" (i.e., proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares with respect to which such brokers or nominees do not have discretionary power to vote) will be considered as present for purposes of determining the presence of a quorum but will not be considered as voting at the Special Meeting. Broker non-votes, therefore, will also have the effect of votes against the approval of the Merger Agreement. Any shareholder of Regional giving a proxy may revoke it at any time prior to the vote at the Special Meeting. Shareholders of Regional wishing to revoke a proxy prior to the vote may do so by delivering to the Secretary of Regional at 1520 Washington Avenue, Alton, Illinois, 62002, at or before the Special Meeting, a written notice of revocation bearing a later date than the proxy or a later dated proxy relating to the same shares, or by attending the Special Meeting and voting the same shares in person. Attendance at the Special Meeting will not in itself constitute the revocation of a proxy. The Board of Directors of Regional is not currently aware of any business to be brought before the Special Meeting other than that described herein. If, however, other matters are properly brought before such Special Meeting, or any adjournments or postponements thereof, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment as to the best interest of Regional. SOLICITATION OF PROXIES Regional will bear its own costs of soliciting proxies, except that MBI will pay printing and mailing expenses and registration fees incurred in connection with preparing this Proxy Statement/Prospectus. Proxies will initially be solicited by mail, but directors, officers and selected other employees of Regional may also solicit proxies in person or by telephone. Directors, executive officers and any other employees of Regional who solicit proxies will not be specially compensated for such services. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward proxy materials to beneficial owners and will be reimbursed for their reasonable expenses incurred in sending proxy materials to beneficial owners. HOLDERS OF REGIONAL COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT TO REGIONAL PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. - 20 - 24 TERMS OF THE PROPOSED MERGER ---------------------------- THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS AND CONDITIONS OF THE MERGER AGREEMENT, WHICH DOCUMENT IS INCORPORATED BY REFERENCE HEREIN. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE MERGER AGREEMENT. MBI, UPON WRITTEN OR ORAL REQUEST, WILL FURNISH A COPY OF THE MERGER AGREEMENT, WITHOUT CHARGE, TO ANY PERSON WHO RECEIVES A COPY OF THIS PROXY STATEMENT/PROSPECTUS. SUCH REQUESTS SHOULD BE DIRECTED TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525. GENERAL DESCRIPTION OF THE MERGER Subject to the satisfaction or waiver of the terms and conditions set forth in the Merger Agreement, which are described below, Regional, an Illinois corporation, will be merged with and into Ameribanc, a Missouri corporation. Upon consummation of the Merger, Regional's corporate existence will terminate and Ameribanc will continue as the surviving entity. Simultaneously with the effectiveness of the Merger, each share of Regional Common Stock (other than (a) a share held by MBI or any MBI corporate affiliate, except a share held in a fiduciary capacity or in satisfaction of a debt previously contracted in good faith, or (b) a share as to which a Regional shareholder has perfected dissenters' rights pursuant to Section 11.70 of the Illinois Act) will be converted into the right to receive as consideration in the Merger: (i) an amount in cash equal to $485.76; (ii) 23.7123 shares of MBI Common Stock; and (iii) 0.4838 of a share of West Pointe Common Stock. Such consideration is subject to certain anti-dilution protections but is not adjustable based on the operating results, financial condition or other factors affecting MBI, Regional or West Pointe prior to the consummation of the Merger. The fair market value of the MBI Common Stock and the West Pointe Common Stock received pursuant to the Merger may fluctuate and at the consummation of the Merger may be more or less than the current fair market value of such shares. The amount and nature of the Merger Consideration was established through arm's-length negotiations between MBI, Ameribanc and Regional, and reflects the balancing of a number of countervailing factors. The total amount of the Merger Consideration reflects a price both parties concluded was appropriate. See "- Background of and Reasons for the Merger; Board Recommendations." NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET VALUE OF MBI COMMON STOCK OR WEST POINTE COMMON STOCK WILL BE EQUIVALENT TO THE FAIR MARKET VALUE OF MBI COMMON STOCK OR WEST POINTE COMMON STOCK, RESPECTIVELY, ON THE DATE SUCH STOCK IS RECEIVED BY A REGIONAL SHAREHOLDER OR AT ANY OTHER TIME. THE FAIR MARKET VALUE OF MBI COMMON STOCK AND WEST POINTE COMMON STOCK AT THE TIME IT IS RECEIVED BY A REGIONAL SHAREHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF MBI COMMON STOCK OR WEST POINTE COMMON STOCK, RESPECTIVELY, DUE TO NUMEROUS MARKET FACTORS. At the Effective Time of the Merger, each outstanding share of Regional Common Stock will be converted into the right to receive the Cash Consideration, the Stock Consideration and the West Pointe Consideration. See "- Surrender of Regional Stock Certificates and Receipt of Merger Consideration." - 21 - 25 CONDITIONS TO THE MERGER The respective obligations of MBI, Ameribanc and Regional to consummate the Merger are subject to the satisfaction on or before the Closing Date of the following mutual conditions, except as such parties may waive such conditions in writing: (1) At the Special Meeting, the Merger and the Merger Agreement shall have been duly approved by the Regional shareholders. (2) Orders, consents and approvals, in form and substance reasonably satisfactory to MBI, Ameribanc and Regional, shall have been entered by the Regulatory Authorities and shall remain in force, granting the authority necessary: (i) for consummation of the transactions contemplated by the Merger Agreement pursuant to the provisions of the Securities Act of 1933, as amended (the "Securities Act") and other applicable laws; and (ii) to satisfy all other requirements prescribed by applicable laws and the rules and regulations of the Regulatory Authorities. (3) No judgment, order or decree of any court and no order, notice, statute or regulation of any government or governmental agency having jurisdiction or authority over Regional, Bank of Alton, MBI or Ameribanc shall be in effect which restrains or prohibits, and no litigation, proceeding or investigation shall be pending or threatened by or before any such court or governmental agency attempting to restrain or prohibit: (i) consummation of the transactions contemplated by the Merger Agreement; or (ii) the exercise of control by MBI or Ameribanc over Regional or Bank of Alton following the Merger. (4) The Registration Statement shall have become effective under the Securities Act and as of the Closing Date no stop order suspending the effectiveness thereof shall have been issued or threatened. (5) The MBI Common Stock shall be listed for trading on the NYSE. (6) MBI shall have delivered to Regional an opinion of Thompson Coburn dated as of the Closing Date or a mutually agreeable earlier date, reasonably satisfactory in form and substance to Regional and its legal counsel, to the effect that the Merger will constitute a reorganization within the meaning of Section 368 of the Code and that no gain or loss will be recognized by Regional or the shareholders of Regional or Bank of Alton to the extent that each received shares of MBI Common Stock solely in exchange for shares of Regional Common Stock in the Merger, which opinion shall not have been withdrawn at or prior to the Effective Time. The obligation of MBI to consummate the Merger is subject to the satisfaction on or before the Closing Date of the following conditions, except as MBI may waive such conditions in writing: (1) All representations and warranties of Regional contained in the Merger Agreement shall be true and correct in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of the Closing Date, and Regional shall have performed in all material respects all agreements and covenants required by the Merger Agreement to be performed by it on or prior to the Closing Date. - 22 - 26 (2) Regional shall have furnished to MBI a certificate dated as of the Closing Date, signed by an executive officer of Regional to the effect that, to his knowledge, the representations and warranties of Regional contained in the Merger Agreement are true and correct in all material respects as of the Closing Date and Regional has performed all agreements, covenants and obligations required to be performed by it in all material respects. (3) Since the date of the Merger Agreement, there shall have been no material adverse change in the financial condition of Regional and Bank of Alton, taken as a whole, except as may have resulted from changes to laws and regulations, GAAP or regulatory accounting principles, interpretations thereof, other conditions that affect the banking industry generally or changes in the general level of interest rates. (4) MBI shall have received from Bryan Cave LLP an opinion as to certain legal matters. The obligation of Regional to consummate the Merger shall be subject to the satisfaction on or before the Closing Date of all of the following conditions, except as Regional may waive such conditions in writing: (1) All representations and warranties of MBI and Ameribanc contained in the Merger Agreement shall be true and correct in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of the Closing Date, and MBI shall have performed in all material respects all agreements and covenants required by the Merger Agreement to be performed by it on or prior to the Closing Date. (2) MBI shall have furnished to Regional a certificate, dated as of the Closing Date, signed by an executive officer of MBI and to the effect that, to the knowledge of such officer, the representations and warranties of MBI and Ameribanc contained in the Merger Agreement are true and correct in all material respects as of the Closing Date and MBI and Ameribanc have performed all agreements, covenants and obligations required to be performed by them. (3) Since the date of the Merger Agreement, there shall have been no material adverse change in the financial condition of MBI or its subsidiaries (as defined in the Merger Agreement), taken as whole, except as may have resulted from changes to laws and regulations, GAAP, interpretations thereof, other conditions that affect the banking industry generally, or changes in the general level of interest rates. (4) Regional shall have received from Thompson Coburn an opinion as to certain legal matters. (5) The Registration Statement shall have become effective under the Securities Act and, as of the Effective Time, no stop order suspending the effectiveness thereof shall have been issued or threatened. - 23 - 27 EFFECTIVE TIME; CLOSING DATE The Merger will be consummated and the Effective Time will occur at the time of the issuance of a certificate of merger by each of the Office of the Secretary of State of the State of Missouri and the Office of the Secretary of State of the State of Illinois. Pursuant to the Merger Agreement, unless MBI, Ameribanc and Regional otherwise agree, the Effective Time shall occur no later than forty-five days following satisfaction or waiver of the conditions to the consummation of the Merger provided in the Merger Agreement. See " - Conditions to the Merger." AMENDMENT OF MERGER AGREEMENT The Merger Agreement may be amended at any time by written agreement of the parties upon the approval of their respective Boards of Directors; provided, however, that after the approval of the Merger Agreement by the shareholders of Regional at the Special Meeting, no such modification may, without approval of the shareholders of Regional (i) alter or change the amount or form of the Merger Consideration to be received by such shareholders or (ii) otherwise materially adversely affect such shareholders. TERMINATION OF MERGER AGREEMENT The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the shareholders of Regional: (1) by mutual consent of the Boards of Directors of MBI and Regional; (2) unilaterally by the Board of Directors of MBI or the Board of Directors of Regional: (i) at any time after August 23, 1997, if the Merger has not been consummated by such date (provided that the failure of such consummation to occur is not a result of a willful and deliberate breach, through action or failure to act, of any representation, warranty, covenant or agreement under the Merger Agreement by the terminating party); (ii) if there shall have been a final judicial or regulatory determination that any of the material provisions of the Merger Agreement are illegal, invalid or unenforceable or denying any regulatory application the approval of which is a condition precedent to such party's obligations under the Merger Agreement; (iii) if the Merger Agreement is not approved by the holders of the outstanding shares of Regional Common Stock at the Special Meeting; or (iv) in the event of a material breach by a party of any representation, warranty, covenant or agreement contained in the Merger Agreement, which breach cannot be or is not cured within 30 days after written notice thereof is given to the breaching party by the non-breaching party; provided, however, that the departure of any Executive Officer from the employ of Regional will not be deemed a material breach of the Merger Agreement; or - 24 - 28 (3) by the Executive Committee of the Board of Directors of MBI in the event that: (i) an environmental audit discloses the existence of certain material environmental liabilities on the properties or assets of Regional or Bank of Alton; (ii) Regional does not choose to correct the condition leading to such environmental liability and to otherwise indemnify MBI from such liability; and (iii) MBI reasonably believes the cost of such remediation or potential liability exceeds $250,000. No assurance can be given that the Merger will be consummated on or before August 23, 1997 or that MBI or Regional will not elect to terminate the Merger Agreement if the Merger has not been consummated on or before such date. In the event of the termination of the Merger Agreement, the Merger Agreement shall become void and there shall be no continuing obligations on the part of any party or their respective officers and directors, except that: (i) confidentiality obligations shall survive termination; (ii) MBI and Ameribanc shall pay all printing, mailing and filing expenses with respect to the Registration Statement, this Proxy Statement/Prospectus and the regulatory applications; and (iii) in the case of termination due to the intentional, deliberate and willful non-performance of any covenant contained in the Merger Agreement after notice and opportunity to cure, the breaching party shall not be relieved of liability to the nonbreaching party arising from such nonperformance. VOTING AGREEMENTS In addition to and contemporaneously with the Merger Agreement, MBI executed separate Voting Agreements with certain of the executive officers and directors of Regional and the controlling shareholder of Regional, pursuant to which such officers, directors and controlling shareholder agreed that they will vote or cause to be voted all of the shares of Regional Common Stock that they beneficially own, control or subsequently acquire in favor of the approval of the Merger Agreement at the Special Meeting. In addition, until the earliest to occur of the Closing Date, the termination of the Merger Agreement or the abandonment of the Merger by mutual agreement of Regional and MBI, such officers, directors and controlling shareholder further agreed that they will not vote or cause to be voted any such shares in favor of the approval of any other agreement relating to the merger or sale of all or substantially all the assets of Regional to any person other than MBI or its affiliates. Such officers, directors and controlling shareholder also agreed that they will not transfer shares of Regional Common Stock unless, prior to such transfer, the transferee executes an agreement with respect to the transferred shares in substantially the same form as the Voting Agreement and in a form reasonably satisfactory to MBI. As of the Record Date, such officers, directors and controlling shareholder together owned beneficially an aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7% of the issued and outstanding shares. INTERESTS OF CERTAIN PERSONS IN THE MERGER From and after the Effective Time, MBI and Ameribanc, as applicable, subject to any limitations or other provisions of applicable law and to the full extent provided in the respective Articles of Incorporation, Bylaws and applicable indemnification agreements of Regional and Bank of Alton as in effect on August 23, 1996, have agreed to indemnify and hold harmless each present and former director, officer, employee and agent of Regional or Bank of Alton, against any costs or expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, administrative or investigative, arising out of, relating to or in connection with any action or omission occurring prior to the Effective Time including, without limitation, acts or omissions arising from such person's position as an officer, director or other fiduciary capacity with Regional or Bank of Alton. MBI will also make advances of expenses incurred prior to the final disposition of a civil, administrative or investigative action, suit, proceeding or claim to - 25 - 29 any indemnifiable person upon the receipt of certain undertakings from such person that such person shall repay such amounts advanced in the event that it is ultimately determined that such person is not entitled to such indemnification. EFFECT ON BENEFIT PLANS The Merger Agreement provides that MBI will cause Ameribanc to honor all provisions for vested benefits earned or accrued through the Effective Time under the Benefit Plans of Regional and Bank of Alton; provided, however, that the provisions of any plan, program or arrangement that provide for the issuance or grant of any other interest in respect of the capital stock of Regional or Bank of Alton will be terminated as of the date of the Merger Agreement. The Benefit Plans will not be terminated by reason of the Merger but will continue after the Merger as plans of Ameribanc until such time as the employees of Regional and Bank of Alton are integrated into MBI's employee benefit plans that are available to other employees of MBI. MBI will take such steps as are necessary to integrate the former employees of Regional and Bank of Alton into such MBI employee benefit plans as soon as practicable after the Effective Time, with (i) full credit for prior service with Regional and Bank of Alton for purposes of vesting and eligibility for participation (but not benefit accruals under any defined benefit plan), and co-payments and deductibles, and (ii) waiver of all waiting periods and, to the extent met or satisfied by an affected employee of Regional or Bank of Alton under the Benefit Plans, all pre-existing condition exclusions or penalties. BACKGROUND OF AND REASONS FOR THE MERGER; BOARD RECOMMENDATIONS BACKGROUND OF THE MERGER. The Board of Directors of Regional has periodically evaluated Regional's corporate strategy based upon general conditions in the banking industry, legislative changes and other developments affecting the industry in general and Regional specifically. These developments have included the ongoing consolidation of the banking industry, and recent state and federal legislative changes that will facilitate nationwide consolidation of the banking industry. Beginning in the second quarter of 1996, the Board of Directors of Regional began reviewing the desirability of a business combination with a larger financial institution in light of increased economic and competitive pressures on community banks and the current trends in acquisitions and consolidations of banking organizations within Regional's service areas. As a result of this review, the Board of Directors determined that pursuing such a business combination was in the best interests of Regional and its shareholders. Accordingly, in May 1996, the Board of Directors solicited several institutions for preliminary expressions of interest in such a transaction. Upon receipt of confidentiality agreements, interested institutions were given access to a limited collection of Regional's financial and business documents. Initially, three large regional bank holding companies, none of which was MBI, expressed a preliminary interest and reviewed these documents. After completing their review of the documents, these parties were asked to submit firm expressions of interest along with the general terms of a proposed transaction by May 31, 1996. Each of these three companies submitted a firm expression of interest along with the basic terms of a proposed transaction. A fourth and fifth regional bank holding company, one of which was MBI, later expressed a preliminary interest. After representatives of Regional undertook discussions with these additional regional bank holding companies, each chose to execute a confidentiality agreement and examine the limited collection of Regional's financial and business documents. After examining these documents, MBI - 26 - 30 chose to submit a firm expression of interest and the other party, after discussions with representatives of Regional, chose not to proceed with the bidding process. All four remaining parties were provided, for their comment and review, a form of merger agreement setting forth proposed terms on which Regional would proceed with a transaction and were asked for definitive proposals representing their highest and best offers. After further discussion and due diligence review, each of these four bank holding companies submitted their highest and best offers to acquire all the Regional Common Stock. Each final bid was made in terms of a combination of cash and common stock in exchange for each share of Regional Common Stock. After further discussions between representatives of Regional and the four bank holding companies, on June --, 1996, Regional's Board of Directors considered the definitive proposals submitted by the four regional bank holding companies. At that meeting, the Board of Directors approved the bid submitted by MBI and authorized certain directors to conduct final negotiations. During June and July 1996, representatives of Regional's Board of Directors, MBI and their respective counsel negotiated the form of merger agreement. On August --, 1996 the board approved the final terms of the Merger Agreement and approved the execution of the Merger Agreement. REGIONAL'S REASONS AND BOARD RECOMMENDATIONS. The Board of Directors of Regional, after careful study and evaluation of economic, financial, legal and market factors, believes that the Merger Agreement and the Merger are in the best interest of Regional and its shareholders. The Board of Directors believes that the Stock Consideration, in addition to the Cash Consideration and West Pointe Consideration to be received by the shareholders of Regional in the Merger, represents an opportunity for the shareholders of Regional to exchange their shares of Regional Common Stock for MBI Common Stock at a favorable exchange ratio for a security with a greater market liquidity. Among the other factors considered by the Board of Directors of Regional in deciding to approve and recommend the execution of the Merger Agreement were MBI's respective businesses, the results of operations and financial condition (including asset quality and capital levels), growth prospects, products available to customers, historical dividend and market performance, and the fact that MBI Common Stock is traded on the NYSE. Additionally, the Board considered MBI's commitment to serving the banking and other needs of the Bank of Alton's depositors, employees, customers and community. Upon careful review and analysis of all of the factors described above, no single factor being substantially more important in the review process than any other, the Board of Directors unanimously approved the Merger Agreement as being in the best interests of Regional and its shareholders. The Board of Directors of Regional unanimously recommends approval of the Merger Agreement. The Board believes that the terms of the Merger Agreement are fair and that the Stock Consideration, Cash Consideration, distribution of the West Pointe Common Stock and the Merger are in the best interest of Regional and its shareholders. See "INFORMATION REGARDING SPECIAL MEETING - Record Date; Vote Required; Voting Agreements." THE BOARD OF DIRECTORS OF REGIONAL CAREFULLY CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS OF REGIONAL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF REGIONAL VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. MBI'S REASONS AND BOARD RECOMMENDATIONS. The Executive Committee of the Board of Directors of MBI considered a number of factors, including, among other things, the financial condition - 27 - 31 of Regional and projected synergies which MBI anticipates will result from the Merger. The Executive Committee concluded that the Merger presents an unique opportunity for MBI to increase its presence in southwestern Illinois through the acquisition of an established banking organization having significant operations in the targeted area. MBI's decision to pursue discussions with Regional was primarily a result of MBI's assessment of the value of Regional banking franchise, its asset base within that area and the compatibility of the businesses of the two banking organizations. FRACTIONAL SHARES No fractional shares of MBI Common Stock or West Pointe Common Stock will be issued to the shareholders of Regional in connection with the Merger. Each holder of Regional Common Stock who otherwise would have been entitled to receive a fraction of a share of MBI Common Stock shall receive in lieu thereof cash, without interest, in an amount equal to the holder's fractional share interest multiplied by $47.80, the Average MBI Stock Price. Each holder of Regional Common Stock who otherwise would have been entitled to receive a fraction of a share of West Pointe Common Stock shall receive in lieu thereof cash, without interest, in an amount equal to the holder's fractional share interest multiplied by $30.00. Cash received by Regional shareholders in lieu of fractional shares of MBI Common Stock or West Pointe Common Stock may give rise to taxable income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." SURRENDER OF REGIONAL STOCK CERTIFICATES AND RECEIPT OF MERGER CONSIDERATION At the Effective Time of the Merger, each outstanding share of Regional Common Stock will be converted into the right to receive the Cash Consideration, the Stock Consideration and the West Pointe Consideration. See "- General Description of the Merger." Within two business days following the Effective Time, the Exchange Agent will mail to each former Regional shareholder a form of letter of transmittal which shall specify instructions for use in effecting the surrender of the certificate or certificates which as of the Effective Time represented outstanding shares of Regional Common Stock (each, a "Certificate"). Upon the surrender to the Exchange Agent of a Certificate for cancellation (or a lost certificate affidavit or bond in a form reasonably acceptable to the Exchange Agent), together with a duly executed letter of transmittal, the holder of such Certificate shall be entitled to receive the cash, the certificate representing MBI Common Stock and the certificate representing West Pointe Common Stock to which such shareholder is entitled as Merger Consideration. No interest will be accrued or paid with respect to the cash component of the Merger Consideration. No dividends or other distributions declared after the Effective Time will be paid to a former Regional shareholder with respect to the MBI Common Stock or West Pointe Common Stock issuable as Merger Consideration until such shareholder's letter of transmittal and Certificate(s) are delivered to the Exchange Agent. Upon such delivery, all such dividends or other distributions declared after the Effective Time with respect to the whole number of shares of MBI Common Stock and West Pointe Common Stock to which such shareholder is entitled will be paid to such shareholder (without interest thereon). No fractional shares of MBI Common Stock or West Pointe Common Stock will be issued in the Merger. Cash, without interest, determined by multiplying the holder's fractional share interest by $47.80, the Average MBI Stock Price, will be paid in lieu of fractional shares of MBI Common Stock. Cash, without interest, determined by multiplying the holder's fractional share interest by $30.00, will be paid in lieu of fractional shares of West Pointe Common Stock. See "- Fractional Shares." The shares of MBI Common Stock and West Pointe Common Stock issued as Merger Consideration will be freely transferable, except that shares of MBI Common Stock issued as Merger Consideration to certain shareholders of Regional who are deemed to be "affiliates" of Regional will be restricted in their transferability in accordance with the rules and regulations promulgated by the Commission. No such - 28 - 32 restrictions on transfer exist with respect to the West Pointe Common Stock. See "INFORMATION REGARDING MBI STOCK - Restrictions on Resale of MBI Stock by Affiliates." After the Effective Time, there will be no further transfers of Regional stock certificates on the records of Regional and, if any such certificates are presented to MBI or the Exchange Agent for transfer, they will be cancelled against delivery of the Merger Consideration. REGULATORY APPROVALS The Merger has been approved by the Federal Reserve Board and the Illinois Commissioner. MBI and Regional are not aware of any governmental approvals or actions that may be required for consummation of the Merger other than as described above. Should any other approval or action be required, it is presently contemplated that such approval or action would be sought. See "SUPERVISION AND REGULATION." BUSINESS PENDING THE MERGER The Merger Agreement provides that, during the period from August 23, 1996 to the Effective Time, except as consented to by MBI in writing, Regional will, and will cause Bank of Alton to: (1) maintain its tangible property and assets in the present state of repair, order and condition, reasonable wear and tear excepted; (2) maintain its books, accounts and records in accordance with GAAP or regulatory accounting principles, as the case may be, consistently applied; - 29 - 33 (3) comply in all material respects with all laws applicable to the conduct of its business; (4) conduct its business only in the usual, regular and ordinary course consistent with prior practice, and not make any purchase or sale or introduce any method of management or operation in respect of such business or property, except in a manner consistent with prior practice; (5) make no change in its Articles of Incorporation, Charters or Bylaws; (6) maintain and keep in full force and effect all fire and other insurance on property and assets, all of the liability and other casualty insurance, and all bonds on personnel, presently carried by it; (7) duly and timely file all reports, tax returns and other documents required to be filed with federal, state and local and other authorities; (8) unless it is contesting the same in good faith and have established reasonable reserves therefor, pay when required to pay all taxes indicated by such tax returns or otherwise lawfully levied or assessed upon it, or any of its properties or assets, or which it is otherwise legally obligated to pay and withhold or collect and pay to the proper governmental authorities or hold in separate bank accounts for such payment all taxes and other assessments which it believes in good faith to be required by law to be so withheld or collected; (9) not sell, mortgage, subject to lien, pledge or encumber or otherwise dispose of any of its assets other than in the ordinary course of business; (10) not redeem, retire or otherwise acquire or agree to redeem or otherwise acquire any of its capital stock or any option, warrant or right to acquire shares of its capital stock or any security convertible into its capital stock, or redeem or otherwise acquire any notes, or make any prepayment on account of or in respect of any indebtedness for any borrowed money; (11) make no change in the number of shares of its capital stock issued and outstanding, and grant no option or commitment relating to their capital stock or any security convertible into its capital stock or any security the value or return of which is measured by capital stock or any security subordinated to the claims of its general creditors; (12) except as otherwise specifically provided in the Merger Agreement, not enter into or amend any employment or severance contract or agreement with or employee plan covering, or grant any salary or wage increase to, any director, officer, employee or agent of Regional or Bank of Alton except for normal increases in compensation to individual non-officer employees in accordance with past practice, and not increase in any amount the benefits or compensation, if any, of any such directors, officers, employees or agents under any Benefit Plan or other contract or commitment, and not pay nor agree to pay any bonus or commission to any such director, officer, employee or agent; - 30 - 34 (13) not declare, set aside or pay any dividends or other distributions, directly or indirectly, in respect of its capital stock (other than dividends from Bank of Alton to Regional), except that Regional may pay its regular quarterly dividend of $10.00 per share, in accordance with its past practice; provided however, that if the Effective Time shall not have occurred prior to March 10, 1997, Regional may declare, set aside or pay a dividend for each share of Regional Common Stock for each quarter thereafter in which the MBI Board of Directors shall declare a dividend on shares of MBI Common Stock in an amount that equals the product of (i) 164% of the Stock Consideration, and (ii) the amount of the dividend per share declared by the Board of Directors of MBI; provided further, however, that Regional shall not declare or pay any such regular quarterly dividend for any quarter in which Regional shareholders will be entitled to receive a regular quarterly dividend on the shares of MBI Common Stock to be issued in the Merger; (14) not merge or consolidate with any other corporation or other entity, acquire any stock (except in a fiduciary capacity or to realize upon collateral obtained in the ordinary course of business), effect any reorganization or recapitalization involving Regional or Bank of Alton; not acquire any assets of any other person, corporation or business organization except in the ordinary course of business, or acquire any assets (including, without limitation, deposits) of, or make any investment in, any financial institution; (15) not lease, sell or dispose of any material part of its assets, make capital or fixed asset expenditures in excess of $100,000 for any single item or $250,000 in the aggregate, enter into any leases of fixed assets, purchase any data processing equipment, waive or release any right or cancel or compromise any debt or claim except in the ordinary course of business, enter into any management, maintenance, servicing or similar contracts having a term of more than one year or providing for fees in excess of a rate of $250,000 per year, or otherwise enter into any material contract, transaction or commitment except in the ordinary course of business; (16) not make any loans, discounts or commitments to loan or discount in excess of the applicable legal lending limits; (17) not: (i) without first consulting with MBI, enter into, renew or increase any loan or credit commitment (including stand-by letters of credit) to, or invest or agree to invest in any person or entity or modify any of the material provisions or renew or otherwise extend the maturity date of any existing loan or credit commitment (collectively, "Lend to") in an amount equal to or in excess of $200,000; (ii) without first consulting with and obtaining the written consent of MBI, Lend to any person or entity in an amount equal to or in excess of $400,000; (iii) Lend to any person other than in accordance with lending policies as in effect on August 23, 1996, provided that in the case of clauses (i) through (iii) Regional or Bank of Alton may make any such loan in the event (A) Regional or Bank of Alton has delivered to MBI or its designated representative a notice of its intent to make such loan and such information as MBI or its designated representative may reasonably require in respect thereof and (B) MBI or its designated representative shall not have reasonably objected to such loan by giving written or facsimile notice of such objection within two business days following the delivery to MBI or its designated representative of the notice of intention and information as aforesaid; or (iv) Lend to any person or entity any of the loans or other extensions of credit to which - 31 - 35 or investments in which are on a "watch list" or similar internal report of Regional or Bank of Alton (except those denoted "pass" thereon), in an amount equal to or in excess of $50,000; provided, however, Regional and Bank of Alton may honor any contractual obligation in existence on August 23, 1996, or, with respect to loans made in compliance with clauses (i) through (iii) above, make such loans after consulting with MBI. Notwithstanding clauses (i) and (ii), Regional or Bank of Alton shall be authorized without first consulting with MBI or obtaining MBI's prior written consent, to increase the aggregate amount of any credit facilities theretofore established in favor of any person or entity (each a "Pre-Existing Facility"), provided that the aggregate amount of any and all such increases shall not be in excess of $25,000. (18) not, directly or indirectly (including through its officers, directors, employees or other representatives) (i) initiate, solicit or encourage any discussions, inquiries or proposals with any third party (other than MBI) relating to the disposition of any significant portion of the business or assets of Regional or Bank of Alton or the acquisition of equity securities of Regional or Bank of Alton or the merger of Regional or Bank of Alton with any person (other than MBI) or any similar transaction (each, an "Acquisition Transaction"), or (ii) provide any such person with information or assistance or negotiate with any such person with respect to an Acquisition Transaction, and Regional shall promptly notify MBI orally of all the relevant details relating to all inquiries, indications of interest and proposals which it may receive with respect to any Acquisition Transaction; (19) not take any action that would (A) materially impede or delay the consummation of the transactions contemplated by the Merger Agreement or the ability of MBI or Regional to obtain any approval of any regulatory authority required for the transactions contemplated by the Merger Agreement or to perform their respective covenants and agreements under the Merger Agreement or (B) prevent or impede the transactions contemplated hereby from qualifying as a reorganization within the meaning of Section 368 of the Code; (20) not materially restructure or change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported, or execute individual investment transactions of greater than $500,000 for U.S. Treasury or Federal Agency Securities and $100,000 for all other investment instruments; or (21) not agree in writing or otherwise to take any of the foregoing actions or engage in any activity, enter into any transaction or intentionally take or omit to take any other action which would make any of its representations and warranties in the Merger Agreement untrue or incorrect in any material respect if made anew after engaging in such activity, entering into such transaction, or taking or omitting such other action. ACCOUNTING TREATMENT The Merger will be accounted for under the purchase method of accounting. Accordingly, data regarding the financial condition and results of operations of Regional will be included in MBI's consolidated financial statements on and after the Closing Date. - 32 - 36 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER ----------------------------------------------------- The following discussion is a general summary of the material United States federal income tax ("federal income tax") consequences of the Merger to certain Regional shareholders and does not purport to be a complete analysis or listing of all potential tax considerations or consequences relevant to a decision whether to vote for the approval of the Merger. The discussion does not address all aspects of federal income taxation that may be applicable to Regional shareholders in light of their status or personal investment circumstances, nor does it address the federal income tax consequences of the Merger that are applicable to Regional shareholders subject to special federal income tax treatment including (without limitation) foreign persons, insurance companies, tax-exempt entities, retirement plans, dealers in securities, persons who acquired their Regional Common Stock pursuant to the exercise of employee stock options or otherwise as compensation, and persons who hold their Regional Common Stock as part of a "straddle," "hedge" or "conversion transaction." In addition, the discussion does not address the effect of any applicable state, local or foreign tax laws, or the effect of any federal tax laws other than those pertaining to the federal income tax. AS A RESULT, EACH REGIONAL SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER. The discussion assumes that shares of Regional Common Stock are held as capital assets (within the meaning of Section 1221 of the Code) at the Effective Time. Regional has received an opinion from Thompson Coburn solely to the effect that, assuming the Merger occurs in accordance with the Merger Agreement, the Merger will constitute a "reorganization" for federal income tax purposes under Section 368 of the Code. If the Merger constitutes a reorganization under the Code, each holder of Regional Common Stock who exchanges, in the Merger, shares of Regional Common Stock solely for shares of MBI Common Stock and the Cash Consideration: (i) will realize gain, determined separately as to each block of Regional Common Stock (shares of Regional Common Stock acquired at the same time in a single transaction) exchanged, if (x) the sum of the fair market value of the shares of MBI Common Stock received and the amount of the Cash Consideration received exceeds (y) the aggregate adjusted tax basis of the Regional Common Stock surrendered in exchange therefor, and will recognize such gain, if any, up to but not in excess of amount of Cash Consideration received; (ii) will not recognize any loss realized (determined separately as to each block of Regional Common Stock exchanged); (iii) will have basis for the shares of MBI Common Stock received (including any fractional share of MBI Common Stock deemed to be received, as described below) equal to the aggregate adjusted tax basis of the shares of Regional Common Stock surrendered, increased by the amount of gain, if any, recognized by such holder and decreased by the amount of Cash Consideration received; and (iv) will have a holding period for the shares of MBI Common Stock received (including any fractional share of MBI Common Stock deemed to be received, as described below) which includes the holding period of the Regional Common Stock surrendered. - 33 - 37 The recognized gain described in clause (ii) above will be capital gain or will be treated as the receipt of a taxable dividend, depending on the facts and circumstances of each Regional shareholder. Under Section 356 of the Code, the determination of whether the receipt of the Cash Consideration has the effect of the distribution of a dividend will be made generally in accordance with the principles of Section 302 of the Code, taking into account the stock ownership attribution rules of Section 318 of the Code. Provided that the receipt of the Cash Consideration by a Regional shareholder does not have the effect of the distribution of a dividend, such gain will be capital gain, and long-term or short-term depending on the holder's holding period for each block of Regional Common Stock surrendered. However, if the receipt of the Cash Consideration does have the effect of the distribution of a dividend, such gain generally will be taxable as a dividend. The receipt of the Cash Consideration by a Regional shareholder will be considered not to have the effect of the distribution of a dividend under Section 302 of the Code and such shareholder's recognized gain will be capital only if the receipt of the Cash Consideration (i) results in a "substantially disproportionate" reduction in such shareholder's actual and constructive stock interest, or (ii) is "not essentially equivalent to a dividend." These two tests will be applied as if all Regional Common Stock exchanged for the Cash Consideration in the Merger had instead been exchanged in the Merger solely for shares of MBI Common Stock, and such shares of MBI Common Stock were then redeemed by MBI in return for the Cash Consideration (a deemed post-Merger redemption). Accordingly, the determination of whether the receipt of the Cash Consideration by a Regional shareholder satisfies either of the foregoing tests will be made by comparing (i) such shareholder's actual and constructive stock interest in MBI before the deemed post-Merger redemption (determined as if such shareholder had received solely MBI Common Stock in the Merger), with (ii) such shareholder's actual and constructive stock interest in MBI after the deemed post-Merger redemption. The receipt of the Cash Consideration will result in a "substantially disproportionate" reduction in a Regional shareholder's stock interest and such shareholder's recognized gain will be capital if the percentage of outstanding MBI Common Stock actually and constructively owned by such shareholder after the deemed post-Merger redemption is less than four-fifths (i.e., 80%) of the percentage of outstanding MBI Common Stock ---- actually and constructively owned by such shareholder immediately prior to the deemed post-Merger redemption (determined as if such shareholder had received solely MBI Common Stock in the Merger). The receipt of the Cash Consideration will not be "essentially equivalent to a dividend" and such shareholder's recognized gain will be capital if the deemed post-Merger redemption results in a meaningful reduction in the percentage of outstanding shares actually and constructively owned by such shareholder. No specific tests apply to determine whether a reduction in a shareholder's ownership interest is meaningful; rather, such determination will be made based on all the facts and circumstances applicable to such Regional shareholder. No general guidelines dictating the appropriate interpretation of facts and circumstances have been announced by the courts or issued by the Internal Revenue Service (the "Service"). However, the Service has indicated in Revenue Ruling 76-385 that a minority shareholder (i.e., a holder who exercises no control ---- over corporate affairs and whose proportionate stock interest is minimal in relation to the number of shares outstanding) generally is treated as having had a "meaningful reduction" in interest if such holder's actual and constructive stock ownership is reduced by even a small amount. The determination of ownership for purposes of the foregoing tests will be made by taking into account both shares owned actually by such shareholder and shares owned constructively by such shareholder pursuant to Section 318 of the Code. Under Section 318 of the Code, a shareholder will be deemed to own stock that is actually or constructively owned by certain members of his or her family (spouse, children, grandchildren, and parents) and other related parties including, for example, certain entities in which such shareholder has a direct or indirect interest (including partnerships, estates, trusts - 34 - 38 and corporations), as well as shares of stock that such shareholder (or a related person) has the right to acquire upon exercise of an option or conversion right. Because the determination of whether the receipt of the Cash Consideration will be treated as having the effect of the distribution of a dividend will generally depend upon the facts and circumstances of each Regional shareholder, Regional shareholders are strongly advised to consult their own tax advisors regarding the tax treatment of the Cash Consideration received in the Merger. A Regional shareholder who receives cash in the Merger in lieu of a fractional share of MBI Common Stock should be treated as if the fractional share had been received by such shareholder in the Merger and then redeemed by MBI in return for the cash. The receipt of such cash will cause the recipient to recognize capital gain or loss equal to the difference between the amount of cash received and the portion of such holder's adjusted tax basis in the shares of MBI Common Stock allocable to the fractional share. The appropriate treatment of the West Pointe Consideration (including cash received in lieu of fractional shares thereof, if any) is unclear. The West Pointe Consideration could be accorded the same treatment as the Cash Consideration, in which case the West Pointe Consideration would be taken into account in determining gain, loss and basis as described above, and gain attributable to the West Pointe Consideration would be characterized either as capital gain or dividend income as described above. Alternatively, the West Pointe Consideration could be treated as having been received in a pre-Merger dividend. If such pre-Merger dividend treatment were appropriate, each Regional shareholder would recognize dividend income in an amount equal to the fair market value of the West Pointe Consideration received, and the West Pointe Consideration would not be taken into account in determining gain, loss or basis as described in the foregoing discussion. Each Regional shareholder should consult his or her own tax advisor as to the determination of basis and holding period in any one share of MBI Common Stock, because several methods of determination may be available. In this regard, the transmittal letter to be received by each Regional shareholder from the Exchange Agent after the Closing Date permits each Regional shareholder to designate the number of MBI Common Stock certificates he or she wishes to receive, in order to permit tracing of basis and holding period. See "TERMS OF THE PROPOSED MERGER - Surrender of Regional Stock Certificates and Receipt of Merger Consideration." Thompson Coburn's opinion is subject to the conditions and assumptions that are stated therein and relies upon various representations made by MBI, Regional and the majority shareholder of Regional, the truth and accuracy of which are assumed for purposes of rendering such opinion. If any of these conditions, assumptions or representations is inaccurate, the Merger may fail to qualify as a reorganization and the tax consequences of the Merger could differ from those described herein. In particular, the Merger must satisfy the "continuity of interest" requirement to qualify as a reorganization. To satisfy the "continuity of interest" requirement, Regional shareholders must not, pursuant to a plan or intent existing at or prior to the Effective Time of the Merger, dispose of or transfer so much of the MBI Common Stock to be received in the Merger ("Planned Dispositions"), such that the Regional shareholders, as a group, would no longer retain a significant, albeit indirect, equity interest in the former business of Regional. Regional shareholders generally will be regarded as having a significant equity interest as long as the MBI Common Stock received in the Merger (after taking into account Planned Dispositions), in the aggregate, represents a substantial portion of the entire consideration received by the Regional shareholders in the Merger. For advance ruling purposes, the IRS considers an interest equal to 50% or more of the fair market value of the outstanding shares of Regional held immediately - 35 - 39 before the Merger as a significant equity interest (the "IRS Continuity Test"). Notwithstanding the IRS Continuity Test, case law clearly supports less than the 50% threshold required for advance ruling purposes. In rendering its opinion, Thompson Coburn has relied upon a representation of the majority shareholder of Regional that such shareholder has no plan or intention to sell, exchange or otherwise dispose of shares of MBI Common Stock received in the Merger. Based on such representation, which is the sole representation that Thompson Coburn relied upon with regard to the continuity of interest requirement, the IRS Continuity Test should be satisfied. However, Regional shareholders should be aware that the majority shareholder of Regional holds sufficient Regional Common Stock such that Planned Dispositions by such shareholder alone could cause the Merger to fail to satisfy the continuity of interest test. A successful IRS challenge to the Reorganization status of the Merger (as a result of a failure of the "continuity of interest" requirement or otherwise) would result in significant tax consequences. A Regional shareholder would recognize capital gain or loss with respect to each share of Regional Common Stock surrendered equal to the difference between the shareholder's basis in such share and the fair market value, as of the Effective Time, of the Merger Consideration received with in respect of such share of Regional Common Stock. In such event, a shareholder's aggregate basis in the MBI Common Stock so received would equal its fair market value, and the shareholder's holding period for such stock would begin the day after the Merger. Thompson Coburn's opinion is also based upon the Code, regulations proposed or promulgated thereunder, judicial precedent relating thereto, and current administrative rulings and practice, all of which are subject to change. Any such change, which may or may not be retroactive, could alter the tax consequences discussed herein. The opinion is available without charge upon written request to Jon W. Bilstrom, General Counsel and Secretary, Mercantile Bancorporation Inc., P.O. Box 524, St. Louis, Missouri 63166-0524. The receipt of Counsel's opinion again as of the date of the closing of the Merger is a condition to the consummation of the Merger. An opinion of counsel, unlike a private letter ruling from the Service, has no binding effect on the Service. The Service could take a position contrary to Counsel's opinion and, if the matter were litigated, a court may reach a decision contrary to the opinion. Neither MBI nor Regional has requested an advance ruling as to the federal income tax consequences of the Merger, and the Service is not expected to issue such a ruling. THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CERTAIN REGIONAL SHAREHOLDERS AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH REGIONAL SHAREHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH REGIONAL SHAREHOLDER. ACCORDINGLY, EACH REGIONAL SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS. - 36 - 40 RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL --------------------------------------------- Each holder of Regional Common Stock has the right to dissent from the Merger and receive the fair value of such shares of Regional Common Stock in cash if the shareholder follows the procedures set forth in the Illinois Act, included as Annex A ------- hereto and the material provisions of which are summarized below. Pursuant to the Illinois Act, a holder of Regional Common Stock may dissent and Ameribanc, as the surviving corporation, will pay to such shareholder the fair value of such shareholder's shares of Regional Common Stock, exclusive of any appreciation or depreciation in anticipation of the Merger, as of immediately before the consummation of the Merger if such shareholder: (1) files with Regional prior to the vote being taken a written demand for payment for his or her shares if the Merger is consummated; and (2) does not vote in favor --- thereof. MBI will include notice of the Effective Time in its letter to all shareholders of Regional notifying them of the procedures to exchange their shares of Regional Common Stock for the Merger Consideration. Such letter shall be sent within two business days following the Effective Time. Within 10 days after the shareholder's vote is effective or 30 days after such shareholder delivers to Regional a written demand for payment, whichever is later, Ameribanc shall send each shareholder who has delivered a written demand for payment a statement setting forth the opinion of Ameribanc as to the estimated fair value of the shares of Regional Common Stock, Regional's latest balance sheet as of the end of a fiscal year ended not earlier than 16 months before the delivery of the statement, together with the statement of income for that year and the latest available interim financial statements, and either (i) a commitment to pay for the shares of the dissenting shareholder at the estimated fair value thereof upon transmittal to Ameribanc of the certificate or certificates, or other evidence of ownership, with respect to such shares or (ii) instructions to the dissenting shareholder to sell his or her shares within 10 days after the delivery of such statement to the shareholder. A VOTE AGAINST THE MERGER, WHETHER BY PROXY OR IN PERSON, WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN DEMAND FOR PAYMENT FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS. Upon consummation of the Merger, Ameribanc shall pay to each dissenter who transmits to Ameribanc the certificate or other evidence of ownership of the shares of Regional Common Stock the amount Ameribanc estimates to be the fair value of such shares, plus accrued interest, accompanied by a written explanation of how the interest was calculated. Upon payment of the agreed value, the dissenting shareholder shall cease to have any interest in such shares of Regional Common Stock or in Regional, Ameribanc or MBI. If the dissenting shareholder does not agree with the opinion of Ameribanc as to the estimated fair value of the shares of Regional Common Stock or the amount of interest due, the dissenting shareholder must, within 30 days from the delivery of Ameribanc's statement of value, notify Ameribanc in writing, of the shareholder's estimated fair value and interest due and demand payment for the difference between the shareholder's estimate of fair value and interest due and the amount of the payment by Ameribanc. If, within 60 days from delivery to Ameribanc of the shareholder notification of estimate of fair value of shares of Regional Common Stock and interest due, Ameribanc and the dissenting shareholder have not agreed in writing upon the fair value of such shares and interest due, Ameribanc shall either pay the difference in value demanded by the shareholder, with interest, or file a petition in the circuit court of the county in which either the registered office or the principal office of Regional is located, requesting the court to determine the fair value of such shares and interest due. The "fair value" determined by the court may be more or less than the amount offered to Regional shareholders under the Merger Agreement. The judgment shall be payable only upon, and simultaneously with, the surrender to MBI of the certificate or certificates representing said shares of Regional Common Stock. Upon the - 37 - 41 payment of the judgment, the dissenting shareholder shall cease to have any interest in such shares of Regional Common Stock or in Regional, Ameribanc or MBI. FAILURE TO COMPLY STRICTLY WITH THESE PROCEDURES WILL CAUSE THE SHAREHOLDER TO LOSE HIS OR HER DISSENTERS' RIGHTS. CONSEQUENTLY, ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR HER DISSENTERS' RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS. THE PRECEDING DISCUSSION IS A COMPLETE DESCRIPTION OF ALL THE MATERIAL PROCEDURES TO BE FOLLOWED BY REGIONAL SHAREHOLDERS IN ORDER TO PERFECT THEIR DISSENTERS' RIGHTS UNDER SECTION 11.70 OF THE ILLINOIS ACT, THE COMPLETE TEXT OF WHICH IS ATTACHED HERETO AS ANNEX A. REGIONAL SHAREHOLDERS WHO ARE INTERESTED IN PERFECTING - ------- DISSENTERS' RIGHTS PURSUANT TO THE ILLINOIS ACT IN CONNECTION WITH THE MERGER SHOULD CONSULT WITH THEIR COUNSEL FOR ADVICE AS TO THE PROCEDURES REQUIRED TO BE FOLLOWED. - 38 - 42 PRO FORMA FINANCIAL INFORMATION ------------------------------- COMPARATIVE UNAUDITED PER SHARE DATA The following table sets forth for the periods indicated selected historical per share data of MBI and Regional and the corresponding pro forma and pro forma equivalent per share amounts, giving effect to the proposed acquisition of Regional, the recent acquisitions of First Financial and TODAY'S and the proposed acquisitions of First City, Mark Twain and Roosevelt. The data presented is based upon the supplemental consolidated financial statements and consolidated financial statements and related notes of MBI and the consolidated financial statements and related notes of Regional, Mark Twain and Roosevelt included in this Proxy Statement/Prospectus or in documents incorporated herein by reference, and the pro forma combined consolidated balance sheet and income statements, including the notes thereto, appearing elsewhere herein. This information should be read in conjunction with such historical and pro forma financial statements and related notes thereto. The assumptions used in the preparation of this table appear in the notes to the pro forma financial information appearing elsewhere in this Proxy Statement/ Prospectus. See "- Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." These data are not necessarily indicative of the results of the future operations of the combined organization or the actual results that would have occurred if the proposed acquisition of Regional, the recent acquisitions of First Financial and TODAY'S and the proposed acquisitions of First City, Mark Twain and Roosevelt had been consummated at the beginning of the periods indicated. All adjustments consisting of only normal recurring adjustments for a fair statement of results of interim periods have been included.
MBI/ MBI/ MBI/All MBI/ Regional Regional Entities All Entities MBI Regional Pro Forma Pro Forma Pro Forma Pro Forma Reported Reported Combined Equivalent Combined Equivalent -------- -------- ------------- --------------- ------------- --------------- Book Value per Share: September 30, 1996 $ 25.51 $924.77 $25.99 $616.23 $26.65 $631.93 December 31, 1995 26.04 913.16 26.49 628.14 28.39 673.19 Cash Dividends Declared per Share: Nine months ended September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17 Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30 Earnings per Share: Nine months ended September 30, 1996 $ 2.01 $ 79.37 $ 2.01 $ 47.66 $ 1.84 $ 43.63 Year ended December 31, 1995 3.74 108.93 3.75 88.92 2.85 67.58 Market Price per Share: At August 23, 1996 $47.750 n/a n/a n/a n/a n/a At January 31, 1997 53.375 n/a n/a n/a n/a n/a - -------------------- Includes the effect of pro forma adjustments for Regional. See "- Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." Based on the pro forma combined per share amounts multiplied by 23.7123, the Stock Consideration. Further explanation of the assumptions used in the preparation of the pro forma combined consolidated financial statements is included in the notes to pro forma financial statements. See "- Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." Includes the effect of pro forma adjustments for Regional, TODAY'S, First Financial, First City, Mark Twain and Roosevelt. See "- Notes to Pro Forma Combined Consolidated Financial Statements (Unaudited)." The market price per share of MBI Common Stock was determined as of August 23, 1996 and January 31, 1997, the last trading day preceding the public announcement of the proposed Merger and as of the latest available date prior to the filing of the Registration Statement, respectively, based on the last sale price as reported on the NYSE Composite Tape. There are no publicly available quotations of Regional Common Stock.
- 39 - 43 PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MBI HAS COMPLETED OR ANNOUNCED A NUMBER OF ACQUISITIONS DURING THE YEARS COVERED BY THE PRO FORMA FINANCIAL STATEMENTS THAT FOLLOW. SET FORTH BELOW IS A TABLE WHICH SUMMARIZES THE COMPLETED AND PENDING ACQUISITIONS, INCLUDING THE NAME OF THE ACQUIRED ENTITY, THE DATE OR EXPECTED DATE OF CONSUMMATION OF THE ACQUISITION, THE ASSETS AND DEPOSITS OF THE ACQUIRED ENTITIES AT THE DATE OF CONSUMMATION FOR THE COMPLETED ACQUISITIONS AND AS OF SEPTEMBER 30, 1996 FOR THE PENDING ACQUISITIONS, THE CONSIDERATION PAID OR TO BE PAID IN CASH AND SHARES OF MBI STOCK AND THE ACCOUNTING METHOD UTILIZED.
Consideration Accounting Date Assets Deposits Cash Shares Method (Dollars in Thousands) Acquisitions Completed Peoples State Bank Aug. 22, 1996 $ 95,657 $ 75,149 $ -- 325,837 Purchase Metro Savings Bank, F.S.B. Mar. 7, 1996 80,857 73,843 5 197,902 Purchase Security Bank of Conway, F.S.B. Feb. 9, 1996 102,502 89,697 1 321,964 Purchase Hawkeye Bancorporation Jan. 2, 1996 1,987,540 1,739,811 80 7,892,196 Pooling First Sterling Bancorp, Inc. Jan. 2, 1996 167,610 147,588 1 521,417 Pooling Southwest Bancshares, Inc. Aug. 1, 1995 187,701 155,628 1 674,975 Pooling AmeriFirst Bancorporation, Inc. Aug. 1, 1995 155,521 130,179 1 661,356 Pooling Plains Spirit Financial Corporation July 7, 1995 400,754 276,887 6,697 1,301,180 Purchase TCBankshares, Inc. May 1, 1995 1,422,798 1,217,740 -- 4,749,999 Pooling Central Mortgage Bancshares, Inc. May 1, 1995 654,584 571,105 8 2,537,723 Pooling UNSL Financial Corp. Jan. 3, 1995 508,346 380,716 11 1,578,107 Pooling Wedge Bank Jan. 3, 1995 195,716 152,865 1 969,954 Pooling Acquisitions Pending Today's Bancorp, Inc. Nov. 7, 1996 519,103 446,573 Purchase First Financial Corporation of America Nov. 1, 1996 87,661 76,379 Purchase Regional Bancshares, Inc. 1st Qtr. 1997 182,272 146,987 Purchase Mark Twain Bancshares, Inc. 2nd Qtr. 1997 3,147,933 2,432,484 -- 17,200,000 Pooling Roosevelt Financial Group, Inc. 3rd Qtr. 1997 9,047,562 5,062,359 Purchase The historical financial statements of MBI were not restated for the acquisition due to the immateriality of the acquiree's financial condition and results of operations to those of MBI. In addition to MBI Common Stock issued, MBI assumed, through an exchange, the outstanding, non-convertible preferred stock of TCBankshares, Inc. Such preferred stock was redeemed in the first quarter of 1996. The value of the consideration totals $87,250,000, which includes up to 1,177,066 shares of MBI Common Stock. The value of the consideration totals $14,980,000, which includes up to 258,783 shares of MBI Common Stock. The value of the consideration totals $41,000,000, which includes up to 600,418 shares of MBI Common Stock. Estimated shares to be issued in acquisition. MBI will deliver up to 13,000,000 shares of common stock at an exchange ratio of .4211 shares of MBI Common Stock, or $22.00 in cash, for each share of Roosevelt common stock.
The following unaudited pro forma combined consolidated balance sheet gives effect to the proposed Merger, the recent acquisitions of First Financial and TODAY'S and the proposed acquisitions of First City, Mark Twain and Roosevelt as if each of the acquisitions were consummated on September 30, 1996. The following pro forma combined consolidated income statements for the nine months ended September 30, 1996 and 1995 and the year ended December 31, 1995 set forth the results of operations of MBI combined with the results of operations of Regional, First Financial, TODAY'S, First City, Mark Twain and Roosevelt as if the proposed Merger, the recent acquisitions of First Financial and TODAY'S and the proposed acquisitions of First City, Mark Twain and Roosevelt had occurred as of the first day of the period presented. - 40 - 44 The unaudited pro forma combined consolidated financial statements should be read in conjunction with the accompanying Notes to the Pro Forma Combined Consolidated Financial Statements and with the historical financial statements of MBI, Regional, Mark Twain and Roosevelt. These pro forma combined consolidated financial statements may not be indicative of the results of operations that actually would have occurred if the proposed acquisitions had been consummated on the dates assumed above or of the results of operations that may be achieved in the future. - 41 - 45 MERCANTILE BANCORPORATION INC. PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1996 (THOUSANDS) (UNAUDITED)
MBI, Regional Pro Forma Regional Combined MBI Regional Adjustments Consolidated Roosevelt Mark Twain ----------- -------- --------------- ------------ -------------- ---------- ASSETS Cash and due from banks $ 909,350 $ 7,452 $ (12,330) $ 904,472 $ 46,006 $ 169,916 Due from banks-interest bearing 74,713 -- 74,713 -- 16 Federal funds sold and repurchase agreements 183,227 495 183,722 -- 15,879 Investments in debt and equity securities Trading 804 -- 804 -- 43,669 Available-for-sale 3,959,361 66,077 4,025,438 1,128,697 459,690 Held to maturity 359,682 -- 359,682 3,309,994 225,384 ----------- -------- --------- ----------- ---------- ---------- Total 4,319,847 66,077 -- 4,385,924 4,438,691 728,743 Loans and leases 12,166,461 103,169 12,269,630 4,236,624 2,143,218 Reserve for possible loan losses (202,149) (1,473) (203,622) (21,471) (32,068) ----------- -------- --------- ----------- ---------- ---------- Net loans and leases 11,964,312 101,696 -- 12,066,008 4,215,153 2,111,150 Other assets 747,092 6,362 23,416 771,038 347,712 122,229 17,584 (23,416) ----------- -------- --------- ----------- ---------- ---------- Total Assets $18,198,541 $182,082 $ 5,254 $18,385,877 $9,047,562 $3,147,933 =========== ======== ========= =========== ========== ========== Roosevelt, Mark Twain, First City, All Entities First Financial, Pro Forma First TODAY'S Combined First City Financial TODAY'S Adjustments Consolidated ---------- --------- --------- --------------- ----------------- ASSETS Cash and due from banks $ 5,864 $ 2,466 $ 14,461 $ (35,000) $ 910,540 (355,250) (412,250) 467,500 150,000 (10,310) (3,335) (34,000) Due from banks-interest bearing -- -- 270 74,999 Federal funds sold and repurchase agreements 11,279 -- 10,250 221,130 Investments in debt and equity securities Trading -- -- -- 44,473 Available-for-sale 9,988 34,328 89,223 5,747,364 Held to maturity 2,022 -- 25,139 3,922,221 -------- -------- -------- --------- ----------- Total 12,010 34,328 114,362 -- 9,714,058 Loans and leases 57,687 48,226 358,239 19,113,623 Reserve for possible loan losses (822) (651) (3,769) (262,403) -------- -------- -------- --------- ----------- Net loans and leases 56,864 47,575 354,470 -- 18,851,220 Other assets 3,134 3,502 25,290 505,867 1,887,802 566,133 (505,867) 289,433 (289,433) 5,942 4,517 (5,942) 10,831 4,149 (10,831) 47,164 40,098 (47,164) -------- -------- -------- --------- ----------- Total Assets $ 89,151 $ 87,871 $519,103 $ 382,252 $31,659,749 ======== ======== ======== ========= =========== See Notes to Pro Forma Combined Consolidated Financial Statements.
- 42 - 46 MERCANTILE BANCORPORATION INC. PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1996 (THOUSANDS) (UNAUDITED)
MBI, Regional Pro Forma Regional Combined MBI Regional Adjustments Consolidated Roosevelt Mark Twain ----------- -------- --------------- ------------ -------------- ---------- LIABILITIES Deposits Non-interest bearing $ 2,659,811 $ 13,717 $ 2,673,528 $ -- $ 449,001 Interest bearing 11,621,523 133,270 11,754,793 5,062,359 1,983,483 Foreign 328,717 -- 328,717 -- -- ----------- -------- ------- ----------- ---------- ---------- Total deposits 14,610,051 146,987 -- 14,757,038 5,062,359 2,432,484 Federal funds purchased and repurchase agreements 1,022,995 -- 1,022,995 405,344 -- Other borrowings 778,990 10,000 788,990 2,868,756 361,617 Other liabilities 251,633 1,679 253,312 205,236 64,399 ----------- -------- ------- ----------- ---------- ---------- Total Liabilities 16,663,669 158,666 -- 16,822,335 8,541,695 2,858,500 COMPANY-OBLIGATED MANDATORILY REDEEMABLE CAPITAL TRUST PASS- THROUGH SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY A COMPANY- GUARANTEED RELATED SUBORDINATED DEBT -- -- -- -- -- -- SHAREHOLDERS' EQUITY Preferred stock -- -- -- 13 -- Common stock 316,276 253 (253) 316,276 422 21,089 Capital surplus 232,873 2,907 1,933 234,806 264,274 67,077 (2,907) Retained earnings 1,122,371 20,256 (20,256) 1,122,371 241,158 215,951 Treasury stock (136,648) -- 26,737 (109,911) -- (14,684) ----------- -------- ------- ----------- ---------- ---------- Total Shareholders' Equity 1,534,872 23,416 5,254 1,563,542 505,867 289,433 ----------- -------- ------- ----------- ---------- ---------- Total Liabilities and Shareholders' Equity $18,198,541 $182,082 $ 5,254 $18,385,877 $9,047,562 $3,147,933 =========== ======== ======= =========== ========== ========== Roosevelt, Mark Twain, First City, All Entities First Financial, Pro Forma First TODAY'S Combined First City Financial TODAY'S Adjustments Consolidated ----------- --------- ------- --------------- ----------------- LIABILITIES Deposits Non-interest bearing $ 12,369 $ 7,520 $ 48,073 $ (10,310) $ 3,180,181 Interest bearing 64,234 67,783 398,500 19,331,152 Foreign -- -- -- 328,717 ----------- -------- -------- ----------- ----------- Total deposits 76,603 75,303 446,573 (10,310) 22,840,050 Federal funds purchased and repurchase agreements 0 1,076 8,938 1,438,353 Other borrowings 6,285 -- 10,833 467,500 4,503,981 Other liabilities 321 661 5,595 529,524 ----------- -------- -------- ----------- ----------- Total Liabilities 83,209 77,040 471,939 457,190 29,311,908 COMPANY-OBLIGATED MANDATORILY REDEEMABLE CAPITAL TRUST PASS- THROUGH SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY A COMPANY- GUARANTEED RELATED SUBORDINATED DEBT -- -- -- 150,000 150,000 SHAREHOLDERS' EQUITY Preferred stock -- -- -- (13) -- Common stock 17 8 13,809 30,000 424,276 (422) 76,750 (21,089) 1,250 (17) (8) (13,809) Capital surplus 1,259 771 6,627 274,500 441,774 (264,274) (78,345) (67,077) 9,209 (1,259) 215 (771) 1,389 (6,627) Retained earnings 5,581 10,052 26,728 (241,158) 1,338,322 215,951 (215,951) (5,581) (10,052) (26,728) Treasury stock (915) -- -- (35,000) (6,531) (355,250) 355,250 75,077 14,684 915 11,430 51,873 ----------- -------- -------- ----------- ----------- Total Shareholders' Equity 5,942 10,831 47,164 (224,938) 2,197,841 ----------- -------- -------- ----------- ----------- Total Liabilities and Shareholders' Equity $ 89,151 $ 87,871 $519,103 $ 382,252 $31,659,749 =========== ======== ======== =========== =========== See Notes to Pro Forma Combined Consolidated Financial Statements.
- 43 - 47 MERCANTILE BANCORPORATION INC. PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
MBI, Regional Pro Forma Regional Combined MBI Regional Adjustments Consolidated Roosevelt Mark Twain --------- -------- --------------- ------------ --------- ---------- Interest income $ 987,701 $9,682 $(1,465) $ 995,918 $489,011 $170,209 Interest expense 465,821 4,826 470,647 356,010 75,803 ---------- ------ ------- ---------- -------- -------- Net interest income 521,880 4,856 (1,465) 525,271 133,001 94,406 Provision for possible loan losses 55,915 75 55,990 900 2,001 ---------- ------ ------- ---------- -------- -------- Net Interest Income after provision for Possible Loan Losses 465,965 4,781 (1,465) 469,281 132,101 92,405 Other Income Trust 59,491 142 59,633 -- 4,976 Service charges 59,492 260 59,752 11,009 6,061 Credit card fees 18,515 18 18,533 -- 795 Securities gains (losses) (2,843) (11) (2,854) 15,978 234 Other 77,274 389 77,663 4,610 17,134 ---------- ------ ------- ---------- -------- -------- Total Other Income 211,929 798 -- 212,727 31,597 29,200 Other Expense Salaries and employee benefits 237,447 1,528 238,975 31,821 36,968 Net occupancy and equipment 66,069 407 66,476 13,158 9,297 Other 178,654 1,193 879 180,726 53,025 14,173 ---------- ------ ------- ---------- -------- -------- Total Other Expense 482,170 3,128 879 486,177 98,004 60,438 ---------- ------ ------- ---------- -------- -------- Income Before Income Taxes 195,724 2,451 (2,344) 195,831 65,694 61,167 Income Taxes 70,407 441 (527) 70,321 22,441 22,197 ---------- ------ ------- ---------- -------- -------- Income Before Extraordinary Items 125,317 2,010 (1,817) 125,510 43,253 38,970 Extraordinary items, net of tax -- -- -- -- (1,452) -- ---------- ------ ------- ---------- -------- -------- Net Income $ 125,317 $2,010 $(1,817) $ 125,510 $ 41,801 $ 38,970 ========== ====== ======= ========== ======== ======== Per Share Data Average Common Shares Outstanding 62,160,601 62,761,019 Net Income $ 2.01 $ 1.99 Roosevelt, Mark Twain, First City, All Entities First Financial, Pro Forma First TODAY'S Combined First City Financial TODAY'S Adjustments Consolidated ---------- --------- ------- ---------------- ------------ Interest income $5,214 $4,894 $28,985 $ (5,625) $1,682,017 (2,815) (554) (3,220) Interest expense 2,692 2,174 14,730 23,667 945,723 ------ ------ ------- -------- ---------- Net interest income 2,522 2,720 14,255 (35,881) 736,294 Provision for possible loan losses 146 18 1,440 60,495 ------ ------ ------- -------- ---------- Net Interest Income after provision for Possible Loan Losses 2,376 2,702 12,815 (35,881) 675,799 Other Income Trust -- -- 1,334 65,943 Service charges 226 154 1,246 78,448 Credit card fees -- -- 37 19,365 Securities gains (losses) -- -- 6 13,364 Other 1,688 175 960 102,230 ------ ------ ------- -------- ---------- Total Other Income 1,914 329 3,583 279,350 Other Expense Salaries and employee benefits 975 1,177 5,598 315,514 Net occupancy and equipment 466 268 1,107 90,772 Other 594 360 6,254 28,307 293,190 226 207 2,005 7,313 ------ ------ ------- -------- ---------- Total Other Expense 2,035 1,805 12,959 38,058 699,476 ------ ------ ------- -------- ---------- Income Before Income Taxes 2,255 1,226 3,439 (73,939) 255,673 Income Taxes 271 390 1,148 (13,178) 101,218 (1,014) (199) (1,159) ------ ------ ------- -------- ---------- Income Before Extraordinary Items 1,984 836 2,291 (58,389) 154,455 Extraordinary items, net of tax -- -- -- (1,452) ------ ------ ------- -------- ---------- Net Income $1,984 $ 836 $ 2,291 $(58,389) $ 153,003 ====== ====== ======= ======== ========== Per Share Data Average Common Shares Outstanding 83,093,534 Net Income $ 1.84 See Notes to Pro Forma Combined Consolidated Financial Statements.
- 44 - 48 MERCANTILE BANCORPORATION INC. PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
MBI, Regional Pro Forma Regional Combined MBI Regional Adjustments Consolidated Roosevelt Mark Twain --------- -------- --------------- ------------ --------- ---------- Interest income $ 962,361 $8,707 $(1,465) $ 969,603 $482,932 $166,669 Interest expense 459,432 3,833 463,265 345,716 70,299 ---------- ------ ------- ---------- -------- -------- Net interest income 502,929 4,874 (1,465) 506,338 137,216 96,370 Provision for possible loan losses 29,177 42 29,219 900 3,344 ---------- ------ ------- ---------- -------- -------- Net Interest Income after provision for Possible Loan Losses 473,752 4,832 (1,465) 477,119 136,316 93,026 Other Income Trust 52,142 149 52,291 -- -- Service charges 56,331 252 56,583 8,078 5,220 Credit card fees 15,622 16 15,638 -- -- Securities gains (losses) 3,776 22 3,798 (11,283) 46 Mark to market of financial future contracts -- -- -- (61,569) -- Other 71,745 401 72,146 7,490 22,123 ---------- ------ ------- ---------- -------- -------- Total Other Income 199,616 840 200,456 (57,284) 27,389 Other Expense Salaries and employee benefits 219,540 1,366 220,906 25,887 36,300 Net occupancy and equipment 60,371 328 60,699 13,015 9,934 Other 127,209 1,279 879 129,367 25,206 18,386 ---------- ------ ------- ---------- -------- -------- Total Other Expense 407,120 2,973 879 410,972 64,108 64,620 ---------- ------ ------- ---------- -------- -------- Income Before Income Taxes 266,248 2,699 (2,344) 266,603 14,924 55,795 Income Taxes 90,164 700 (527) 90,337 3,742 20,579 ---------- ------ ------- ---------- -------- -------- Net Income $ 176,084 $1,999 $(1,817) $ 176,266 $ 11,182 $ 35,216 ========== ====== ======= ========== ======== Per Share Data Average Common Shares Outstanding 61,497,977 62,098,395 Net Income $ 2.85 $ 2.83 Roosevelt, Mark Twain, First City, All Entities First Financial, Pro Forma First TODAY'S Combined First City Financial TODAY'S Adjustments Consolidated ---------- --------- ------- ---------------- ------------ Interest income $5,217 $4,490 $29,099 $ (5,625) $ 1,645,796 (2,815) (554) (3,220) Interest expense 2,557 1,982 14,605 23,667 922,091 ------ ------ ------- -------- ----------- Net interest income 2,660 2,508 14,494 (35,881) 723,705 Provision for possible loan losses 146 -- 615 34,224 ------ ------ ------- -------- ----------- Net Interest Income after provision for Possible Loan Losses 2,514 2,508 13,879 (35,881) 689,481 Other Income Trust -- 155 1,216 53,662 Service charges 241 -- 1,347 71,469 Credit card fees -- -- -- 15,638 Securities gains (losses) (18) (82) 140 (7,399) Mark to market of financial future contracts -- -- (61,569) Other 264 290 1,188 103,501 ------ ------ ------- -------- ----------- Total Other Income 487 363 3,891 175,302 Other Expense Salaries and employee benefits 951 1,137 5,783 290,964 Net occupancy and equipment 405 325 2,093 86,471 Other 729 500 4,518 28,307 216,764 226 207 2,005 7,313 ------ ------ ------- -------- ----------- Total Other Expense 2,085 1,962 12,394 38,058 594,199 ------ ------ ------- -------- ----------- Income Before Income Taxes 916 909 5,376 (73,939) 270,584 Income Taxes 336 286 1,874 (13,178) 101,604 (1,014) (199) (1,159) ------ ------ ------- -------- ----------- Net Income $ 580 $ 623 $ 3,502 $(58,389) $ 168,980 ====== ====== ======= ======== =========== Per Share Data Average Common Shares Outstanding 82,316,227 Net Income $ 2.04 See Notes to Pro Forma Combined Consolidated Financial Statements.
- 45 - 49 MERCANTILE BANCORPORATION INC. PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995 (THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
MBI, Regional Pro Forma Regional Combined MBI Regional Adjustments Consolidated Roosevelt Mark Twain --------- -------- --------------- ------------ --------- ---------- Interest income $ 1,293,944 $11,840 $(1,953) $ 1,303,831 $647,795 $223,173 Interest expense 620,534 5,318 625,852 466,433 94,932 ----------- ------- ------- ----------- -------- -------- Net interest income 673,410 6,522 (1,953) 677,979 181,362 128,241 Provision for possible loan losses 36,530 42 36,572 1,200 5,003 ----------- ------- ------- ----------- -------- -------- Net Interest Income after provision for Possible Loan Losses 636,880 6,480 (1,953) 641,407 180,162 123,238 Other Income Trust 70,751 198 70,949 -- 6,364 Service charges 75,408 341 75,749 10,706 7,051 Credit card fees 19,690 21 19,711 -- 676 Securities gains (losses) 4,042 10 4,052 (3,178) 296 Recognition of financial futures losses -- -- -- (71,022) -- Other 103,762 538 -- 104,300 8,354 22,399 ----------- ------- ------- ----------- -------- -------- Total Other Income 273,653 1,108 -- 274,761 (55,140) 36,786 Other Expense Salaries and employee benefits 298,625 1,811 300,436 34,780 47,531 Net occupancy and equipment 82,674 439 83,113 18,758 13,222 Other 172,449 1,647 1,172 175,268 34,128 25,769 ----------- ------- ------- ----------- -------- -------- Total Other Expense 553,748 3,897 1,172 558,817 87,666 86,522 ----------- ------- ------- ----------- -------- -------- Income Before Income Taxes 356,785 3,691 (3,125) 357,351 37,356 73,502 Income Taxes 124,109 933 (703) 124,339 10,258 25,789 ----------- ------- ------- ----------- -------- -------- Net Income $ 232,676 $ 2,758 $(2,422) $ 233,012 $ 27,098 $ 47,713 =========== ======= ======= =========== ======== ======== Per Share Data Average Common Shares Outstanding 61,883,723 62,484,141 Net Income $ 3.74 $ 3.71 Roosevelt, Mark Twain, First City, All Entities First Financial, Pro Forma First TODAY'S Combined First City Financial TODAY'S Adjustments Consolidated ---------- --------- ------- ---------------- ------------ Interest income $7,030 $6,104 $39,180 $ (7,500) $2,210,827 (3,754) (738) (4,294) Interest expense 3,517 2,693 19,775 31,556 1,244,758 ------ ------ ------- -------- ---------- Net interest income 3,513 3,411 19,405 (47,842) 966,069 Provision for possible loan losses 311 -- 960 44,046 ------ ------ ------- -------- ---------- Net Interest Income after provision for Possible Loan Losses 3,202 3,411 18,445 (47,842) 922,023 Other Income Trust -- -- 1,624 78,937 Service charges 347 264 1,655 95,772 Credit card fees -- -- -- 20,387 Securities gains (losses) (18) (37) 62 1,177 Recognition of financial futures losses -- -- -- (71,022) Other 348 484 1,640 137,525 ------ ------ ------- -------- ---------- Total Other Income 677 711 4,981 262,776 Other Expense Salaries and employee benefits 1,221 1,569 7,318 392,855 Net occupancy and equipment 546 191 2,806 118,636 Other 2,209 934 5,836 37,742 294,887 301 277 2,673 9,750 ------ ------ ------- -------- ---------- Total Other Expense 3,976 2,694 15,960 50,743 806,378 ------ ------ ------- -------- ---------- Income Before Income Taxes (97) 1,428 7,466 (98,585) 378,421 Income Taxes (76) 430 2,587 (17,570) 142,594 (1,351) (266) (1,546) ------ ------ ------- -------- ---------- Net Income $ (21) $ 998 $ 4,879 $(77,852) $ 235,827 ====== ====== ======= ======== ========== Per Share Data Average Common Shares Outstanding 82,740,698 Net Income $ 2.84 See Notes to Pro Forma Combined Consolidated Financial Statements. - 46 - 50 MERCANTILE BANCORPORATION INC. NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Represents MBI restated historical consolidated financial statements reflecting the acquisition of Hawkeye, effective January 2, 1996. Such acquisition was accounted for as a pooling- of-interests. The acquisition of Sterling was also accounted for as a pooling-of-interests; however, due to the immateriality of the financial condition and results of operations of Sterling to that of MBI, MBI did not restate its historical financial statements to reflect the acquisition of Sterling. Each of Sterling, Conway, Metro and Peoples is included in these pro forma financial statements only from its acquisition date forward. The full impact of these acquisitions is immaterial to the pro forma combined consolidated financial statements. The acquisition of Mark Twain will be accounted for as a pooling- of-interests. The acquisitions of Roosevelt, Regional, First City, First Financial and TODAY'S will be accounted for as purchase transactions. Purchase accounting adjustments offset each other or are believed to be immaterial at this time to the pro forma consolidated financial condition and results of operations of MBI. Included herein are the amortization of goodwill over a 15-year period (see footnote 18 below), the lost interest income/interest expense on the cash consideration (for Roosevelt, Regional, First Financial and TODAY'S) and stock buybacks. Goodwill is considered non-tax-deductible. The balance sheet impact of goodwill amortization and lost interest income is ignored due to immateriality. The income tax benefit associated with taxable income statement adjustments is computed at an effective tax rate of 35%. In conjunction with the proposed acquisition of Mark Twain, MBI plans on delivering 900,000 shares of MBI Common Stock previously acquired in the open market at an average price per share of $44.53. An additional 700,000 shares may be repurchased with an estimated price per share of $50.00. In conjunction with the proposed acquisitions of Regional, First Financial and TODAY'S, MBI repurchased 2,036,267 shares of MBI Common Stock in the open market at an average price per share of $44.22. In conjunction with the proposed acquisition of Roosevelt, MBI plans to repurchase 7,000,000 shares of MBI Common Stock in the open market. The assumed repurchase price per share is $50.75, the closing price of MBI Common Stock on December 20, 1996, the last business date before the announcement of the reorganization agreement between MBI and Roosevelt. Purchase entry of Regional with assumed consideration consisting of 600,418 reissued treasury shares at $47.75 per share, plus $12,330,000 in cash. The closing price for MBI Common Stock on August 23, 1996 (the date of execution of the Merger Agreement) was $47.75. Exclusion of the West Pointe Consideration from the purchase entry is not material to the financial condition or results of operations reflected in the Pro Forma Combined Consolidated Statements. Elimination of MBI's investment in Regional. Purchase entry of Roosevelt with assumed consideration consisting of 7,000,000 reissued treasury shares at $50.75 per share, 6,000,000 shares of issued MBI Common Stock and $412,250,000 in cash. The closing price for MBI Common Stock on December 20, 1996, the business date preceding the announcement of the reorganization agreement between MBI and Roosevelt, was $50.75. The pro forma financial statements assume that all Roosevelt preferred shares are converted to common shares prior to or upon consummation of the acquisition by MBI of Roosevelt. Roosevelt completed three acquisitions in the fourth quarter of 1996. Roosevelt acquired Community Charter Corporation, a commercial bank holding company, Mutual - 47 - 51 Bancompany, Inc., parent company of Mutual Savings Bank, and Sentinel Financial Corporation, a thrift holding company. The impact of these acquisitions is immaterial to the pro forma combined consolidated financial statements. Elimination of MBI's investment in Roosevelt. Proposed subordinated debt of $467,500,000 to be issued to partially finance the acquisition of Roosevelt. The assumed interest rate on such subordinated debt is 6.75%. Proposed issuance of $150,000,000 of subordinated debt securities of MBI (the "Debt Securities"). The Debt Securities are issued at a floating rate equal to the three-month LIBOR plus 85 basis points. The rate assumed in calculating the expense for the Pro Forma Combined Consolidated Financial Statements is 6.5%. The Debt Securities will be the sole assets of Mercantile Capital Trust I, a statutory business trust created under the laws of the State of Delaware of which MBI owns all the common securities (the "Trust"). Floating Rate Capital Trust Pass-through Securities of the Trust (the "Trust Securities") will be issued in exchange for approximately $150,000,000 and the proceeds therefrom will be invested in the Debt Securities. The payment of distributions on the Trust Securities out of moneys held by the Trust and payments on liquidation of the Trust or the redemption of the Trust Securities will be guaranteed by MBI (the "Guarantee"). The Guarantee covers payments of distributions and other payments on the Trust Securities only if and to the extent MBI has made payments of interest or principal or other payments on the Debt Securities held by the Trust. The Guarantee, when taken together with MBI's obligations under the Debt Securities, the declaration and the indenture, including MBI's obligations to pay costs, expenses, debts and other obligations of the Trust, will provide a full and unconditional guarantee on a subordinated basis by MBI of amounts due on the Trust Securities. Acquisition of Mark Twain with 16,950,000 shares of issued MBI Common Stock, including 1,600,000 reissued treasury shares, based on the exchange ratio of .952 shares of MBI Common Stock per share of Mark Twain common stock. Mark Twain acquired Northland Bancshares, Inc., owner of First National Bank of Platte County, in September 1996 in an acquisition accounted for as a pooling-of-interests. However, due to the immateriality of the financial condition and results of operations of Northland Bancshares, Inc. to that of Mark Twain, Mark Twain did not restate its historical financial statements to reflect this acquisition. The full impact of the acquisition of Northland Bancshares, Inc. is immaterial to the pro forma combined consolidated financial statements. Elimination of non-interest bearing deposit balance of Mark Twain subsidiary bank with MBI subsidiary bank. Elimination of MBI's investment in Mark Twain. The purchase of First City by Mark Twain is expected to be completed prior to the acquisition of Mark Twain by MBI. Assumed consideration of First City is 261,479 shares of Mark Twain common stock valued at $40 per share. Based on the exchange ratio of .952 shares of MBI Common Stock per share of Mark Twain common stock, approximately 250,000 equivalent shares of MBI Common Stock will be issued in the First City acquisition. Elimination of MBI's investment in First City. Purchase entry of First Financial with assumed consideration consisting of 258,783 reissued treasury shares at $45.00 per share, plus $3,335,000 in cash. The closing price for MBI Common Stock on July 9, 1996 (the date of execution of the definitive merger agreement between MBI and First Financial) was $45.00. Elimination of MBI's investment in First Financial. Purchase entry of TODAY'S with assumed consideration of 1,177,066 reissued treasury shares at $45.25 per share, plus $34,000,000 in cash. The closing price for MBI Common Stock on March 19, 1996 (the date of the execution of the definitive merger agreement between MBI and TODAY'S) was $45.25. Elimination of MBI's investment in TODAY'S. The pro forma excess of cost over fair value of net assets acquired was $566,133,000, $4,517,000, $4,149,000, $40,098,000 and $17,584,000 as of September 30, 1996 for Roosevelt, Regional, First City, First Financial and TODAY'S, respectively. On January 2, 1997, Roosevelt announced that it will recognize in the fourth quarter of 1996 approximately $80 million of pre-tax expenses, previously deferred in accordance with GAAP, - 48 - 52 related to historical activities with interest rate exchange agreements. The current charge results from the continuing balance sheet repositioning associated with the execution of Roosevelt's retail strategy. The fourth quarter extinguishment of short-term borrowings, which had been previously synthetically altered by interest rate exchange agreements, dictates, in accordance with GAAP, the recognition of any previously deferred expenses. After a tax benefit of 35% is recorded, shareholders' equity will be reduced by approximately $52 million. In addition, Roosevelt announced that it intentionally reduced its assets by approximately $1.2 billion to $7.8 billion at December 31, 1996. Upon consummation of the acquisition of Mark Twain, MBI expects to record certain adjustments related to such acquisition at an approximate pre-tax total of $30 million. Upon consummation of the acquisition of Roosevelt, MBI expects to record certain adjustments related to conform accounting and credit policies regarding loan and other asset valuations to those of MBI. The pre-tax adjustment for Roosevelt is expected to total between $38 and $45 million. The Mark Twain and Roosevelt adjustments are MBI's estimate based upon prior acquisitions, where amounts to standardize systems, standardize procedures, accruals for severance and employee change of control contracts and the writedown of fixed assets approximated 60 basis points of total assets. For the Mark Twain acquisition, approximately $11 million was added for professional fees, and, as the transaction is entirely in-market, additional charges for branch closings and severance payments are expected to exceed the base 60 basis point estimate. As Roosevelt's asset base is three times that of Mark Twain and includes a significant investment portfolio, no additional amount was deemed necessary.
- 49 - 53 INFORMATION REGARDING REGIONAL ------------------------------ BUSINESS Regional is a registered single bank holding company that was incorporated in 1979 under the laws of the State of Illinois. As of September 30, 1996, Regional had consolidated assets of $182,082,000, deposits of $146,987,000, loans, net of unearned discount, of $103,169,000 and shareholders' equity of $23,416,000 and employed fifty full-time employees and fourteen part-time employees. Regional owns 100% of the outstanding capital stock of Bank of Alton. Bank of Alton is a full-service community bank that offers banking services to commercial and residential customers throughout Madison County, Illinois. Such banking services include commercial, real estate and personal loans, money market accounts, checking, savings and time deposit accounts and trust services. The lending portion of Bank of Alton's business relates primarily to the activities of small- to medium-sized businesses, local community residences and other consumer purposes. Regional is subject to vigorous competition from major banking institutions, as well as other financial institutions in its principal service area, such as savings and loan associations, insurance companies, credit unions and finance companies. Regional and Bank of Alton are subject to supervision, regulation and examination by the Federal Reserve Board, the Illinois Commissioner and the Federal Deposit Insurance Corporation (the "FDIC"). The deposits of Bank of Alton are primarily insured by the Bank Insurance Fund ("BIF") of the FDIC. In the following pages, statistical information about Regional is presented. Such information should be read in conjunction with "--Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of Regional included elsewhere herein. - 50 - 54 DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES The following tables show the condensed average balance sheets for the periods presented and the percentage of each principal category of assets, liabilities and shareholders' equity to total assets. Also shown are the average yield on each category of interest- earning assets and the average rate paid on interest-bearing liabilities for each of the periods presented.
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------------------------------------------------------- 1996 1995 --------------------------------------- --------------------------------------- PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE ------- ------ ------- -------- ------- ------ ------- -------- (DOLLARS IN THOUSANDS) Assets: Interest-earning assets: Loans $99,433 57.25% $ 6,679 8.96% $94,584 61.58% $6,285 8.86% Taxable investment securities 43,757 25.19 2,018 6.15 30,229 19.68 1,426 6.29 Non-taxable investment securities 19,911 11.47 1,441 9.65 16,687 10.87 1,291 10.31 Federal funds sold 806 0.46 34 5.62 3,294 2.14 143 5.79 -------- ------ ------- ---- -------- ------ ------ ----- Total interest-earning assets 163,907 94.37 10,172 8.27 144,794 94.27 9,145 8.42 Noninterest earning assets: Cash and due from banks 5,083 2.90 4,316 2.81 Premises and equipment 3,576 2.06 3,338 2.17 Other assets 2,589 1.49 2,738 1.78 Allowance for possible loan losses (1,422) (0.82) (1,580) (1.03) -------- ------ -------- ------ Total assets $173,688 100.00% $153,606 100.00% ======== ====== ======== ====== Liabilities and shareholders' equity: Interest-bearing liabilities: Demand deposits $ 17,807 10.25% $ 272 2.04 $ 17,013 11.08% $ 263 2.06 Savings deposits 13,231 7.62 294 2.96 12,859 8.37 285 2.96 Money market 23,094 13.30 702 4.05 18,975 12.35 530 3.72 Time deposits 76,966 44.31 3,323 5.76 70,239 45.73 2,745 5.21 Federal funds purchased and short-term borrowings 5,383 3.10 235 5.82 218 0.14 10 6.12 -------- ------ ------- ---- -------- ------ ------ ----- Total interest-bearing liabilities 136,481 78.58 4,826 4.71 119,304 77.67 3,833 4.28 Noninterest-bearing liabilities: Demand deposits 12,195 7.02 12,153 7.91 Other liabilities 1,775 1.02 1,405 0.92 -------- ------ -------- ------ Total liabilities 150,451 86.62 132,862 86.50 Shareholders' equity 23,237 13.38 20,744 13.50 -------- ------ -------- ------ Total liabilities and shareholders' equity $173,688 100.00% $153,606 100.00% ======== ====== ======== ====== Net interest Income $ 5,346 $5,312 ======= ====== Interest rate spread 3.56% 4.14% ==== ===== Net interest rate margin 4.35% 4.89% ==== ===== - -------------------- Average yield/rate for the nine months ended September 30, 1996 and 1995 is annualized. Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Non-taxable investment income presented on a fully tax-equivalent basis. The tax effect resulted in an increase in interest income of $490,000 and $439,000 for the nine months ended September 30, 1996 and 1995, respectively. - 51 - 55 YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------------- 1995 1994 --------------------------------------- --------------------------------------- PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE ------- ------ ------- ---- ------- ------ ------- ---- (DOLLARS IN THOUSANDS) Assets: Interest-earning assets: Loans $ 95,077 60.12% $ 8,529 8.97% $ 84,372 57.19% $ 6,889 8.17% Taxable investment securities 32,103 20.30 2,000 6.23 33,515 22.72 1,872 5.59 Non-taxable investment securities 17,065 10.79 1,723 10.10 20,307 13.77 2,264 11.15 Federal funds sold 3,017 1.91 173 5.73 1,171 0.79 55 4.70 -------- ------ ------- ----- -------- ------ ------- ----- Total interest-earning assets 147,262 93.12 12,425 8.44 139,365 94.47 11,080 7.95 Noninterest earning assets: Cash and due from banks 4,418 2.79 3,913 2.65 Premises and equipment 3,330 2.11 3,220 2.18 Other assets 4,673 2.95 3,127 2.12 Allowance for possible loan losses (1,527) (0.97) (2,097) (1.42) -------- ------ -------- ------ Total assets $158,156 100.00% $147,528 100.00% ======== ====== ======== ====== Liabilities and shareholders' equity Interest-bearing liabilities: Demand deposits $ 17,265 10.92% $ 355 2.06 $ 15,800 10.71% $ 328 2.08 Savings deposits 12,848 8.12 381 2.97 12,731 8.63 381 2.99 Money market 19,692 12.45 752 3.82 20,737 14.06 553 2.67 Time deposits 71,277 45.07 3,810 5.35 61,508 41.69 2,688 4.37 Federal funds purchased and short-term borrowings 322 0.20 20 6.21 2,167 1.47 98 4.52 -------- ------ ------- ----- -------- ------ ------- ----- Total interest-bearing liabilities 121,404 76.76 5,318 4.38 112,943 76.56 4,048 3.58 Noninterest-bearing liabilities: Demand deposits 12,143 7.68 13,049 8.85 Other liabilities 1,487 0.94 1,600 1.08 -------- ------ -------- ------ Total liabilities 135,034 85.38 127,592 86.49 Shareholders' equity 23,122 14.62 19,936 13.51 -------- ------ -------- ------ Total liabilities and shareholders' equity $158,156 100.00% $147,528 100.00% ======== ====== ======== ====== Net interest income $ 7,107 $ 7,032 ======= ======= Interest rate spread 4.06% 4.37% ===== ===== Net interest rate margin 4.83% 5.05% ===== ===== - -------------------- Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Non-taxable investment income presented on a fully tax-equivalent basis. The tax effect resulted in an increase in interest income of $585,000 and $770,000 for the years ended December 31, 1995 and 1994, respectively.
- 52 - 56 INTEREST DIFFERENTIAL The following table sets forth, on a tax-equivalent basis for the periods presented, a summary of the changes in interest income and expenses resulting from changes in yields/ rates. The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.
AMOUNT OF INCREASE (DECREASE) 1995 COMPARED TO 1994 INCREASE (DECREASE) DUE TO: ------------------------------------------- VOLUME RATE NET ---------- -------- ------ (DOLLARS IN THOUSANDS) Interest earned on: Loans $ 926 $ 714 $1,640 Taxable investment securities (81) 209 128 Non-taxable investment securities (340) (201) (541) Federal funds sold 104 14 118 ----- ----- ------ Total interest-earning assets 609 736 1,345 ----- ----- ------ Interest paid on: Interest-bearing demand deposits 30 27 Savings deposits 3 0 Money market (29) 228 199 Time deposits 465 657 1,122 Federal funds purchased & other short-term borrowings (105) 27 (78) ----- ----- ------ Total interest-bearing liabilities 364 906 1,270 ----- ----- ------ Net interest income $ 245 $(170) $ 75 ===== ===== ====== - -------------------- Change in volume multiplied by yield/rate of prior period. Change in yield/rate multiplied by volume of prior period. Nontaxable investment securities are presented on a fully tax-equivalent basis assuming a tax rate of 34%.
INVESTMENT PORTFOLIO The book value of investment securities is summarized as follows:
DECEMBER 31, --------------------------------------------------------------- 1995 1994 --------------------------- --------------------------- PERCENT PERCENT OF TOTAL OF TOTAL AMOUNT SECURITIES AMOUNT SECURITIES ------ ---------- ------ ---------- (DOLLARS IN THOUSANDS) U.S. Treasury securities and U.S. government agencies and corporations $27,775 49.2% $21,012 45.9% State and municipal 27,070 48.0% 20,586 45.0 Other 1,579 2.8% 4,137 9.1 ------- ----- ------- ----- Total $56,424 100.0% $45,735 100.0% ======= ===== ======= =====
- 53 - 57 The following table summarizes maturity and yield information on investment securities at December 31, 1995:
DECEMBER 31, 1995 MATURING ----------------------------------------------------------------------------------------- OVER ONE OVER FIVE IN ONE THROUGH THROUGH OVER YEAR OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL ------------------ ------------------- ------------------ ------------------ ------- AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT ------ --------- ------ --------- ------ --------- ------ --------- ------- (DOLLARS IN THOUSANDS) U.S. Treasury securities and other U.S. government agencies and corporations $1,008 6.80% $21,132 5.59% $2,229 6.76% $ -- --% $24,369 State and municipal 887 7.01 8,699 8.00 4,314 8.67 13,170 9.45 27,070 Other (includes MBS) 102 9.00 3,406 5.75 -- -- -- -- 3,508 ------ ------- ------ ------- ------- Total $1,997 7.01% $33,237 6.24% $6,543 8.02% $13,170 9.45% $54,947 ====== ==== ======= ==== ====== ==== ======= ==== ======= - -------------------- Presented on a fully tax-equivalent basis assuming a tax rate of 34%. Equity securities of $1,035,000 in Federal Home Loan Mortgage Corporation stock and $442,400 in Federal Home Loan Bank of Chicago stock are not included in this table as these equity securities have no stated maturity.
LOAN PORTFOLIO The composite of the loan portfolio is summarized as follows:
DECEMBER 31, --------------------------------------------------------------- 1995 1994 --------------------------- --------------------------- PERCENT PERCENT OF TOTAL OF TOTAL AMOUNT LOANS AMOUNT LOANS ------ -------- ------ -------- (DOLLARS IN THOUSANDS) Commercial, financial and agricultural $36,539 36.6% $35,410 37.7% Real estate-mortgage 22,368 22.4 25,351 27.0 Installment 37,859 38.0 30,360 32.4 Consumer 3,004 3.0 2,513 2.7 Loans held for sale -- -- 214 0.2 ------- ----- ------- ----- Total $99,770 100.0% $93,848 100.0% ======= ===== ======= =====
- 54 - 58 The following table sets forth the maturities and sensitivities composition of total loans at December 31, 1995 and summarizes maturity information for the loan portfolio as of December 31, 1995:
DECEMBER 31, 1995 --------------------------------------------------------------- AFTER ONE IN ONE THROUGH AFTER YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL ------------ ---------- ---------- ----- (DOLLARS IN THOUSANDS) Fixed Rate Loans: - ---------------- Commercial, financial and agricultural $12,111 $10,344 $ 259 $22,174 Real estate-mortgage 2,678 6,586 5,528 14,792 Installment 1,484 34,897 1,469 37,850 Consumer 225 -- -- 225 ------- ------- ------- ------- Total $16,498 $51,827 $ 7,256 $75,581 ======= ======= ======= ======= Variable Rate Loans: - ------------------- Commercial, financial and agricultural $ 6,531 $ 6,949 $ 345 $13,825 Real estate-mortgage 1,108 -- 6,468 7,576 Installment 9 -- -- 9 Consumer 2,779 -- -- 2,779 ------- ------- ------- ------- Total $10,427 $ 6,949 $ 6,813 $24,189 ======= ======= ======= ======= Total Loans: - ----------- Commercial, financial and agricultural $18,642 $17,293 $ 604 $36,539 Real estate-mortgage 3,786 6,586 11,996 22,368 Installment 1,493 34,897 1,469 37,859 Consumer 3,004 -- -- 3,004 ------- ------- ------- ------- Total $26,925 $58,776 $14,069 $99,770 ======= ======= ======= =======
RISK ELEMENTS INVOLVED IN LENDING ACTIVITIES. The following table details the nonperforming asset information for the periods presented:
SEPTEMBER 30, DECEMBER 31, ------------- ------------------------ 1996 1995 1994 ---- ---- ---- (DOLLARS IN THOUSANDS) Non-accrual loans $ 730 $1,031 $2,414 Loans past due 90 days or more 179 5 61 Restructured loans -- -- -- ------ ------ ------ Total non-performing loans 909 1,036 2,475 Foreclosed property 631 960 719 ------ ------ ------ Total non-performing assets $1,540 $1,996 $3,194 ====== ====== ====== Non-performing loans to loans 0.88% 1.07% 2.71% Non-performing assets to loans plus foreclosed property 1.48% 2.04% 3.47% Non-performing assets to total assets 0.85% 1.19% 2.16%
It is generally the policy of Regional to discontinue the accrual of interest on loans when principal or interest is due and has remained unpaid for 90 days or more, unless the loan is well secured and in the process of collection. If interest on nonaccrual loans had been accrued, such income would have amounted to $85,000 for 1995. Interest income on those loans, representing cash payments received, amounted to $20 for 1995. - 55 - 59 POTENTIAL PROBLEM LOANS. Certain loans may require frequent management attention and are reviewed on a monthly or more frequent basis. Although payments on these loans are less than 90 days past due or in many cases are current, the borrowers have or have had a history of financial difficulties and management has concern as to the borrower's ability to comply with present loan repayment terms. As such, these loans may result in classification at some future point as nonperforming. At September 30, 1996 and December 31, 1995, such loans (excluding all nonperforming loans described above) amounted to $4,146,000 and $3,887,000, respectively. FOREIGN OUTSTANDING. Regional had no loans to any foreign countries on any of the dates specified in the tables. LOAN CONCENTRATIONS. Regional does not have a particular concentration of credit in any one economic sector. SUMMARY OF LOAN LOSS EXPERIENCE The following table summarizes changes in the allowance for loan loss arising from loans charged off and recoveries on loans previously charged off, by loan category and additions to the allowance that have been charged to expense.
YEAR ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, ------------------------ 1996 1995 1994 ------------- ------ ------ (DOLLARS IN THOUSANDS) Balance at beginning of period $1,350 $1,825 $1,897 Loans charged off: Commercial, financial and agricultural 29 800 7 Real estate-mortgage -- -- -- Installment and consumer 150 114 24 ------ ------ ------ Total charge-offs 179 914 31 ------ ------ ------ Recoveries of loans previously charged off: Commercial, financial and agricultural 194 384 231 Real estate-mortgage 2 -- -- Installment and consumer 31 13 8 ------ ------ ------ Total recoveries 227 397 239 ------ ------ ------ Net charge-offs (recoveries) (48) 517 (208) ------ ------ ------ Additions to allowance charged to (credited to) expense 75 42 (280) ------ ------ ------ Balance at end of period $1,473 $1,350 $1,825 ====== ====== ====== Net charge-offs (recoveries) to average loans (0.05)% 0.54% (0.25)% Allowance for loan losses to loans 1.43 % 1.40% 2.00 % Allowance for loan losses to non-performing loans 162.05 % 130.31% 73.74 %
The level of the allowance for loan loss is reviewed quarterly by the board of directors and management utilizing two methods of analysis. The first method assigns specific allocation percentages based on the loans' risk ratings and includes unused loan commitments. These specific allocation percentages are reviewed annually by the board of directors and management. The second method utilizes a loss history for each type of loan category while estimating the potential loss exposure. - 56 - 60 Management views the allowance for loan losses as being available for all potential or previously unidentified loan losses which may occur in the future. The risk of future losses that is inherent in the loan portfolio is not precisely attributable to a particular loan or category of loans. Based on its review of adequacy, Regional's management has estimated those portions of the allowance that could be attributable to major categories of loans as detailed in the following table:
DECEMBER 31, ------------------------------------------------------------------ 1995 1994 ------------------------------ -------------------------------- PERCENT OF PERCENT OF LOANS IN EACH LOANS IN EACH CATEGORY TO CATEGORY TO ALLOWANCE TOTAL LOANS ALLOWANCE TOTAL LOANS --------- ------------- --------- ------------- (DOLLARS IN THOUSANDS) Commercial, financial and agricultural $ 848 36.6% $1,146 37.7% Real estate-mortgage 89 22.4 120 27.0 Installment 356 38.0 482 32.4 Consumer 57 3.0 7 2.7 Loans held for sale -- -- -- 0.2 ------ ----- ------ ----- Total $1,350 100.0% $1,825 100.0% ====== ===== ====== =====
Allocations estimated for the loan categories do not specifically represent that loan charge-offs of that magnitude will necessarily be incurred. The allocation does not restrict future loan losses attributable to other categories. The risk factors considered when determining the overall level of the allowance for loan losses are the same when estimating the allocation by major category, as specified in the allowance category. DEPOSITS The following table shows, for each type of deposit, the average balance and rate paid on each type of deposit for the years ended December 31, 1995 and 1994:
DECEMBER 31, -------------------------------------------------------------- 1995 1994 -------------------------------------------------------------- AVERAGE AVERAGE BALANCE RATE BALANCE RATE -------------------------- -------------------------- (DOLLARS IN THOUSANDS) Noninterest bearing demand deposits $ 12,143 --% $ 13,049 --% Interest-bearing demand deposits 36,956 3.00 36,537 2.41 Savings deposits 12,848 2.97 12,731 2.99 Time deposits 71,277 5.35 61,508 4.37 -------- -------- Total $133,224 3.98% $123,825 3.19% ======== ==== ======== ====
The following table shows the maturity of time deposits of $100,000 or more at December 31, 1995:
(DOLLARS IN THOUSANDS) Three months or less $1,069 Over three through six months 3,940 Over six through twelve months 2,427 Over twelve months 1,727 ------ $9,163 ======
- 57 - 61 RETURN OF EQUITY AND ASSETS The following ratios are among those commonly used in analyzing the performance of banks and bank holding companies:
1995 1994 ------ ------ Return on average assets 1.74% 1.73% Return on average equity 11.93% 12.77% Dividend payout ratio 37.49% 5.90% Equity to assets ratio 14.62% 13.51%
PROPERTIES Both Regional's and Bank of Alton's principal office is located at 1520 Washington Avenue, Alton, Illinois 62002. Bank of Alton also operates two branch facilities; one of which is located at 2627 State Street, Alton, Illinois 62002 and the other of which is located at One Terminal Drive, Bethalto, Illinois 62010. LEGAL PROCEEDINGS During the normal course of business, various legal claims have arisen which, in the opinion of the management of Regional, will not result in any material liability to Regional. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION. The following discussion and analysis is intended to review the significant factors affecting the financial condition and results of operations of Regional for the nine months ended September 30, 1996 and 1995 and the three-year period ended December 31, 1995. It provides a more comprehensive review of factors not otherwise apparent from the consolidated financial statements of Regional alone. Reference should be made to those financial statements and the selected financial data presented elsewhere herein for an understanding of the following review. NET INCOME ANALYSIS. Regional's net income for 1995 was $2,758,000, compared to $2,546,000 for 1994 and $3,019,000 for 1993. The increase in net income for 1995 as compared to 1994 was due primarily to a decrease in non-interest expense offset by an increase in provision for loan loss expense. The decrease in net income for 1994 as compared to 1993 was due to both the adoption of a new accounting standard for income taxes, which added $518,000 to 1993 net income, and the change in the provision for loan loss credit from $(960,000) in 1993 to $(280,000) in 1994. For the nine months ended September 30, 1996 and 1995, net income was $2,010,000 and $1,999,000, respectively. The increase was due primarily to a decrease in income tax expense. NET INTEREST INCOME. Net interest income is the largest component of earnings and is affected by the volume of the sources and uses of funds, the respective rates earned and paid on those funds, the mix of those funds and the volume of non-performing assets. Regional's net interest income increased 4.1% to $6,522,000 for 1995 and increased 6.7% to $6,263,000 for 1994. The net interest margin, which is calculated by dividing tax-equivalent net interest income by average interest-earning assets, was 4.83% in 1995, compared to 5.05% and 5.19% in 1994 and 1993, respectively. Regional's yield on interest-earning assets increased to 8.44% in 1995 from 7.95% in 1994 while the cost of funds - 58 - 62 increased to 4.38% in 1995 from 3.58% in 1994. The decreases in net interest margin were attributable to the increasing rate environment and intense competition for deposits between local financial institutions. During 1995, increases in the average volume of loans and federal funds sold resulted in an increase in interest income of $1,030,000. This increase was partially offset by a $421,000 decrease in average volume of taxable and non-taxable investment securities. Changes in interest rates on the average volume of loans and federal funds sold increased interest income by $728,000. Changes in interest rates on the average volume of money markets and time deposits increased interest expense by $885,000. The net effect of the volume and rate changes associated with all categories of interest-earning assets during 1995 as compared to 1994 increased interest income by $1,345,000, while the net effect of the volume and rate changes associated with all categories of interest-bearing liabilities increased interest expense by $1,270,000. Net interest income was $4,856,000 for the first nine months of 1996, a .3% decrease from the same period of 1995. Interest income increased $975,000 for the first nine months of 1996 and interest expense increased $993,000. The net decrease was primarily attributable to lower than expected loan demand and strong local competition for deposits. PROVISION FOR LOAN LOSSES. The provision for loan losses charged to expense was $42,000 in 1995, compared to credits of $(280,000) in 1994 and $(960,000) in 1993. The negative provisions recorded by Regional in 1994 and 1993 were due to significant performance improvements on several credits which resulted in management's decision to reduce the level of the allowance for loan losses in 1994 and 1993. The allowance for loan losses is maintained at a level considered adequate to provide for potential losses. The provision for loan losses is based on a periodic analysis, considering, among other factors, current economic conditions, loan portfolio composition, past loan loss experience, independent appraisals, loan collateral and payment experience. In addition to the allowance for losses on identified problem loans, an overall unallocated allowance is established to provide for unidentified credit losses inherent in the portfolio. As adjustments become necessary, they are reflected in the results of operations in the periods in which they become known. Management believes the allowance for loan losses is adequate to absorb losses in the loan portfolio. While management uses available information to recognize loan losses, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for loan losses. Such agencies may require Regional to increase the allowance for loan losses based on their judgments and interpretations about information available to them at the time of their examinations. The ratio of nonperforming loans to loans decreased since 1993 as a result of a more aggressive approach to account collections and the effectiveness of management in working with the problem credits coupled with acquisitions of foreclosed real estate. The provision for loan losses was $75,000 in the first nine months of 1996, compared to $42,000 in the same period for 1995. NON-INTEREST INCOME. Regional's 1995 non-interest income was $1,108,000, representing a 33.7% increase from 1994 results, while 1994 non-interest income represents a 34.7% decrease from 1993 results. The increase in 1995 was due to an increase of $35,000 in ATM switch income, a $10,000 increase in gain on sale of investment securities, offset by a decrease of $37,000 in gain on sale of other - 59 - 63 real estate. In addition, no security losses were recorded in 1995, compared to a loss of $250,000 in 1994 resulting from repositioning the investment portfolio. The decrease in 1994 non-interest income was due primarily to a decrease of 80% on gain on sale of mortgage loans due to a decrease of the volume of loans sold from $13,356,000 in 1993 to $5,084,000 in 1994, partially offset by a $85,000 increase in ATM switch income. In addition, Regional recorded a gain on sale of investment securities of $176,000 in 1993, compared to the loss of $250,000 in 1994. Non-interest income for the first nine months of 1996 was $798,000, a 5.0% decrease from 1995. The decrease was due primarily to a decrease in gains on sales of investment securities, mortgage loans and other real estate. NON-INTEREST EXPENSE. Non-interest expense decreased 3.3% in 1995 and 9.2% in 1994. FDIC insurance assessment decreased 47.5% in 1995, primarily due to the FDIC's reduction of deposit premiums charged to commercial banks, which resulted from the BIF reaching its required reserve level of 1.25% of total insured deposits during 1995. These decreases in non-interest expense were offset by an increase in equipment and data processing expense of 18.0% and 55.2%, respectively, due to implementation of a new data processing system in August 1994. The 1994 decrease was attributable to a decrease in occupancy expense of 35.7% and a decrease in legal and professional fees of 27.8%. In 1993, the useful lives of many fixed assets were evaluated and shortened, resulting in a one-time charge to depreciation expense which inflated 1993 occupancy expense. In addition, 1993 legal and professional fees contained expenses associated with regulatory matters involving a former bank officer. These decreases were offset by a 46.7% increase in data processing expense, again due to implementation of a new data processing system in August 1994. Non-interest expense for the first nine months of 1996 was $3,128,000 compared to $2,973,000 in the first nine months of 1995. The addition of a new facility in Bethalto, Illinois increased salaries and employee benefits 11.9%, increased occupancy 34.4% and increased equipment expense 17.7%. These increases were partially offset by a 99.5% decrease in FDIC insurance assessment, again primarily due to the FDIC's reduction in the deposit premium charged to commercial banks. Other non- interest expense increased 12.0% partially due to a write-down on other real estate of $50,000. INCOME TAXES. Regional recorded income tax expense of $933,000 for 1995, $796,000 for 1994 and $1,158,000 for 1993. The effective income tax rates were 25.3%, 23.8% and 31.6% for the years ended December 31, 1995, 1994 and 1993, respectively. Income tax expense of $441,000 and $700,000 was recorded for the nine months ended September 30, 1996 and 1995, respectively. In February 1992, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). SFAS 109 was effective for fiscal years beginning after December 15, 1992 and could have been applied through retroactive restatement of previously issued financial statements, or through reporting the cumulative effect of applying the changes in the period of its initial application. Regional implemented SFAS 109 during 1993 and reported the cumulative effect of this change in the method of accounting for income taxes resulting in an increase in earnings of $518,000 in Regional's 1993 consolidated statement of income. LIQUIDITY AND INTEREST RATE SENSITIVITY. Liquidity is provided to Regional through earning assets, including short-term investments in federal funds sold, and through maturities in the investment - 60 - 64 and loan portfolios. In addition, liquidity is provided by advances from the Federal Home Loan Bank of Chicago. The asset/liability management process, which involves management of the components of the balance sheet to allow assets and liabilities to reprice at approximately the same time, is a dynamic process essential to minimizing the effect of interest rate fluctuations on net interest income. The following tables reflect Regional's GAP analysis (rate-sensitive assets minus rate-sensitive liabilities) as of September 30, 1996 and December 31, 1995, respectively:
SEPTEMBER 30, 1996 ------------------------------------------------------------ OVER OVER 3 MONTHS 1 YEAR 3 MONTHS THROUGH 12 THROUGH OVER OR LESS MONTHS 5 YEARS 5 YEARS TOTAL -------- ---------- ------- ------- ----- (DOLLARS IN THOUSANDS) Assets: Investments in debt and equity securities $ 155 $ 2,287 $ 36,937 $26,698 $ 66,077 Loans 21,408 15,701 48,733 20,685 106,527 Federal funds sold 495 -- -- -- 495 Interest-bearing deposits -- -- -- -- -- -------- -------- -------- ------- -------- Total interest-sensitive assets 22,058 17,988 85,670 47,383 173,099 -------- -------- -------- ------- -------- Liabilities: Money market deposits (interest-bearing demand) 41,797 -- -- -- 41,797 Savings 12,547 -- -- -- 12,547 Time deposits 30,757 23,944 24,225 -- 78,926 Short-term borrowings 4,000 5,000 1,000 -- 10,000 -------- -------- -------- ------- -------- Total interest-sensitive liabilities 89,101 28,944 25,255 -- 143,270 -------- -------- -------- ------- -------- Interest-sensitivity gap at September 30, 1996: Incremental $(67,043) $(10,956) $ 60,445 $47,383 $ 29,829 ======== ======== ======== ======= ======== Cumulative $(67,043) $(77,999) $(17,554) $47,383 ======== ======== ======== ======= DECEMBER 31, 1995 ------------------------------------------------------------ OVER OVER 3 MONTHS 1 YEAR 3 MONTHS THROUGH 12 THROUGH OVER OR LESS MONTHS 5 YEARS 5 YEARS TOTAL -------- ---------- ------- ------- ----- (DOLLARS IN THOUSANDS) Assets: Investments in debt and equity securities $ -- $ 1,997 $ 33,237 $21,190 $ 56,424 Loans 19,661 12,178 49,355 18,576 99,770 Federal funds sold 3,625 -- -- -- 3,625 -------- ------- -------- Total interest-sensitive assets 23,286 14,175 82,592 39,766 159,819 -------- -------- -------- ------- -------- Liabilities: Money market deposits (interest-bearing demand) 43,013 -- -- -- 43,013 Savings 13,041 -- -- -- 13,041 Time deposits 22,062 33,502 19,286 -- 74,850 Total interest-sensitive liabilities 78,116 33,502 19,286 -- 130,904 -------- -------- -------- ------- -------- Interest-sensitivity gap at December 31, 1995: Incremental $(54,830) $(19,327) $ 63,306 $39,766 $ 28,915 ======== ======== ======== ======= ======== Cumulative $(54,830) $(74,157) $(10,851) $28,915 ======== ======== ======== =======
As indicated in the preceding tables, Regional was liability sensitive on a cumulative basis in the near term (three months or less) at September 30, 1996 and December 31, 1995, based on contractual maturities and earliest repricing dates. In this regard, an increase in the general level of interest rates would generally have a negative effect on Regional's net interest income as the repricing of the larger volume of interest- sensitive liabilities would create a larger amount of interest expense than - 61 - 65 the additional amount of interest income created by the repricing of the smaller volume of interest-sensitive assets. The following table summarizes certain trends in Regional's consolidated balance sheet during the two-year period:
DECEMBER 31, ------------ 1995 1994 ---- ---- (DOLLARS IN THOUSANDS) Total assets $167,680 $148,140 Earning assets $156,733 $138,476 Deposits $142,714 $127,107 Loans to deposits (net loans) 67.75% 71.84% Loans to total assets (net loans) 57.66% 61.64% Debt securities to total assets 33.65% 30.87%
The composition of total assets and earning assets changed during 1995 as funds were shifted into investments due to lower than expected loan growth. Regional's earning assets increased $18,257,000 from December 31, 1994 to December 31, 1995. Investment securities were $56,424,000 at December 31, 1995 as compared to $45,375,000 at December 31, 1994. Loans, net of unearned discount, were $96,684,000 at December 31, 1995, compared to $91,316,000 at December 31, 1994. Deposits increased $15,607,000 from December 31, 1994 to December 31, 1995. Interest-bearing deposits increased $17,182,000, while non interest-bearing deposits decreased $1,575,000. CAPITAL ADEQUACY. Regional's equity capital was $23,416,000, $23,122,000 and $19,685,000 at September 30, 1996, December 31, 1995 and December 31, 1994, respectively. During 1996, equity capital increased $294,000 as a result of net income of $2,010,000, offset by dividends paid of $760,000 and a net unrealized loss on securities available-for-sale of $(956,000). During 1995, equity capital increased $3,437,000. This increase was attributable to net income of $2,758,000, and a $1,713,000 net unrealized gain on marketable equity securities, offset by dividends paid of $1,034,000. Risk-based capital guidelines for financial institutions were adopted by regulatory authorities and were effective January 1, 1991. These guidelines were designed to relate regulatory capital requirements to the risk profile of the specific institutions and to provide for uniform requirements among the various regulators. Currently, the risk-based capital guidelines require Regional to meet a minimum total capital ratio of 8.0%, of which at least 4.0% must consist of Tier 1 capital. Tier 1 capital generally consists of (a) common shareholders' equity, (b) qualifying perpetual preferred stock and related surplus subject to certain limitations specified by the FDIC and (c) minority interests in the equity accounts of consolidated subsidiaries less goodwill and any other intangible assets and investments in subsidiaries that the FDIC determines should be deducted from Tier 1 capital. The FDIC also requires a minimum leverage ratio of 3.0%, defined as the ratio of Tier 1 capital less purchased mortgage servicing rights to total assets, for banking organizations deemed the strongest and most highly-rated by banking regulators. A higher minimum leverage ratio is required of less highly-rated banking organizations. - 62 - 66 The following tables summarize, on a consolidated basis, Regional's risk-based capital and leverage ratios:
RISK BASED CAPITAL RATIOS ------------------------------------------------------------------------------------------------- TOTAL TIER 1 -------------------------------------------- ------------------------------------------- SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------- ---------------------- ------------- --------------------- 1996 1995 1994 1996 1995 1994 ---- ---- ---- ---- ---- ---- 21.97% 22.43% 22.99% 20.72% 21.18% 21.74% LEVERAGE RATIOS -------------------------------------------- SEPTEMBER 30, DECEMBER 31, ------------- ---------------------- 1996 1995 1994 ---- ---- ---- 12.86% 13.79% 13.29%
Risk Management. Regional's management objective in structuring the balance sheet is to maximize the return on stockholders' equity while minimizing the associated risks. The major risks involved in the banking industry are market, credit and liquidity risks. The following is a discussion of Regional's management of these risks. Market Risk Management. Regional's management ---------------------- believes its loan and investment portfolios are sufficiently diversified to minimize the effect of a downturn in any particular industry or market. Regional does not have any particular concentration of credit in any one economic sector. Installment loans as of December 31, 1995 totaled $37,859,000, or 38%, of the loan portfolio, while real estate loans totaled $22,368,000, or 22.4%, of the loan portfolio. Commercial loans as of December 31, 1995 totaled $36,539,000, or 36.6%, of the loan portfolio. The commercial loan portfolio, which includes loans made primarily to businesses located in Madison County and served by Regional, is generally secured by business assets such as inventory, accounts receivable and equipment. At December 31, 1995 the total investment portfolio was $56,424,000. Approximately 49.2% of the portfolio is comprised of U.S. Government issues and approximately 48.0% is comprised of State and Municipal Bonds. Credit Risk Management. The risks Regional's ---------------------- management assumes in providing credit products to customers is fundamental to its business operation. Credit risk management includes defining an acceptable level of risk and return, establishing policies and procedures to govern the credit process and maintaining a thorough portfolio review function. Credit policies are ultimately the responsibility of Regional's Board of Directors and, as such, are reviewed and approved by the Board of Directors. Of equal importance in this risk management process are the ongoing monitoring procedures performed by management. Nonperforming loans represented .88% of total loans at September 30, 1996, compared to 1.07% and 2.71% at December 31, 1995 and 1994, respectively. Other real estate owned by Regional totaled $631,000 at September 30, 1996 and $960,000 and $719,000 at December 31, 1995 and 1994, respectively. Liquidity Risk Management. Liquidity is a ------------------------- measurement of Regional's ability to meet the borrowing needs and the deposit withdrawal requirements of its customers. Regional actively manages the composition of its assets and liabilities to maintain the appropriate level of liquidity in the balance sheet. Management is guided by regularly reviewed policies when determining the - 63 - 67 appropriate portion of total assets, which should be comprised of readily marketable assets available to meet future liquidity needs. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS. During May 1993, FASB issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan ("SFAS 114") and SFAS 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). During October 1994, the FASB issued SFAS 118, Accounting by Creditors for Impairment of a Loan - - Income Recognition and Disclosures ("SFAS 118"), which amends SFAS 114. During October 1994, the FASB issued SFAS 119, Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments ("SFAS 119"). In March 1995, the FASB issued SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). In May 1995, the FASB issued SFAS 122, Accounting for Mortgage Servicing Rights ("SFAS 122"), an amendment of FASB Statement No. 65. In June 1995, the FASB issued SFAS 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities ("SFAS 125"). SFAS 114, as amended by SFAS 118, amends SFAS 5, Accounting for Contingencies, and SFAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings, and became effective for Regional on January 1, 1995. SFAS 114 defines the recognition criterion for loan impairment and the measurement methods for certain impaired loans and restructured loans, loans whose terms have been modified in troubled-debt restructurings. Specifically, a loan is considered impaired when it is probable a creditor will be unable to collect all amounts due, including both principal and interest, according to the contractual terms of the loan agreement. When measuring impairment, the expected future cash flows of an impaired loan will be discounted at the loan's effective interest rate. Alternatively, impairment could be measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral- dependent loan. Regardless of the measurement method used, SFAS 114 requires a creditor to measure impairment based on the fair value of the collateral when the creditor determines foreclosure is probable. Additionally, impairment of a restructured loan will be measured by discounting the total expected future cash flow at the loan's effective rate of interest as stated in the original loan agreement. SFAS 118 amends SFAS 114 to allow creditors to use existing methods of recognizing interest income on impaired loans. Regional has elected to continue to use its existing nonaccrual methods of recognizing interest on impaired loans. The impact of initially applying SFAS 114 and SFAS 118 was not reported as an accounting change; rather, it was reported as a component of the provision for loan losses charged to operations, and had no effect on Regional's consolidated results of operation as a result of implementation. SFAS 114 and SFAS 118 are effective for fiscal years beginning after December 15, 1994. SFAS 115 supersedes SFAS 12, Accounting for Certain Marketable Securities and related interpretations, and significantly amends SFAS 65, Accounting for Certain Mortgage Banking Activities, and SFAS No. 60, Accounting and Reporting by Insurance Enterprises. Regional adopted the provisions of SFAS 115 on January 1, 1994. SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values, and all investments in debt securities. Under SFAS 115, debt and equity securities are classified into one of three categories; trading; available-for-sale and held-to- maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which Regional has the ability and intent to hold until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Regional has classified all securities as available-for-sale. - 64 - 68 As previously mentioned, effective January 1, 1994, Regional adopted SFAS 115, for which the cumulative effect was recorded on the consolidated balance sheet on that date. On January 1, 1994: (i) debt and marketable equity securities with an amortized cost of $55,075,000 were classified as available- for-sale securities; (ii) a market valuation account was established for the available-for-sale securities of $2,713,000 to increase the recorded balance of such securities at January 1, 1994 to their fair value on that date; (iii) a deferred liability of $922,000 was recorded to reflect the tax effect of the market valuation account; and (iv) the net increase resulting from the market valuation adjustment at January 1, 1994 was recorded as a separate component of shareholders' equity. Regional did not classify any securities as held-to-maturity or trading securities at January 1, 1994. Prior to the adoption of SFAS 115, marketable equity securities were carried at the lower of cost or estimated market value. A deferred tax benefit was established for the unrealized loss on marketable equity securities at January 1, 1994. SFAS 119 requires disclosures about the amounts, nature and terms of derivative financial instruments that are not subject to SFAS 105, Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk, because they do not result in off-balance-sheet risk of accounting loss. SFAS 119 requires that a distinction be made between financial instruments held or issued for trading purposes and financial instruments held or issued for purposes other than trading. SFAS 119 was effective for financial statements issued for fiscal years ending after December 15, 1994 and resulted in no effect on Regional's consolidated financial statements, other than additional disclosure requirements with respect to fixed rate loan commitments. Effective January 1, 1996, Regional adopted SFAS 121. SFAS 121 provides guidance for recognition and measurement of impairment on long-lived assets, certain identifiable intangibles and goodwill related both to assets to be held and used and assets to be disposed of. The statement requires entities to perform separate calculations for assets to be held and used to determine whether recognition of an impairment loss is required, and, if so, to measure impairment. If the sum of the expected future cash flows, undiscounted and without interest charges, is less than the asset's carrying amount, an impairment loss can be recognized. If the sum of the expected future cash flows is more than the assets carrying amount, an impairment loss cannot be recognized. Measurement of an impairment loss is based on the fair value of the asset. SFAS 121 also requires long-lived assets and certain identifiable intangibles to be disposed of to be reported at the lower of carrying amount or fair value less cost to sell. As of the adoption date January 1, 1996, Regional had no impaired long-lived or intangible assets affected by SFAS 121. SFAS 122 amends SFAS 65, Accounting for Certain Mortgage Banking Activities, to require that a mortgage banking enterprise recognize as separate assets rights to service mortgage loans for others, regardless of how such servicing rights are acquired. A mortgage banking enterprise that acquires mortgage servicing rights through either the purchase or origination of mortgage loans sells or securitizes those loans with servicing rights and the loans (without mortgage servicing rights) based on their relative fair values, if it is practicable to estimate those fair values. If it is not practicable to estimate the fair values of the mortgage servicing rights and the mortgage loans (without the mortgage servicing rights), the entire cost of purchasing or originating the loans should be allocated to the mortgage loans and no cost should be allocated to mortgage servicing rights. SFAS 122 also requires that a mortgage banking enterprise assess its capitalized mortgage servicing rights for impairment based on the fair value of those rights. SFAS 122 must be applied prospectively for fiscal years beginning after December 15, 1995, with earlier adoption encouraged, to transactions in which a mortgage banking enterprise sells or securitizes mortgage loans with servicing rights retained and to impairment evaluations of all amounts capitalized as mortgage servicing rights, including those purchased before the adoption of SFAS 122. Retroactive capitalization of mortgage servicing rights retained in transactions in which a mortgage banking enterprise originates mortgage loans and sells or securitizes those loans before the - 65 - 69 adoption of SFAS 122 is prohibited. Regional adopted the provisions of SFAS 122 effective January 1, 1996. The adoption of SFAS 122 had no impact on Regional's consolidated financial position or results of operations. SFAS 125 established accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities. The standards established by SFAS 125 are based on consistent applications of a "financial- components" approach that focuses on control. Under such approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities that it has incurred, derecognizes financial assets when control has been surrendered and derecognizes liabilities when extinguished. SFAS 125 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS 125 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996 and is to be applied prospectively. Earlier or retroactive application is not permitted. Regional does not believe that the implementation of SFAS 125 will have a material effect on its consolidated financial position or results of operation. EFFECT OF INFLATION. Persistent high rates of inflation can have a significant effect on the reported financial condition and results of operations of all industries. However, the asset and liability structure of commercial banks is substantially different from that of an industrial company in that virtually all assets and liabilities of commercial banks are monetary in nature. Accordingly, changes in interest rates may have a significant impact on a commercial bank's performance. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Inflation does have an impact on the growth of total assets in the banking industry, often resulting in a need to increase equity capital at higher than normal rates to maintain an appropriate equity-to-assets ratio. - 66 - 70 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of the Record Date the number of shares of Regional Common Stock beneficially owned and the percentage of ownership of outstanding shares of Regional Common Stock by (a) each director and executive officer of Regional, (b) each person who is known by Regional to own beneficially 5% or more of such stock and (c) all directors and executive officers of Regional as a group:
SHARES PERCENT NAME AND ADDRESS BENEFICIALLY OF OF BENEFICIAL OWNER OWNED CLASS - ------------------- ----- ----- Paul E. Utterback 23,373 92.31% 94 Fairmount Alton, IL 62002 David B. Utterback 267 1.05 President and Chairman 4305 S.W. 83rd Way Gainesville, Florida 32608 Mark P. Utterback 38 .15 Vice President 4530 Pershing St. Louis, MO 63108 Sarah E. Utterback 309 1.22 Secretary and Treasurer 7515 Parkdale, #1 West St. Louis, MO 63105 Virgil D. Hook 1,334 5.27 All Directors and 614 2.42% Executive Officers as a Group (three persons) - -------------------- Includes shares held by the Paul E. Utterback Voting Trust, of which Billy R. Summers is the trustee and Paul E. Utterback is the sole beneficiary. Also includes shares held by the Mary G. Utterback Family Trust and the Mary G. Utterback Marital Trust; Paul E. Utterback is the trustee and sole beneficiary for each. Includes shares held by the Virgil D. Hook Living Trust and the Margaret A. Hook Living Trust.
For purposes of the above table, a person is deemed to be a beneficial owner of shares of Regional Common Stock if the person has or shares the power to vote or to dispose of such shares. Unless otherwise indicated in the footnotes, each person has sole voting and investment power with respect to shares shown in the table as beneficially owned by such person. - 67 - 71 INFORMATION REGARDING MBI STOCK ------------------------------- DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE PURCHASE RIGHTS GENERAL. MBI has authorized 5,000,000 shares of MBI Preferred Stock, no par value, and 100,000,000 shares of MBI Common Stock, $5.00 par value. At September 30, 1996, MBI had no shares of MBI Preferred Stock issued and outstanding and 60,163,042 shares of MBI Common Stock outstanding. Under Missouri law, MBI's Board of Directors may generally approve the issuance of authorized shares of Preferred Stock and Common Stock without shareholder approval. MBI's Board of Directors is also authorized to fix the number of shares and determine the designation of any series of Preferred Stock and to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any series of MBI Preferred Stock. Except for the designation and reservation of Series A Junior Participating Preferred Stock pursuant to MBI's Preferred Share Purchase Rights Plan described below, MBI's Board of Directors has not acted to designate or issue any shares of MBI Preferred Stock. The existence of a substantial number of unissued and unreserved shares of MBI Common Stock and undesignated shares of MBI Preferred Stock may enable the Board of Directors to issue shares to such persons and in such manner as may be deemed to have an anti-takeover effect. The following summary of the terms of MBI's capital stock does not purport to be complete and is qualified in its entirety by reference to the applicable provisions of MBI's Restated Articles of Incorporation and By-Laws and Missouri law. DIVIDENDS. The holders of MBI Common Stock are entitled to share ratably in dividends when, as and if declared by the Board of Directors from funds legally available therefor, after full cumulative dividends have been paid or declared, and funds sufficient for the payment thereof set apart, on all series of MBI Preferred Stock ranking superior as to dividends to MBI Common Stock. The Board of Directors of MBI intends to maintain its present policy of paying quarterly cash dividends on MBI Common Stock, when justified by the financial condition of MBI and its subsidiaries. The declaration and amount of future dividends will depend on circumstances existing at the time, including MBI's earnings, financial condition and capital requirements as well as regulatory limitations, note and indenture provisions and such other factors as the Board of Directors may deem relevant. The payment of dividends to MBI by subsidiary banks is subject to extensive regulation by various state and federal regulatory agencies. See "SUPERVISION AND REGULATION." VOTING RIGHTS. Each holder of MBI Common Stock has one vote for each share held on matters presented for consideration by the shareholders, except that, in the election of directors, each shareholder has cumulative voting rights which entitle each such shareholder to the number of votes which equals the number of shares held by the shareholder multiplied by the number of directors to be elected. All such votes may be cast for one candidate for election as a director or may be distributed among two or more candidates. PREEMPTIVE RIGHTS. The holders of MBI Common Stock have no preemptive right to acquire any additional unissued shares or treasury shares of MBI. LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding up of MBI, whether voluntary or involuntary, the holders of MBI Common Stock will be entitled to share ratably in - 68 - 72 any of its assets or funds that are available for distribution to its shareholders after the satisfaction of its liabilities (or after adequate provision is made therefor) and after preferences on any outstanding MBI Preferred Stock. ASSESSMENT AND REDEMPTION. Shares of MBI Common Stock are and will be, when issued, fully paid and nonassessable. Such shares do not have any redemption provisions. PREFERRED SHARE PURCHASE RIGHTS PLAN. One preferred share purchase right is attached to each share of MBI Common Stock. The MBI Rights trade automatically with shares of MBI Common Stock, and become exercisable and will trade separately from the MBI Common Stock on the tenth day after public announcement that a person or group has acquired, or has the right to acquire, beneficial ownership of 20% or more of the outstanding shares of MBI Common Stock, or upon commencement or announcement of intent to make a tender offer for 20% or more of the outstanding shares of MBI Common Stock, in either case without prior written consent of the Board. When exercisable, each MBI Right will entitle the holder to buy 1/100 of a share of MBI Series A Junior Participating Preferred Stock at an exercise price of $100 per MBI Right. In the event a person or group acquires beneficial ownership of 20% or more of MBI Common Stock, holders of MBI Rights (other than the acquiring person or group) may purchase MBI Common Stock having a market value of twice the then current exercise price of each MBI Right. If MBI is acquired by any person or group after the Rights become exercisable, each MBI Right will entitle its holder to purchase stock of the acquiring company having a market value of twice the current exercise price of each MBI Right. The MBI Rights are designed to protect the interests of MBI and its shareholders against coercive takeover tactics. The purpose of the MBI Rights is to encourage potential acquirors to negotiate with MBI's Board of Directors prior to attempting a takeover and to give the Board leverage in negotiating on behalf of all shareholders the terms of any proposed takeover. The MBI Rights may deter certain takeover proposals. The MBI Rights, which can be redeemed by MBI's Board of Directors in certain circumstances, expire by their terms on June 3, 1998. CLASSIFICATION OF BOARD OF DIRECTORS. The Board of Directors of MBI is divided into three classes, and the directors are elected by classes to three-year terms, so that one of the three classes of the directors of MBI will be elected at each annual meeting of the shareholders. While this provision promotes stability and continuity of the Board of Directors, classification of the Board of Directors may also have the effect of decreasing the number of directors that could otherwise be elected at each annual meeting of shareholders by a person who obtains a controlling interest in the MBI Common Stock and thereby could impede a change in control of MBI. Because fewer directors will be elected at each annual meeting, such classification also will reduce the effectiveness of cumulative voting as a means of establishing or increasing minority representation on the Board of Directors. OTHER MATTERS. MBI's Restated Articles of Incorporation and By-Laws also contain provisions which: (i) require the affirmative vote of holders of at least 75% of the voting power of all of the shares of outstanding capital stock of MBI entitled to vote in the election of directors to remove a director or directors without cause; (ii) require the affirmative vote of the holders of at least 75% of the voting power of all shares of the outstanding capital stock of MBI to approve certain "business combinations" with "interested parties" unless at least two-thirds of the Board of Directors first approves such business combinations; and (iii) require an affirmative vote of at least 75% of the voting power of all shares of the outstanding capital stock of MBI for the amendment, alteration, change or repeal of any of the above provisions unless at least two-thirds of the Board of Directors first approves such an amendment, alteration, change or repeal. Such provisions may be deemed to have an anti- takeover effect. - 69 - 73 RESTRICTIONS ON RESALE OF MBI STOCK BY AFFILIATES Under Rule 145 of the Securities Act, certain persons who receive MBI Common Stock pursuant to the Merger and who are deemed to be "affiliates" of Regional will be limited in their right to resell the stock so received. The term "affiliate" is defined to include any person who, directly or indirectly, controls, or is controlled by, or is under common control with Regional at the time the Merger is submitted to a vote of the shareholders of Regional. Each affiliate of Regional (generally each director and executive officer of Regional and each shareholder who beneficially owns a substantial number of outstanding shares of Regional Common Stock) who desires to resell the MBI Common Stock received in the Merger must sell such stock either pursuant to an effective Registration Statement or in accordance with an applicable exemption, such as the applicable provisions of Rule 145(d) under the Securities Act. Rule 145(d) provides that persons deemed to be affiliates may resell their stock received in the Merger pursuant to certain of the requirements of Rule 144 under the Securities Act if such stock is sold within the first two years after the receipt thereof. After two years, if such person is not an affiliate of MBI and if MBI is current with respect to its required public filings, a former affiliate of Regional may freely resell the stock received in the Merger without limitation. After three years from the issuance of the stock, if such person is not an affiliate of MBI at the time of sale and for at least three months prior to such sale, such person may freely resell such stock, without limitation, regardless of the status of MBI's required public filings. The shares of MBI Common Stock to be received by affiliates of Regional in the Merger will be legended as to the restrictions imposed upon resale of such stock. COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF MBI AND REGIONAL MBI is incorporated under the laws of the State of Missouri, while Regional is incorporated under the laws of the State of Illinois. The rights of the shareholders of MBI are governed by MBI's Restated Articles of Incorporation and By-Laws and the Missouri Act. The rights of Regional shareholders are governed by Regional's Articles of Incorporation and By-Laws and by the Illinois Act. The rights of Regional shareholders who receive shares of MBI Common Stock in the Merger will thereafter be governed by MBI's Restated Articles of Incorporation and By-Laws and by the Missouri Act. The material rights of such shareholders, and, where applicable, the differences between the rights of MBI shareholders and Regional shareholders, are summarized below. PREFERRED SHARE PURCHASE RIGHTS PLAN. As described above under "-- Preferred Share Purchase Rights Plan," MBI Common Stock has attached Rights, which may deter certain takeover proposals. Regional does not have a rights plan. SUPERMAJORITY PROVISIONS. MBI's Restated Articles of Incorporation and MBI's By-Laws contain provisions requiring a supermajority vote of the shareholders of MBI to approve certain proposals. Under both MBI's Restated Articles and By-Laws, removal by the shareholders of the entire Board of Directors or any individual director from office without cause requires the affirmative vote of not less than 75% of the total votes entitled to be voted at a meeting of shareholders called for the election of directors. Amendment by the shareholders of MBI's Restated Articles or By-Laws relating to (i) the number or qualification of directors; (ii) the classification of the Board of Directors; (iii) the filling of vacancies on the Board of Directors; or (iv) the removal of directors, requires the affirmative vote of not less than 75% of the total votes of MBI's then outstanding shares of capital stock entitled to vote, voting together as a single class, unless such amendment has previously been expressly approved by at least two-thirds of the Board of Directors. The Restated Articles of MBI additionally provide that, in addition to any shareholder vote required under the Missouri Act, the affirmative vote of the holders of not less than 75% of the total votes to which all of the then outstanding shares of capital stock of MBI - 70 - 74 are entitled, voting together as a single class (the "Voting Stock"), shall be required for the approval of any Business Combination. A "Business Combination" is defined generally to include sales, exchanges, leases, transfers or other dispositions of assets, mergers or consolidations, issuances of securities, liquidations or dissolutions of MBI, reclassifications of securities or recapitalizations of MBI, involving MBI on the one hand, and an Interested Shareholder or an affiliate of an Interested Shareholder on the other hand. An "Interested Shareholder" is defined generally to include any person, firm, corporation or other entity which is the beneficial owner of 5% or more of the voting power of the outstanding Voting Stock. If, however, at least two-thirds of the Board of Directors of MBI approve the Business Combination, such Business Combination shall require only the vote of shareholders as provided by Missouri law or otherwise. The amendment of the provisions of MBI's Restated Articles relating to the approval of Business Combinations requires the affirmative vote of the holders of at least 75% of the Voting Stock unless such amendment has previously been approved by at least two-thirds of the Board of Directors. To the extent that a potential acquiror's strategy depends on the passage of proposals which require a supermajority vote of MBI's shareholders, such provisions requiring a supermajority vote may have the effect of discouraging takeover attempts that do not have Board approval by making passage of such proposals more difficult. Neither Regional's Articles of Incorporation nor Regional's By-Laws require a supermajority vote of shareholders with respect to any item. VOTING FOR DIRECTORS. MBI's By-Laws provide for cumulative voting in the election of directors. Cumulative voting entitles each shareholder to cast an aggregate number of votes equal to the number of voting shares held, multiplied by the number of directors to be elected. Each shareholder may cast all such votes for one nominee or distribute them among two or more nominees, thus permitting holders of less than a majority of the outstanding shares of voting stock to achieve board representation. Neither Regional's Articles of Incorporation or By-Laws provide for cumulative voting. CLASSIFIED BOARD. As described under "-- Classification of Board of Directors," the Board of Directors of MBI is divided into three classes of directors, with each class being elected to a staggered three-year term. By reducing the number of directors to be elected in any given year, the existence of a classified Board diminishes the benefits of the cumulative voting rights to minority shareholders. Regional does not have a classified Board of Directors. ANTI-TAKEOVER STATUTES. The Missouri Act contains certain provisions applicable to Missouri corporations such as MBI which may be deemed to have an anti-takeover effect. Such provisions include Missouri's business combination statute and the control share acquisition statute. The Missouri business combination statute protects domestic corporations after hostile takeovers by prohibiting certain transactions once an acquiror has gained control. The statute restricts certain "Business Combinations" between a corporation and an "Interested Shareholder" or affiliates of the Interested Shareholder for a period of five years unless certain conditions are met. A "Business Combination" includes a merger or consolidation, certain sales, leases, exchanges, pledges and similar dispositions of corporate assets or stock and certain reclassifications and recapitalizations. An "Interested Shareholder" includes any person or entity which beneficially owns or controls 20% or more of the outstanding voting shares of the corporation. During the initial five-year restricted period, no Business Combination may occur unless such Business Combination or the transaction in which an Interested Shareholder becomes "interested" (the "Acquisition Transaction") was approved by the board of directors of the corporation on or before the date of the Acquisition Transaction. Business Combinations may occur after the five-year period - 71 - 75 following the Acquisition Transaction only if: (i) prior to the stock acquisition by the Interested Shareholder, the board of directors approves the transaction in which the Interested Shareholder became an Interested Shareholder or approves the Business Combination in question; (ii) the holders of a majority of the outstanding voting stock, other than stock owned by the Interested Shareholder, approve the Business Combination; or (iii) the Business Combination satisfies certain detailed fairness and procedural requirements. The Missouri Act exempts from its provisions: (i) corporations not having a class of voting stock registered under Section 12 of the Exchange Act; (ii) corporations which adopt provisions in their articles of incorporation or bylaws expressly electing not to be covered by the statute; and (iii) certain circumstances in which a shareholder inadvertently becomes an Interested Shareholder. MBI's Restated Articles of Incorporation and By-Laws do not contain an election to "opt out" of the Missouri business combination statute. The Missouri Act also contains a "Control Share Acquisition Statute" which provides that an "Acquiring Person" who after any acquisition of shares of a publicly traded corporation has the voting power, when added to all shares of the same corporation previously owned or controlled by the Acquiring Person, to exercise or direct the exercise of: (i) 20% but less than 33 1/3%, (ii) 33 1/3% or more but less than a majority or (iii) a majority, of the voting power of outstanding stock of such corporation, must obtain shareholder approval for the purchase of the "Control Shares." If approval is not given, the Acquiring Person's shares lose the right to vote. The statute prohibits an Acquiring Person from voting its shares unless certain disclosure requirements are met and the retention or restoration of voting rights is approved by both: (i) a majority of the outstanding voting stock, and (ii) a majority of the outstanding voting stock after exclusion of "Interested Shares." Interested Shares are defined as shares owned by the Acquiring Person, by directors who are also employees, and by officers of the corporation. Shareholders are given dissenters' rights with respect to the vote on Control Share Acquisitions and may demand payment of the fair value of their shares. A number of acquisitions of shares are deemed not to constitute Control Share Acquisitions, including good faith gifts, transfers pursuant to wills, purchases pursuant to an issuance by the corporation, mergers involving the corporation which satisfy the other requirements of the Missouri Act, transactions with a person who owned a majority of the voting power of the corporation within the prior year, or purchases from a person who has previously satisfied the provisions of the Control Share Acquisition Statute so long as the transaction does not result in the purchasing party having voting power after the purchase in a percentage range (such ranges are as set forth in the immediately preceding paragraph) beyond the range for which the selling party previously satisfied the provisions of the statute. Additionally, a corporation may exempt itself from application of the statute by inserting a provision in its articles of incorporation or bylaws expressly electing not to be covered by the statute. MBI's Restated Articles of Incorporation and By-Laws do not contain an election to "opt out" of the Control Share Acquisition Statute. Illinois has a business combination statute similar to Missouri's which generally prohibits a domestic corporation from engaging in mergers or other business combinations with certain "interested shareholders" for a period of three years from the time that the person becomes an "interested shareholder." The three year moratorium can be avoided if (i) the business combination or transaction in which the shareholder became an interested shareholder is approved by the Board of Directors prior to the date on which the interested shareholder acquires the requisite percentage of stock, (ii) as a result of the transaction pursuant to which the shareholder became an "interested shareholder," the interested shareholder owned 85% or more of the voting shares of the corporation, excluding for purposes of determining the number of shares outstanding those shares owned by (A) persons who are directors and - 72 - 76 also officers, and (B) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or (iii) subsequent to becoming an interested shareholder the transaction is approved by the Board of Directors and authorized (but not by written consent) by 66 2/3% or more of the corporation's shareholders (other than the interested shareholder). DISSENTERS' RIGHTS. Under both Section 351.455 of the Missouri Act and Section 11.65 of the Illinois Act, a shareholder of any corporation which is a party to a merger or consolidation, or which sells all or substantially all of its assets, has the right to dissent from such corporate action and to demand payment of the value of such shares. The provisions of the Illinois Act are applicable to the shareholders of Regional. SHAREHOLDERS' RIGHT TO INSPECT. Under Section 351.215 of the Missouri Act, any shareholder of MBI may inspect the corporation's books and records for any reasonable and proper purpose. Such inspection may be made at any reasonable time or times. Shareholders of Regional have similar rights under Section 7.75 of the Illinois Act. SIZE OF BOARD OF DIRECTORS. As permitted under the Missouri Act, the number of directors on the Board of Directors of MBI is set forth in MBI's By-Laws, which provide that the number of directors may be fixed from time to time at not less than 12 nor more than 24 by an amendment of the By-Laws or by a resolution of the Board of Directors, in either case, adopted by the vote or consent of at least two-thirds of the number of directors then authorized under the By-Laws. MBI's Board of Directors currently has twelve members. Regional's Board of Directors currently has three members. The supermajority vote required for the amendment of MBI's By-Laws regarding a change in the number of directors may have the effect of making it more difficult to force an immediate change in the composition of a majority of the Board of Directors and may be deemed to have an anti-takeover effect. SUPERVISION AND REGULATION -------------------------- GENERAL As a bank holding company, MBI is subject to regulation under the BHCA and its examination and reporting requirements. Under the BHCA, a bank holding company may not directly or indirectly acquire the ownership or control of more than 5% of the voting shares or substantially all of the assets of any company, including a bank or savings and loan association, without the prior approval of the Federal Reserve Board. In addition, bank holding companies are generally prohibited under the BHCA from engaging in nonbanking activities, subject to certain exceptions. MBI and its subsidiaries are subject to supervision and examination by applicable federal and state banking agencies. The earnings of MBI's subsidiaries, and therefore the earnings of MBI, are affected by general economic conditions, management policies and the legislative and governmental actions of various regulatory authorities, including the Federal Reserve Board, the Office of Thrift Supervision, the FDIC, the Office of the Comptroller of the Currency (the "Comptroller") and various state financial institution regulatory agencies. In addition, there are numerous governmental requirements and regulations that affect the activities of MBI and its subsidiaries. - 73 - 77 CERTAIN TRANSACTIONS WITH AFFILIATES There are various legal restrictions on the extent to which a bank holding company and certain of its nonbank subsidiaries can borrow or otherwise obtain credit from its bank subsidiaries. In general, these restrictions require that any such extensions of credit must be on non-preferential terms and secured by designated amounts of specified collateral and be limited, as to any one of the holding company or such nonbank subsidiaries, to 10% of the lending bank's capital stock and surplus, and as to the holding company and all such nonbank subsidiaries in the aggregate, to 20% of such capital stock and surplus. PAYMENT OF DIVIDENDS MBI is a legal entity separate and distinct from its wholly owned financial institutions and other subsidiaries. The principal source of MBI's revenues is dividends from its financial institution subsidiaries. Various federal and state statutory provisions limit the amount of dividends the affiliate financial institutions can pay to MBI without regulatory approval. The approval of the appropriate federal or state bank regulatory agencies is required for any dividend if the total of all dividends declared by the bank in any calendar year would exceed the total of the institutions net profits, as defined by regulatory agencies, for such year combined with its retained net profits for the preceding two years. In addition, a national bank or a state member bank may not pay a dividend in an amount greater than its net profits then on hand. The payment of dividends by any financial institution subsidiary may also be affected by other factors, such as the maintenance of adequate capital. CAPITAL ADEQUACY The Federal Reserve Board has issued standards for measuring capital adequacy for bank holding companies. These standards are designed to provide risk-responsive capital guidelines and to incorporate a consistent framework for use by financial institutions operating in major international financial markets. The banking regulators have issued standards for banks that are similar to, but not identical with, the standards for bank holding companies. In general, the risk-related standards require financial institutions and financial institution holding companies to maintain capital levels based on "risk-adjusted" assets, so that categories of assets with potentially higher credit risk will require more capital backing than categories with lower credit risk. In addition, financial institutions and financial institution holding companies are required to maintain capital to support off-balance sheet activities such as loan commitments. FDIC INSURANCE ASSESSMENTS The subsidiary depository institutions of MBI are subject to FDIC deposit insurance assessments. The FDIC has adopted a risk-based premium schedule. Each financial institution is assigned to one of three capital groups--well capitalized, adequately capitalized or undercapitalized--and further assigned to one of three subgroups within a capital group, on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors, and on the basis of other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. The actual assessment rate applicable to a particular institution will, therefore, depend in part upon the risk assessment classification so assigned to the institution by the FDIC. See "- FIRREA and FDICIA." The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), adopted in August 1989 to provide for the resolution of insolvent savings associations, required the FDIC - 74 - 78 to establish separate deposit insurance funds -- the BIF for banks and the Savings Association Insurance Fund ("SAIF") for savings associations. FIRREA also required the FDIC to set deposit insurance assessments at such levels as would cause BIF and SAIF to reach their "designated reserve ratios" of 1.25 percent of the deposits insured by them within a reasonable period of time. Due to low costs of resolving bank insolvencies in the last few years, BIF reached its designated reserve ratio in May 1995. As a result, effective January 1, 1996, the FDIC eliminated deposit insurance assessments (except for the minimum $2,000 payment required by law) for banks that are well capitalized and well managed and reduced the deposit insurance assessments for all other banks. As of January 1, 1996, the SAIF had not reached the designated reserve ratio. MBI, which has acquired substantial amounts of SAIF-insured deposits during the years from 1989 to the present, is required to pay SAIF deposit insurance premiums on these SAIF-insured deposits. The Deposit Insurance Funds Act of 1996 (the "Funds Act"), enacted on September 30, 1996, required the FDIC to take immediate steps to recapitalize the SAIF and to change the basis on which funds are raised to make the scheduled payments on the FICO bonds issued in 1987 to replenish the Federal Savings and Loan Insurance Corporation. The new legislation, combined with regulations issued by the FDIC immediately after enactment of the Funds Act, provides for the following: (i) A special assessment in the amount of 65.7 basis points on SAIF-insured deposits held by depository institutions on March 31, 1995 (the special assessment was required by the Funds Act to recapitalize the SAIF to the designated reserve ratio of 1.25 percent of the deposits insured by SAIF). Payments of this assessment were made in November 1996, but were accrued by financial institutions in the third calendar quarter of 1996. Institutions such as MBI that have deposits insured by both the BIF and the SAIF ("Oakar Banks") were required to pay the special assessment on 80% of their "adjusted attributable deposit amounts" ("AADA"). In addition, for purposes of future regular deposit insurance assessments, the AADA on which Oakar Banks pay assessments to SAIF was also reduced by 20%. (ii) Commencing January 1, 1997, BIF insured institutions will be responsible for a portion of the annual carrying costs of the FICO bonds. Such institutions will be assessed at 80% of the rate applicable to SAIF-insured institutions until December 31, 1999. Additionally, pursuant to the Funds Act, if the reserves in BIF at the end of any semiannual assessment period exceed 1.25% of insured deposits, the FDIC is required to refund the excess to the BIF- insured institutions. (iii) The merger of the BIF and the SAIF on January 1, 1999 to create the Deposit Insurance Fund, but only if no more savings associations are in existence at that time. The Deposit Act also directs the Secretary of the Treasury to conduct a study and submit recommendations to Congress regarding the establishment of a common charter for depository institutions. PROPOSALS TO OVERHAUL THE SAVINGS ASSOCIATION INDUSTRY Proposals recently have been introduced in the U.S. Congress that, if adopted, would overhaul the savings association industry. The most significant of these proposals would merge the Comptroller and the OTS, abolish the federal savings association charter and require federal thrifts to convert to commercial banks. MBI cannot predict whether these or any other legislative proposals will be enacted, or, if enacted, the final form of the law. - 75 - 79 SUPPORT OF SUBSIDIARY BANKS Under Federal Reserve Board policy, MBI is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each of the subsidiaries in circumstances where it might not choose to do so absent such a policy. This support may be required at times when MBI may not find itself able to provide it. In addition, any capital loans by MBI to any of its subsidiaries would also be subordinate in right of payment to deposits and certain other indebtedness of such subsidiary. Consistent with this policy regarding bank holding companies serving as a source of financial strength for their subsidiary banks, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the bank holding company's capital needs, asset quality and overall financial condition. FIRREA AND FDICIA FIRREA contains a cross-guarantee provision which could result in insured depository institutions owned by MBI being assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other insured depository institution owned by MBI. Under FIRREA, failure to meet the capital guidelines could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including the termination of deposit insurance by the FDIC. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") made extensive changes to the federal banking laws. FDICIA instituted certain changes to the supervisory process, including provisions that mandate certain regulatory agency actions against undercapitalized institutions within specified time limits. FDICIA contains various other provisions that may affect the operations of banks and savings institutions. The prompt corrective action provision of FDICIA requires the federal banking regulators to assign each insured institution to one of five capital categories ("well capitalized," "adequately capitalized" or one of three "undercapitalized" categories) and to take progressively more restrictive actions based on the capital categorization, as specified below. Under FDICIA, capital requirements would include a leverage limit, a risk-based capital requirement and any other measure of capital deemed appropriate by the federal banking regulators for measuring the capital adequacy of an insured depository institution. All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the minimum levels for any relevant capital measure. The FDIC and the Federal Reserve Board adopted capital- related regulations under FDICIA. Under those regulations, a bank will be well capitalized if it: (i) had a risk-based capital ratio of 10% or greater; (ii) had a ratio of Tier 1 capital to risk-adjusted assets of 6% or greater; (iii) had a ratio of Tier 1 capital to adjusted total assets of 5% or greater; and (iv) was not subject to an order, written agreement, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. An association will be adequately capitalized if it was not "well capitalized" and: (i) had a risk-based capital ratio of 8% or greater; (ii) had a ratio of Tier 1 capital to risk-adjusted assets of 4% or greater; and (iii) had a ratio of Tier 1 capital to adjusted total assets of 4% or greater (except that certain associations rated "Composite 1" under the federal banking agencies' - 76 - 80 CAMEL rating system may be adequately capitalized if their ratios of core capital to adjusted total assets were 3% or greater). FDICIA also makes extensive changes in existing rules regarding audits, examinations and accounting. It generally requires annual on-site, full scope examinations by each bank's primary federal regulator. It also imposes new responsibilities on management, the independent audit committee and outside accountants to develop or approve reports regarding the effectiveness of internal controls, legal compliance and off- balance sheet liabilities and assets. DEPOSITOR PREFERENCE STATUTE Legislation enacted in August 1993 provides a preference for deposits and certain claims for administrative expenses and employee compensation against an insured depository institution, in the liquidation or other resolution of such an institution by any receiver. Such obligations would be afforded priority over other general unsecured claims against such an institution, including federal funds and letters of credit, as well as any obligation to shareholders of such an institution in their capacity as such. THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION In September 1994, legislation was enacted that is expected to have a significant effect in restructuring the banking industry in the United States. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle- Neal") facilitates the interstate expansion and consolidation of banking organizations by permitting (i) bank holding companies that are adequately capitalized and managed, one year after enactment of the legislation, to acquire banks located in states outside their home states regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks after June 1, 1997, subject to the right of individual states to "opt in" or to "opt out" of this authority before that date, (iii) banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state, (iv) foreign banks to establish, with approval of the regulators in the United States, branches outside their home states to the same extent that national or state banks located in the home state would be authorized to do so, and (v) banks to receive deposits, renew time deposits, close loans, service loans and receive payments on loans and other obligations as agent for any bank or thrift affiliate, whether the affiliate is located in the same state or a different state. One effect of Riegle-Neal is to permit MBI to acquire banks located in any state and to permit bank holding companies located in any state to acquire banks and bank holding companies in Missouri. Overall, Riegle-Neal is likely to have the effects of increasing competition and promoting geographic diversification in the banking industry. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS ----------------------------------------- KPMG Peat Marwick LLP served as MBI's independent accountants for the year ended December 31, 1995 and continues to serve in such capacity. Services provided in connection with the audit function included examination of the annual consolidated financial statements, review and consultation regarding filings with the Commission and other regulatory authorities and consultation on financial accounting and reporting matters. KPMG Peat Marwick LLP served as Regional's independent accountants for the year ended December 31, 1995 and continues to serve in such capacity. Services provided in connection with the audit function included examination of the annual consolidated financial statements, review and consultation regarding filings with regulatory authorities and consultation on financial accounting and reporting matters. - 77 - 81 LEGAL MATTERS ------------- Certain legal matters will be passed upon for MBI by Thompson Coburn, St. Louis, Missouri and for Regional by Bryan Cave LLP, St. Louis, Missouri. EXPERTS ------- The consolidated financial statements of MBI as of December 31, 1995, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1995, incorporated by reference in MBI's Annual Report on Form 10-K, and the supplemental consolidated financial statements of MBI as of December 31, 1995, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1995, contained in MBI's Current Report on Form 8-K dated March 11, 1996, have been incorporated by reference herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Mark Twain incorporated by reference in Mark Twain's Annual Report on Form 10-K for the year ended December 31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon incorporated by reference therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Roosevelt as of December 31, 1995 and 1994 and for each of the years in the three-year period ended December 31, 1995, included in Roosevelt's Annual Report on Form 10-K for the year ended December 31, 1995, as amended, have been incorporated by reference herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Regional as of and for the year ended December 31, 1995 have been included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, whose report is included herein, and upon the authority of such firm as experts in accounting and auditing. OTHER MATTERS ------------- The Board of Directors of Regional, at the date hereof, is not aware of any business to be presented at the Special Meeting other than that referred to in the Notice of Special Meeting and discussed herein. If any other matter should properly come before the Special Meeting, the persons named as proxies will have discretionary authority to vote the shares represented by proxies in accordance with their discretion and judgment as to the best interests of Regional. SHAREHOLDER PROPOSALS --------------------- If the Merger is approved, the other conditions to the Merger are satisfied and the Merger is consummated, shareholders of Regional will become shareholders of MBI at the Effective Time. MBI shareholders may submit to MBI proposals for formal consideration at the 1997 and 1998 annual meetings of MBI's shareholders and inclusion in MBI's proxy statements for such meetings. The deadline for all such proposals to be considered for inclusion in MBI's Proxy Statement and proxy for the 1997 annual - 78 - 82 meeting was November 22, 1996. All such proposals to be considered for inclusion in MBI's Proxy Statement and proxy for the 1998 annual meeting must be received in writing by the Corporate Secretary at Mercantile Bancorporation Inc., P.O. Box 524, St. Louis, Missouri 63166-0524 by November 22, 1997. - 79 - 83 REGIONAL BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS INDEX ----- INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . .F-1 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994 (UNAUDITED) . . . . . . . . . . . . . . . . . . .F-2 CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1995 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-3 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . . . . .F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1995 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . .F-6 TO F-14 - 80 - 84 INDEPENDENT AUDITORS' REPORT The Board of Directors Regional Bancshares, Inc.: We have audited the accompanying consolidated balance sheet of Regional Bancshares, Inc. and subsidiary as of December 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit 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 audit provides 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 Regional Bancshares, Inc. and subsidiary as of December 31, 1995, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP St. Louis, Missouri March 1, 1996 F-1 85 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Consolidated Balance Sheets September 30, 1996, and December 31, 1995 and 1994
December 31, September 30, --------------------------- Assets 1996 1995 1994 ------ ---- ---- ---- (unaudited) (unaudited) Cash and due from banks $ 7,452,252 6,068,895 4,810,081 Federal funds sold 495,000 3,625,000 1,425,000 ------------ ----------- ----------- Cash and cash equivalents 7,947,252 9,693,895 6,235,081 ------------ ----------- ----------- Investments in debt and marketable equity securities available-for-sale, at estimated market value 66,076,952 56,424,260 45,734,728 Loans 106,526,609 99,770,366 93,848,406 Less: Unearned discount and fees 3,357,540 3,086,141 2,532,455 Allowance for loan losses 1,473,078 1,350,143 1,825,044 ------------ ----------- ----------- Net loans 101,695,991 95,334,082 89,490,907 ------------ ----------- ----------- Premises and equipment, net 3,702,882 3,303,592 3,361,715 Accrued interest receivable 1,317,682 1,361,231 1,226,868 Other real estate 630,600 960,100 718,600 Other assets 710,838 602,805 1,372,506 ------------ ----------- ----------- Total assets $182,082,197 167,679,965 148,140,405 ============ =========== =========== Liabilities and Stockholders' Equity ------------------------------------ Deposits: Non-interest-bearing 13,716,585 11,809,821 13,384,765 Interest-bearing 133,269,970 130,904,150 113,721,824 ------------ ----------- ----------- Total deposits 146,986,555 142,713,971 127,106,589 Short-term borrowings 10,000,000 - - Other liabilities 1,679,405 1,844,082 1,348,932 ------------ ----------- ----------- Total liabilities 158,665,960 144,558,053 128,455,521 ------------ ----------- ----------- Commitments and contingencies Stockholders' equity: Common stock, $10 par value; 30,000 shares authorized, 25,321 shares issued and outstanding 253,210 253,210 253,210 Surplus 2,906,963 2,906,963 2,906,963 Retained earnings 20,543,954 19,293,738 17,569,329 Net unrealized gains (losses) on securities available-for-sale (287,890) 668,001 (1,044,618) ------------ ----------- ----------- Total stockholders' equity 23,416,237 23,121,912 19,684,884 ------------ ----------- ----------- Total liabilities and stockholders' equity $182,082,197 167,679,965 148,140,405 ============ =========== =========== See accompanying notes to consolidated financial statements.
F-2 86 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Income Nine months ended September 30, 1996 and 1995 and years ended December 31, 1995, 1994 and 1993
September 30, December 31, ------------------ ------------------------------- 1996 1995 1995 1994 1993 ---- ---- ---- ---- ---- (unaudited) (unaudited) Interest income: Interest and fees on loans $6,679,393 6,284,770 8,529,234 6,889,208 6,171,383 Interest on federal funds sold 34,068 143,317 173,471 54,733 86,873 Interest and dividends on debt and marketable equity securities: Taxable 2,017,769 1,426,393 2,000,033 1,872,382 2,002,935 Exempt from federal income taxes 950,790 852,160 1,137,487 1,494,383 1,347,806 ---------- --------- ---------- ---------- --------- Total interest income 9,682,020 8,706,640 11,840,225 10,310,706 9,608,997 ---------- --------- ---------- ---------- --------- Interest expense: Interest on deposits 4,591,052 3,822,975 5,297,799 3,949,964 3,739,384 Other interest expense 234,837 10,345 20,402 98,015 2,207 ---------- --------- ---------- ---------- --------- Total interest expense 4,825,889 3,833,320 5,318,201 4,047,979 3,741,591 ---------- --------- ---------- ---------- --------- Net interest income 4,856,131 4,873,320 6,522,024 6,262,727 5,867,406 Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000) ---------- --------- ---------- ---------- --------- Net interest income after provision for loan losses 4,781,134 4,831,655 6,480,359 6,542,727 6,827,406 ---------- --------- ---------- ---------- --------- Noninterest income: Service charges on deposits 259,993 252,170 341,352 360,877 326,380 Trust income 142,497 150,000 198,028 208,194 218,790 ATM switch income 153,818 109,142 144,863 109,694 24,529 Gain on sale of mortgage loans 19,531 42,417 65,664 42,103 213,616 Gain (loss) on sale of debt and marketable equity securities, net (11,513) 21,852 10,072 (249,608) 176,248 Gain on sale of other real estate, net 7,380 34,156 35,616 72,580 19,238 Other noninterest income 225,910 229,961 312,404 285,189 289,944 ---------- --------- ---------- ---------- --------- Total noninterest income 797,616 839,698 1,107,999 829,029 1,268,745 ---------- --------- ---------- ---------- --------- Noninterest expense: Salaries and employee benefits 1,527,667 1,365,600 1,811,480 1,889,273 1,793,117 Occupancy 163,511 122,234 164,513 186,760 290,561 Equipment 253,440 214,968 287,587 244,427 268,560 Data processing 188,327 178,798 238,990 153,660 105,202 FDIC insurance assessment 800 193,899 146,213 278,547 276,002 Legal and professional fees 143,549 137,043 168,043 171,380 236,766 Other noninterest expense 850,614 760,009 1,080,617 1,105,773 1,467,135 ---------- --------- ---------- ---------- --------- Total noninterest expense 3,127,908 2,972,551 3,897,443 4,029,820 4,437,343 ---------- --------- ---------- ---------- --------- Income before income tax expense and cumulative effect of change in accounting principle 2,450,842 2,698,802 3,690,915 3,341,936 3,658,808 Income tax expense 440,995 700,054 932,650 796,010 1,158,085 ---------- --------- ---------- ---------- --------- Income before cumulative effect of change in accounting principle 2,009,847 1,998,748 2,758,265 2,545,926 2,500,723 Cumulative effect of change in accounting for income taxes - - - - 517,850 ---------- --------- ---------- ---------- --------- Net income $2,009,847 1,998,748 2,758,265 2,545,926 3,018,573 ========== ========= ========== ========== ========= Earnings per share (based on weighted average shares outstanding of 25,321): Income before cumulative effect of change in accounting principle $ 79.37 78.94 108.93 100.55 98.76 Cumulative effect of change in accounting for income taxes - - - - 20.45 ---------- --------- ---------- ---------- --------- Net income $ 79.37 78.94 108.93 100.55 119.21 ========== ========= ========== ========== ========= See accompanying notes to consolidated financial statements.
F-3 87 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity Nine months ended September 30, 1996 and years ended December 31, 1995, 1994, and 1993
Net unrealized gains (losses) on securities Common Retained available- stock Surplus earnings for-sale Total ----- ------- -------- -------- ----- Balance, December 31, 1992 (unaudited) $253,210 2,906,963 12,154,982 - 15,315,155 Net income (unaudited) - - 3,018,573 - 3,018,573 -------- --------- ---------- ---------- ---------- Balance, December 31, 1993 (unaudited) 253,210 2,906,963 15,173,555 - 18,333,728 Cumulative effect of implementation of change in accounting for debt and marketable equity securities, net of tax (unaudited) - - - 1,790,579 1,790,579 Net income (unaudited) - - 2,545,926 - 2,545,926 Cash dividends ($5.93 per share) (unaudited) - - (150,152) - (150,152) Net change in unrealized gains (losses) on securities available-for-sale (unaudited) - - - (2,835,197) (2,835,197) -------- --------- ---------- ---------- ---------- Balance, December 31, 1994 (unaudited) 253,210 2,906,963 17,569,329 (1,044,618) 19,684,884 Net income - - 2,758,265 - 2,758,265 Cash dividends ($40.83 per share) - - (1,033,856) - (1,033,856) Net change in unrealized gains (losses) on securities available-for-sale - - - 1,712,619 1,712,619 -------- --------- ---------- ---------- ---------- Balance, December 31, 1995 253,210 2,906,963 19,293,738 668,001 23,121,912 Net income (unaudited) - - 2,009,847 - 2,009,847 Cash dividends ($30.00 per share) (unaudited) - - (759,631) - (759,631) Net change in unrealized gains (losses) on securities available-for-sale (unaudited) - - - (955,891) (955,891) -------- --------- ---------- ---------- ---------- Balance, September 30, 1996 (unaudited) $253,210 2,906,963 20,543,954 (287,890) 23,416,237 ======== ========= ========== ========== ========== See accompanying notes to consolidated financial statements.
F-4 88 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Nine months ended September 30, 1996 and 1995 and years ended December 31, 1995, 1994, and 1993
September 30, December 31, ------------------ ------------------------------- 1996 1995 1995 1994 1993 ---- ---- ---- ---- ---- (unaudited) (unaudited) Cash flows from operating activities: Net income $ 2,009,847 1,998,748 2,758,265 2,545,926 3,018,573 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000) Depreciation and amortization 227,885 191,169 231,619 218,450 355,140 Loss (gain) on sale of debt and marketable equity securities, net 11,513 (21,852) (10,072) 249,608 (176,248) Gain on sale of other real estate, net (7,380) (34,156) (35,616) (72,580) (19,238) Decrease (increase) in accrued interest receivable 43,549 (39,293) (134,363) 993 110,901 Origination of secondary market mortgage loans (1,753,210) (3,838,026) (7,003,556) (5,232,318) (13,336,807) Proceeds from the sale of secondary market mortgage loans 1,735,991 4,080,372 7,454,345 5,084,103 13,355,616 Other operating activities, net 277,328 639,004 502,662 268,197 (760,984) ------------ ----------- ----------- ----------- ----------- Net cash provided by operating activities 2,620,520 3,017,631 3,804,949 2,782,379 1,586,953 ------------ ----------- ----------- ----------- ----------- Cash flows from investing activities: Proceeds from calls and maturities of and principal payments on debt securities 4,797,330 5,273,079 7,340,948 8,433,681 5,245,399 Proceeds from sales of debt and marketable equity securities 3,947,913 7,641,243 10,635,198 11,118,812 12,930,256 Purchase of debt and marketable equity securities (19,903,741) (20,941,923) (26,051,008) (12,089,885) (28,285,368) Net (increase) decrease in loans (6,298,656) (6,440,935) (7,166,055) (15,056,625) 87,374 Purchase of premises and equipment (609,842) (132,061) (209,810) (372,911) (252,097) Proceeds from sale of premises and equipment 1,500 19,200 26,600 35,467 - Proceeds from sales of other real estate 185,380 456,006 504,466 241,498 359,595 ------------ ----------- ----------- ----------- ----------- Net cash used in investing activities (17,880,116) (14,125,391) (14,919,661) (7,689,963) (9,914,841) ------------ ----------- ----------- ----------- ----------- Cash flows from financing activities: Net increase in deposits 4,272,584 11,050,916 15,607,382 3,385,333 7,494,289 Proceeds from short-term borrowings 10,000,000 - - - - Cash dividends paid on common stock (759,631) (789,255) (1,033,856) (150,152) - ------------ ----------- ----------- ----------- ----------- Net cash provided by financing activities 13,512,953 10,261,661 14,573,526 3,235,181 7,494,289 ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (1,746,643) (846,099) 3,458,814 (1,672,403) (833,599) Cash and cash equivalents at beginning of period 9,693,895 6,235,081 6,235,081 7,907,484 8,741,083 ------------ ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period $ 7,947,252 5,388,982 9,693,895 6,235,081 7,907,484 ============ =========== =========== =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest on deposits and borrowed funds $ 4,762,136 3,756,570 5,249,746 3,992,433 3,753,166 Income taxes 399,300 580,803 610,000 787,300 980,300 Noncash transactions: Transfers to other real estate in settlement of loans 2,500 813,458 813,458 140,600 39,079 Loans originated to facilitate sales of other real estate 104,000 - 66,500 80,000 22,500 Unrealized gain (loss) on securities available- for-sale (1,482,071) 2,219,258 2,594,877 (1,582,754) - ============ =========== =========== =========== =========== See accompanying notes to consolidated financial statements.
F-5 89 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 1995 (audited) and December 31, 1994 and 1993 (unaudited) NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Regional Bancshares, Inc. and subsidiary (the Company) provides a full range of banking services to individual and corporate customers through its wholly owned subsidiary bank, Bank of Alton. The Company is subject to competition from other financial and nonfinancial institutions providing financial services in its customer service area, which is primarily the Alton-Wood River area of Southwestern Illinois. Additionally, the Company is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory agencies. The consolidated financial statements of the Company have been prepared in conformity with generally accepted accounting principles and conform to predominant practices within the banking industry. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions, including the determination of the allowance for loan losses, that affect the reported amounts of assets and liabilities and 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. Significant accounting policies used by the Company in the preparation and presentation of the consolidated financial statements are summarized below: CONSOLIDATION The consolidated financial statements include the accounts of Regional Bancshares, Inc. and Bank of Alton. All significant intercompany balances and transactions have been eliminated. CONSOLIDATED STATEMENTS OF CASH FLOWS For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and due from banks and federal funds sold. INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES The Company classifies its debt and equity securities as available-for-sale. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and reported as a separate component of stockholders' equity until realized. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the lives of the respective securities as an adjustment to yield using the interest method. Amortization of premiums and accretion of discounts on mortgage-backed securities are amortized in relation to the corresponding prepayment rates, both historical and estimated, using a method which approximates the interest method. Interest income is recognized when earned. Realized gains and losses for securities are included in earnings using the specific identification method for determining the cost of securities sold. LOANS Interest on commercial, real estate mortgage, and most consumer loans is recognized using the simple-interest method. Interest on some consumer loans is recognized using a method which approximates the interest method. The accrual of interest on loans is discontinued when, in management's judgment, the interest will not be collectible in the normal course of business. Subsequent payments received on such loans are applied to principal if doubt exists as to the collectibility of such principal; otherwise, the portion of such receipts representing interest is recorded as income. Loans are returned to accrual status when management believes full collectibility of principal and interest is expected. (Continued) F-6 90 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements Net loan origination fees are deferred and recognized over the lives of the related loans as a yield adjustment using a method approximating the interest method. The allowance for loan losses is available to absorb loan charge-offs. The allowance is increased by provisions charged to operations and reduced by loan charge-offs less recoveries. Management utilizes a systematic, documented approach in determining the appropriate level of the allowance for loan losses. Management's approach, which provides for general and specific allocations of the allowance for loan losses, is based on current economic conditions, past losses, collection experience, risk characteristics of the portfolio, assessment of collateral values by obtaining independent appraisals for significant properties, and such other factors which, in management's judgment, deserve current recognition in estimating loan losses. Management believes the allowance for loan losses is adequate to absorb losses in the loan portfolio. While management uses available information to recognize loan losses, future additions to the allowance may be necessary based on changes in economic conditions. Additionally, various regulatory agencies, as an integral part of the examination process, periodically review Bank of Alton's allowance for loan losses. Such agencies may require Bank of Alton to increase its allowance for loan losses based on their judgments and interpretations about information available to them at the time of their examinations. On January 1, 1995, the Company adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan (SFAS 114), as amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures (SFAS 118). SFAS 114 (as amended by SFAS 118) defines the recognition criteria for loan impairment and the measurement methods for certain impaired loans and loans for which terms have been modified in troubled-debt restructurings (a restructured loan). Specifically, a loan is considered impaired when it is probable a creditor will be unable to collect all amounts due - both principal and interest - according to the contractual terms of the loan agreement. When measuring impairment, the expected future cash flows of an impaired loan is discounted at the loan's effective interest rate. Alternatively, impairment could be measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral-dependent loan. Regardless of the historical measurement method used, SFAS 114 requires a creditor to measure impairment based on the fair value of the collateral when the creditor determines foreclosure is probable. Additionally, impairment of a restructured loan is measured by discounting the total expected future cash flows at the loan's effective rate of interest as stated in the original loan agreement. SFAS 118 amends SFAS 114 to allow creditors to use existing methods of recognizing interest income on impaired loans. The Company has elected to continue to use its existing nonaccrual methods for recognizing interest on impaired loans. The adoption of SFAS 114 and SFAS 118 resulted in no prospective adjustment to the provision for loan losses. SECONDARY MORTGAGE MARKET OPERATIONS The Bank of Alton originates mortgage loans for sale in the secondary market to the Federal Home Loan Mortgage Corporation (FHLMC). Any such mortgage loans held for sale are maintained on the Company's consolidated balance sheets at the lower of cost or market as determined by outstanding commitments from FHLMC to purchase such loans. Gains and losses on the sale of these loans and loan origination fees are recognized upon sale of the related loans and included in the consolidated statements of income as noninterest income. Additionally, loan administration fees, representing income earned from servicing these loans, are calculated on the outstanding principal balances of the loans serviced and recorded as noninterest income as earned. In May 1995, the Financial Accounting Standards Board issued SFAS No. 122, Accounting for Mortgage Servicing Rights (SFAS 122) which (Continued) F-7 91 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements requires that a mortgage banking enterprise recognize as separate assets the rights to service mortgage loans for others at the origination or purchase date of the loans when the enterprise has definitive plans to sell or securitize the loans and retain the mortgage servicing rights, assuming the fair value of the loans and servicing rights may be practically estimated. Otherwise, servicing rights should be recognized when the underlying loans are sold or securitized, using an allocation of total cost of the loans based on the relative fair values at the date of sale. SFAS 122 also requires an assessment of capitalized mortgage servicing rights for impairment to be based on the current fair value of those rights. SFAS 122 is required to be applied prospectively in fiscal years beginning after December 31, 1995. The Company believes SFAS 122 will not have a material effect on its financial position or results of operations. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of premises and equipment are provided using the straight-line method over the estimated useful lives of the respective assets or the respective lease terms for leasehold improvements. The estimated useful lives range from 30-40 years for buildings and improvements and 3-10 years for furniture, fixtures and equipment. Expenditures for major renewals and betterments of premises and equipment are capitalized, and those for maintenance and repairs are expensed as incurred. INCOME TAXES The Company and Bank of Alton file a consolidated federal income tax return. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period which includes the enactment date. OTHER REAL ESTATE Other real estate represents property acquired through foreclosure or deeded to the Company's banking subsidiary in lieu of foreclosure on loans on which the borrowers have defaulted as to payment of principal and interest. Other real estate is recorded on an individual asset basis at the lower of fair value minus estimated selling costs or cost. If the fair value minus estimated selling costs is less than cost, the deficiency is recorded in a valuation reserve account through a provision charged to income. Subsequent increases in the fair value minus estimated selling costs are recorded through a reversal of the valuation reserve, but not below zero. TRUST OPERATIONS Assets held in fiduciary or agency capacities for customers are not included in the accompanying consolidated balance sheets since such items are not assets of the Company. Trust income is recognized on the accrual basis. FINANCIAL INSTRUMENTS Financial instruments are defined as cash, evidence of ownership interest in an entity, or a contract that both: * Imposes on one entity a contractual obligation to deliver cash or another financial instrument to a second entity or to exchange other financial instruments on potentially unfavorable terms with the second entity; and * Conveys to that second entity a contractual right to receive cash or another financial instrument from the first entity or to exchange other financial instruments on potentially favorable terms with the first entity. EARNINGS PER SHARE Earnings per share is computed based upon the weighted average shares outstanding. (Continued) F-8 92 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 2 -- REGULATORY RESTRICTIONS Subsidiary bank dividends are the principal source of funds for payment of dividends by the Company to its stockholders. Bank of Alton is subject to regulations by regulatory authorities which require the maintenance of minimum capital levels. As of December 31, 1995, there are no regulatory restrictions, other than maintenance of minimum capital standards, as to the amount of dividends Bank of Alton may pay. Bank of Alton is required to maintain certain daily reserve balances on hand in accordance with Federal Reserve Board requirements. The reserve balance maintained in accordance with such requirements as of December 31, 1995 and 1994 was $771,000 and $722,000, respectively. NOTE 3 -- INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES The amortized cost, gross unrealized gains, gross unrealized losses, and estimated market value for available-for-sale securities, by major security type, at December 31, 1995 and 1994 are as follows:
Gross Gross unreal- unreal- Estimated Amortized ized ized market cost gains losses value ---- ----- ------ ----- U.S. Treasury securities $ 9,484,634 130,583 16,932 9,598,285 Securities of U.S. government agencies and corporations 15,426,541 30,329 685,315 14,771,555 Obligations of states and political subdivisions 25,494,784 1,575,616 720 27,069,680 Mortgage-backed and other asset- backed securities 3,464,233 - 58,623 3,405,610 Corporate debt security 99,544 2,186 - 101,730 Federal Home Loan Mortgage Corporation stock 1,000,000 35,000 - 1,035,000 Federal Home Loan Bank stock 442,400 - - 442,400 ----------- --------- ------- ---------- Total $55,412,136 1,773,714 761,590 56,424,260 =========== ========= ======= ==========
Gross Gross unreal- unreal- Estimated Amortized ized ized market cost gains losses value ---- ----- ------ ----- U.S. Treasury securities $7,962,495 8,289 262,654 7,708,130 Securities of U.S. government agencies and corporations 11,000,000 - 1,239,374 9,760,626 Obligations of states and political subdivisions 20,230,039 418,314 62,114 20,586,239 Mortgage-backed and other asset- backed securities 6,901,599 - 525,045 6,376,554 Corporate debt security 98,996 1,070 - 100,066 Federal Home Loan Mortgage Corporation stock 1,000,000 - 20,000 980,000 Student Loan Mortgage Association stock 124,352 98,761 - 223,113 ----------- ------- --------- ---------- Total $47,317,481 526,434 2,109,187 45,734,728 =========== ======= ========= ==========
As a member of the Federal Home Loan Bank System administered by the Federal Housing Finance Board, Bank of Alton is required to maintain an investment in the capital stock of the Federal Home Loan Bank of Chicago (FHLB) in an amount equal to the greater of 1% of the aggregate outstanding balance of loans secured by dwelling units at the beginning of each year or .3% of the total assets of Bank of Alton. The stock is recorded at cost, which represents redemption value. The amortized cost and estimated market value of investments in debt and marketable equity securities at December 31, 1995, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized market cost value ---- ----- Due in one year or less $ 1,979,887 1,997,240 Due after one year through five years 29,963,223 29,831,571 Due after five years through ten years 6,278,299 6,543,676 Due after ten years 12,284,094 13,168,763 Mortgage-backed securities 3,464,233 3,405,610 FHLMC stock 1,000,000 1,035,000 FHLB stock 442,400 442,400 ----------- ---------- $55,412,136 56,424,260 =========== ==========
(Continued) F-9 93 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements Proceeds from sales of debt and marketable equity securities during 1995, 1994, and 1993 were $10,635,198, $11,118,812, and $12,930,256, respectively. Gross gains of $511,353, $341,867, and $212,895 and gross losses of $501,281, $591,475, and $36,647 were realized on these sales during 1995, 1994, and 1993, respectively. Debt securities with a carrying value of $15,230,641 and $15,807,188 at December 31, 1995 and 1994, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law. NOTE 4 -- LOANS The composition of the loan portfolio at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Commercial, financial, and agricultural $36,539,413 35,410,169 Real estate mortgage 22,367,669 25,565,124 Consumer 40,863,284 32,873,113 ----------- ---------- Total $99,770,366 93,848,406 =========== ==========
The Company grants commercial, financial, agribusiness, residential, and consumer loans to customers throughout their service area, which is primarily in the Alton-Wood River area of Southwestern Illinois. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and secured by real estate. The ability of the Company's borrowers to honor their contractual obligations is dependent upon the local economy and its effect on the real estate market. The Company's management has determined that no loans other than those on nonaccrual status were impaired during 1995. A summary of impaired loans at December 31, 1995 follows:
Impaired loans with Total Allowance no related impaired/ for losses on allowance nonaccrual impaired for loan loans loans losses ----- ----- ------ $1,030,205 200,000 668,638 ========== ======= =======
The average balance of impaired loans during 1995 was $1,593,228. If interest on impaired loans, consisting only of nonaccrual loans, had been accrued, such income would have amounted to $85,401 for 1995. Interest income on those loans, representing cash payments received, amounted to $20 for 1995. At December 31, 1994, the Company had loans on a nonaccrual basis totaling $2,413,832. If interest on these loans had been accrued, such additional income would have been $453,934 for the year ended December 31, 1994. Bank of Alton is an authorized seller of residential real estate mortgage loans to the FHLMC. Loans sold in this capacity are sold without recourse, with Bank of Alton servicing all loans sold in exchange for a servicing fee. Loans serviced for others totaled $22,059,196 and $17,135,000 at December 31, 1995 and 1994, respectively. Servicing fees received on loans serviced for others and included in other noninterest income were $50,064, $50,123, and $19,373 for the years ended December 31, 1995, 1994, and 1993, respectively. (Continued) F-10 94 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements Transactions in the allowance for loan losses for the years ended December 31, 1995, 1994, and 1993 are summarized as follows:
1995 1994 1993 ---- ---- ---- Balance, beginning of year $1,825,044 1,896,942 2,321,897 Provision charged to operations 41,665 (280,000) (960,000) Loans charged off (913,499) (31,735) (660,795) Recoveries on loans previously charged off 396,933 239,837 1,195,840 ---------- --------- --------- Net (charge-offs) recoveries (516,566) 208,102 535,045 ---------- --------- --------- Balance, end of year $1,350,143 1,825,044 1,896,942 ========== ========= =========
Certain officers and directors of the Company (including associates of officers and directors) and certain corporations in which officers and directors had substantial beneficial interest or corporations in which officers and directors serve as trustees or in a similar capacity incurred indebtedness, in the form of loans, as customers, in the aggregate amount of $2,888,459 and $2,515,669 at December 31, 1995 and 1994, respectively. These loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did not involve more than the normal risk of collectibility. NOTE 5 -- PREMISES AND EQUIPMENT A summary of premises and equipment at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Land $ 871,524 853,232 Buildings and improve- ments 2,370,545 2,378,451 Furniture, fixtures and equipment 1,957,596 1,799,729 ---------- --------- 5,199,665 5,031,412 Less accumulated deprecia- tion 1,896,073 1,669,697 ---------- --------- $3,303,592 3,361,715 ========== =========
Amounts charged to occupancy and equipment expense for depreciation aggregated $241,341, $180,049, and $330,216 for the years ended December 31, 1995, 1994, and 1993, respectively. NOTE 6 -- INTEREST-BEARING DEPOSITS A summary of interest-bearing deposits at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- NOW, super NOW, and money market demand accounts $ 43,013,204 32,646,370 Savings accounts 13,041,075 13,057,398 Time deposits: Less than $100,000 65,686,704 60,312,982 $100,000 or more 9,163,167 7,705,074 ------------ ----------- $130,904,150 113,721,824 ============ ===========
A summary of interest on deposits for the years ended December 31, 1995, 1994, and 1993 is as follows:
1995 1994 1993 ---- ---- ---- NOW, super NOW, and money market demand accounts $1,107,416 881,415 953,827 Savings accounts 381,358 381,382 378,328 Time deposits: Less than $100,000 3,320,364 2,255,619 2,004,989 $100,000 or more 488,661 431,548 402,240 ---------- --------- --------- $5,297,799 3,949,964 3,739,384 ========== ========= =========
NOTE 7 -- INCOME TAXES The components of income tax expense for the year ended December 31, 1995 are as follows: Current $619,085 Deferred 313,565 -------- $932,650 ========
A reconciliation of expected income tax expense, computed by applying the federal statutory rate of 34% to income before applicable income tax expense for the year ended December 31, 1995 to reported income tax expense, is as follows: Expected statutory federal income tax $1,254,911 Tax-exempt interest income (341,267) State tax expense, net of federal tax benefit 63,442 Other, net (44,436) ---------- $ 932,650 ========== (Continued) F-11 95 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 are as follows:
Deferred tax assets: Other real estate $ 18,595 Deferred directors' fees 21,234 State income tax 83,211 Deferred loan fees 21,810 --------- Total deferred tax assets 144,850 --------- Deferred tax liabilities: Allowance for loan losses (345,917) Investments in debt and marketable equity securities (25,627) Premises and equipment (114,448) Unrealized losses on securities available-for-sale (344,122) --------- Total deferred tax liabilities (830,114) --------- Net deferred tax liabilities $(685,264) =========
A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. The Company has not established a valuation allowance as of December 31, 1995 due to management's belief that all criteria for recognition have been met, including the existence of a history of taxes paid sufficient to support the realization of the deferred tax assets. Income tax expense was $796,010 and $1,158,085 at December 31, 1994 and 1993, respectively. The Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), during 1993. The cumulative effect of this change in accounting for income taxes was $517,850 as of December 31, 1993. NOTE 8 -- EMPLOYEE BENEFIT PLANS The Company maintains an employee savings plan formed in accordance with Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees of the Company. The Company's contribution to this plan was $116,400, $98,717, and $80,004 for the years ended December 31, 1995, 1994, and 1993, respectively. NOTE 9 -- COMMITMENTS AND CONTINGENT LIABILITIES During the normal course of business, various legal claims have arisen which, in the opinion of management, will not result in any material liability to the Company. NOTE 10 -- DISCLOSURES ABOUT FINANCIAL INSTRUMENTS The Company is a 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 extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included in the consolidated balance sheets. Off-balance-sheet financial instruments whose contractual amount represents credit risk as of December 31, 1995 and 1994 are as follows:
1995 1994 ---- ---- Commitments to extend credit $9,768,184 6,807,000 Standby letters of credit 964,288 1,221,000 ========= =========
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. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Of the total commitments to extend credit at December 31, 1995 and 1994, (Continued) F-12 96 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements $926,165 and $308,563, respectively, represents fixed-rate loan commitments. Commitments to extend credit and standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since certain of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but is generally residential or income-producing property, inventory, accounts receivable, or equipment. Following is a summary of the carrying amounts and fair values of the Company's financial instruments at December 31, 1995:
Carrying Fair amount value ------ ----- Balance sheet assets: Cash and due from banks $ 6,068,895 6,068,895 Federal funds sold 3,625,000 3,625,000 Investments in debt and marketable equity securities available-for-sale 56,424,260 56,424,260 Loans, net 95,334,082 96,794,054 Accrued interest receivable 1,361,231 1,361,231 ------------ ----------- $162,813,468 164,273,440 ============ =========== Balance sheet liabilities: Deposits 142,713,971 138,216,402 Accrued interest payable 486,262 486,262 ------------ ----------- $143,200,233 138,702,664 ============ ===========
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 such value: CASH AND OTHER SHORT-TERM INSTRUMENTS For cash and due from banks, federal funds sold, accrued interest receivable, and accrued interest payable, the carrying amount is a reasonable estimate of fair value, as such instruments are payable upon demand or reprice in a short time. INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES For debt and marketable equity securities, fair values are based on quoted market prices or dealer quotes. LOANS The fair value of loans 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. DEPOSITS The fair value of demand accounts, 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 using the rates currently offered for deposits of similar remaining maturities. COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair value of commitments to extend credit and irrevocable letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counter-parties drawing on such financial instruments, and the present creditworthiness of such counterparties. The Company believes such commitments have been made on terms which are competitive in the markets in which it operates and, accordingly, the Company has not assigned a value to such instruments for purposes of this disclosure. (Continued) F-13 97 REGIONAL BANCSHARES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 11 -- PARENT COMPANY ONLY FINANCIAL INFORMATION Following are condensed balance sheets of Regional Bancshares, Inc. (parent company only) as of December 31, 1995 and 1994, and condensed schedules of income and cash flows for the years ended December 31, 1995, 1994, and 1993: Condensed Balance Sheets (dollars expressed in thousands)
Assets 1995 1994 ------ ---- ---- Cash $ 54 106 Investment in Bank of Alton, at equity 22,848 19,047 Other assets 245 662 ------- ------ Total assets $23,147 19,815 ======= ====== Liabilities and Stockholders' Equity ------------------------------------ Other liabilities 25 130 Stockholders' equity: Common stock 253 253 Surplus 2,907 2,907 Retained earnings 19,294 17,569 Net unrealized gains (losses) on securities available-for-sale 668 (1,044) ------- ------ Total stockholders' equity 23,122 19,685 ------- ------ Total liabilities and stock- holders' equity $23,147 19,815 ======= ======
Condensed Schedules of Income (dollars expressed in thousands)
1995 1994 1993 ---- ---- ---- Income: Dividends from Bank of Alton $ 720 150 695 Other 7 24 42 ------ ----- ----- Total income 727 174 737 ------ ----- ----- Expenses: Salaries and employee benefits 32 125 75 Legal and professional fees 21 1 14 Other noninterest expense 39 17 426 ------ ----- ----- Total expenses 92 143 515 ------ ----- ----- Income before income tax benefit and equity in undistributed earnings of Bank of Alton 635 31 222 Income tax benefit 34 54 37 ------ ----- ----- Income before equity in undistributed earnings of Bank of Alton 669 85 259 Equity in undistributed earnings of Bank of Alton 2,089 2,461 2,760 ------ ----- ----- Net income $2,758 2,546 3,019 ====== ===== =====
Condensed Schedules of Cash Flows (dollars expressed in thousands)
1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net income $2,758 2,546 3,019 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of Bank of Alton (2,089) (2,461) (2,760) Other, net 313 (24) (96) ------ ------ ------ Net cash provided by operating activities 982 61 163 Cash flows from financing activities - cash dividends paid on common stock (1,034) (150) - ------ ----- ----- Net increase (decrease) in cash and cash equivalents (52) (89) 163 Cash and cash equivalents at beginning of year 106 195 32 ------ ----- ----- Cash and cash equivalents at end of year $ 54 106 195 ====== ===== =====
NOTE 12 -- UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The unaudited consolidated financial statements as of and for the nine months ended September 30, 1996 and 1995 and years ended December 31, 1994 and 1993 include the accounts of Regional Bancshares, Inc. and its subsidiary after elimination of material intercompany transactions. This unaudited data, in the opinion of the management of the Company, includes all adjustments necessary for the fair presentation thereof. All adjustments made were of a normal and recurring nature. NOTE 13 -- EVENT (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT On August 23, 1996, the Company entered into an Agreement and Plan of Merger with Mercantile Bancorporation Inc. (MBI) to merge (the Merger) the Company into a wholly owned subsidiary of MBI (the Merger Agreement). As of September 30, 1996, MBI, which is headquartered in St. Louis, Missouri, had total assets of approximately $18.2 billion. The Merger Agreement with MBI will be effected by converting the Company's common stock into the right to receive as consideration in the Merger, on a per share basis, an amount in cash equal to $485.76; 23.7123 shares of MBI common stock; and 0.4838 of a share of West Pointe Bank And Trust Company common stock. The Merger is contingent upon approval of various regulatory agencies and the affirmative vote of the holders of at least two-thirds of the outstanding Company common stock. F-14 98 ANNEX A ------- Following is the text of the statutory dissenters' right as set forth at Section 11.70 of the Illinois Business Corporation Act of 1983, as amended: 5/11.70 PROCEDURE TO DISSENT. (a) If the corporate action giving rise to the right to dissent is to be approved at a meeting of shareholders, the notice of meeting shall inform the shareholders of their right to dissent and the procedure to dissent. If, prior to the meeting, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to vote on the transaction that will objectively enable a shareholder to vote on the transaction and to determine whether or not to exercise dissenters' rights, a shareholder may assert dissenters' rights only if the shareholder delivers to the corporation before the vote is taken a written demand for payment for his or her shares if the proposed action is consummated, and the shareholder does not vote in favor of the proposed action. (b) If the corporate action giving rise to the right to dissent is not to be approved at a meeting of shareholders, the notice to shareholders describing the action taken under Section 11.30 or Section 7.10 shall inform the shareholders of their right to dissent and the procedure to dissent. If, prior to or concurrently with the notice, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to determine whether or not to exercise dissenters' rights, a shareholder may assert dissenter's rights only if he or she delivers to the corporation within 30 days from the date of mailing the notice a written demand for payment for his or her shares. (c) Within 10 days after the date on which the corporate action giving rise to the right to dissent is effective or 30 days after the shareholder delivers to the corporation the written demand for payment, whichever is later, the corporation shall send each shareholder who has delivered a written demand for payment a statement setting forth the opinion of the corporation as to the estimated fair value of the shares, the corporation's latest balance sheet as of the end of a fiscal year ending not earlier than 16 months before the delivery of the statement, together with the statement of income for that year and the latest available interim financial statements, and either a commitment to pay for the shares of the dissenting shareholder at the estimated fair value thereof upon transmittal to the corporation of the certificate or certificates, or other evidence of ownership, with respect to the shares, or instructions to the dissenting shareholder to sell his or her shares within 10 days after delivery of the corporation's statement to the shareholder. The corporation may instruct the shareholder to sell only if there is a public market for the shares at which the shares may be readily sold. If the shareholder does not sell within that 10 day period after being so instructed by the corporation, for purposes of this Section the shareholder shall be deemed to have sold his or her shares at the average closing price of the shares, if listed on a national exchange, or the average of the bid and asked price with respect to the shares quoted by a principal market maker, if not listed on a national exchange, during that 10 day period. (d) A shareholder who makes written demand for payment under this Section retains all other rights of a shareholder until those rights are cancelled or modified by the consummation of the proposed corporate action. Upon consummation of that action, the corporation shall pay to each dissenter who transmits to the corporation the certificate or other evidence of ownership of the shares the amount the corporation estimates to be the fair value of the shares, plus accrued interest, accompanied by a written explanation of how the interest was calculated. A-1 99 (e) If the shareholder does not agree with the opinion of the corporation as to the estimated fair value of the shares or the amount of interest due, the shareholder, within 30 days from the delivery of the corporation's statement of value, shall notify the corporation in writing of the shareholder's estimated fair value and amount of interest due and demand payment for the difference between the shareholder's estimate of fair value and interest due and the amount of the payment by the corporation or the proceeds of sale by the shareholder, whichever is applicable because of the procedure for which the corporation opted pursuant to subjection (c). (f) If, within 60 days from the delivery to the corporation of the shareholder notification of estimate of fair value of the shares and interest due, the corporation and the dissenting shareholder have not agreed in writing upon the fair value of the shares and interest due, the corporation shall either pay the difference in value demanded by the shareholder, with interest, or file a petition in the circuit court of the county in which either the registered office or the principal office of the corporation is located, requesting the court to determine the fair value of the shares and interest due. The corporation shall make all dissenters, whether or not residents of this State, whose demands remain unsettled parties to the proceeding as an action against their shares and all parties shall be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. Failure of the corporation to commence an action pursuant to this Section shall not limit or affect the right of the dissenting shareholders to otherwise commence an action as permitted by law. (g) The jurisdiction of the court in which the proceeding is commenced under subsection (f) by a corporation is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it. (h) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds that the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation or the proceeds of sale by the shareholder, whichever amount is applicable. (i) The court, in a proceeding commenced under subsection (f), shall determine all costs of the proceeding, including the reasonable compensation and expenses of the appraisers, if any, appointed by the court under subsection (g), but shall exclude the fees and expenses of counsel and experts for the respective parties. If the fair value of the shares as determined by the court materially exceeds the amount which the corporation estimated to be the fair value of the shares or if no estimate was made in accordance with subsection (c), then all or any part of the costs may be assessed against the corporation. If the amount which any dissenter estimated to be the fair value of the shares materially exceeds the fair value of the shares as determined by the court, then all or any part of the costs may be assessed against that dissenter. The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, as follows: (1) Against the corporation and in favor of any or all dissenters if the court finds that the corporation did not substantially comply with the requirements of subsections (a), (b), (c), (d) or (f). (2) Against either the corporation or a dissenter and in favor of any other party if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this Section. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and that the fees for those services should not be assessed against the A-2 100 corporation, the court may award to that counsel reasonable fees to be paid out of the amounts awarded to the dissenters who are benefited. Except as otherwise provided in this Section, the practice, procedure, judgment and costs shall be governed by the Code of Civil Procedure. (j) As used in this section: (1) "Fair value", with respect to a dissenter's shares, means the value of the shares immediately before the consummation of the corporate action to which the dissenter objects excluding any appreciation or depreciation in anticipation of the corporate action, unless exclusion would be inequitable. (2) "Interest" means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances. A-3 101 REGIONAL BANCSHARES, INC. 1520 WASHINGTON AVENUE ALTON, ILLINOIS FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MARCH __, 1997 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS The undersigned shareholder(s) of REGIONAL BANCSHARES, INC. ("Regional"), does hereby nominate, constitute and appoint Mark P. Utterback and Sarah E. Utterback, or each of them (with full power to act alone), true and lawful attorney(s), with full power of substitution, for the undersigned and in the name, place and stead of the undersigned to vote all of the shares of Common Stock, $10.00 par value, of Regional standing in the name of the undersigned on its books at the close of business on _______________, 1997 at the Special Meeting of Shareholders to be held at the offices of Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri, on ______, March __, 1997, at 10:00 a.m., Central Time, and at any adjournments or postponements thereof, with all the powers the undersigned would possess if personally present, as follows: 1. A proposal to approve the Agreement and Plan of Merger, dated as of August 23, 1996 (the "Merger Agreement"), and each of the transactions contemplated thereby, pursuant to which Regional will be merged with and into a wholly owned subsidiary of Mercantile Bancorporation Inc. ("MBI") and whereby, upon consummation of the merger, each share (other than shares owned by MBI or as to which a Regional shareholder has perfected dissenters' rights) of Regional common stock will be converted into the following as consideration in the merger: (i) an amount in cash equal to $485.76; (ii) 23.7123 shares of MBI common stock; and (iii) 0.4838 shares of West Pointe Bank And Trust Company common stock, all as determined by the election procedures and exchange ratio set forth in detail in the accompanying Proxy Statement/Prospectus, and subject to certain adjustments as provided in the Merger Agreement. / / FOR / / AGAINST / / ABSTAIN 2. To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof. / / FOR / / AGAINST / / ABSTAIN THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED ABOVE. Dated:----------------------------- ----------------------------------- Signature of Shareholder ----------------------------------- Signature of Shareholder (When signing as an attorney, executor, administrator, trustee or guardian, please give full title. If more than one person holds the power to vote the same shares, all must sign. All joint owners must sign.) PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. 102 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ------------------------------------------ Item 20. Indemnification of Officers and Directors - --------------------------------------------------- Sections 351.355(1) and (2) of The General and Business Corporation Law of the State of Missouri provide that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of an action or suit by or in the right of the corporation, the corporation may not indemnify such persons against judgments and fines and no person shall be indemnified as to any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation, unless and only to the extent that the court in which the action or suit was brought determines upon application that such person is fairly and reasonably entitled to indemnity for proper expenses. Section 351.355(3) provides that, to the extent that a director, officer, employee or agent of the corporation has been successful in the defense of any such action, suit or proceeding or any claim, issue or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred in connection with such action, suit or proceeding. Section 351.355(7) provides that a corporation may provide additional indemnification to any person indemnifiable under subsection (1) or (2), provided such additional indemnification is authorized by the corporation's articles of incorporation or an amendment thereto or by a shareholder-approved bylaw or agreement, and provided further that no person shall thereby be indemnified against conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct or which involved an accounting for profits pursuant to Section 16(b) of the Securities Exchange Act of 1934. Article 12 of the Restated Articles of Incorporation of the Registrant provides that the Registrant shall extend to its directors and executive officers the indemnification specified in subsections (1) and (2) and the additional indemnification authorized in subsection (7) and that it may extend to other officers, employees and agents such indemnification and additional indemnification. Pursuant to directors' and officers' liability insurance policies, with total annual limits of $30,000,000, the Registrant's directors and officers are insured, subject to the limits, retention, exceptions and other terms and conditions of such policy, against liability for any actual or alleged error, misstatement, misleading statement, act or omission, or neglect or breach of duty by the directors or officers of the Registrant, individually or collectively, or any matter claimed against them solely by reason of their being directors or officers of the Registrant. Item 21. Exhibits and Financial Statement Schedules - ---------------------------------------------------- A. Exhibits. See Exhibit Index. --------- B. Financial Statement Schedules. Not Applicable. ----------------------------- II-1 103 Item 22. Undertakings - ---------------------- (1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (2) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. (4) The Registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415 (Section 230.415 of this chapter), will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offering therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in the documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (6) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-2 104 (7) The undersigned Registrant hereby undertakes: (a) To file during any period in which offers and sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof), which individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (b) That for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 105 SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 2 to the Registration Statement relating to the acquisition of Regional Bancshares, Inc. to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Louis, State of Missouri, on February 3, 1997. MERCANTILE BANCORPORATION INC. By /s/ John Q. Arnold ---------------------------------------- John Q. Arnold, Senior Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- Chairman of the Board February 3, 1997 - ------------------------------ President, Chief Executive Thomas H. Jacobsen Officer and Director Principal Executive Officer /s/ John Q. Arnold Senior Executive Vice President and February 3, 1997 - ------------------------------ Chief Financial Officer John Q. Arnold Principal Financial Officer Senior Vice President - Finance February 3, 1997 - ------------------------------ and Control Michael T. Normile Principal Accounting Officer Director February 3, 1997 - ------------------------------ Harry M. Cornell, Jr. Director February 3, 1997 - ------------------------------ William A. Hall Director February 3, 1997 - ------------------------------ Thomas A. Hays II-4 106 Signature Title Date --------- ----- ---- Director February 3, 1997 - ------------------------------ Frank Lyon, Jr. Director February 3, 1997 - ------------------------------ Edward A. Mueller Director February 3, 1997 - ------------------------------ Robert W. Murray Director February 3, 1997 - ------------------------------ Harvey Saligman Director February 3, 1997 - ------------------------------ Craig D. Schnuck Director February 3, 1997 - ------------------------------ Robert L. Stark Director February 3, 1997 - ------------------------------ Patrick T. Stokes Director February 3, 1997 - ------------------------------ John A. Wright By /s/ John Q. Arnold ---------------------------------------- John Q. Arnold John Q. Arnold, by signing his name hereto, does sign this document on behalf of the persons named above, pursuant to a power of attorney duly executed by such persons and previously filed.
II-5 107 EXHIBIT INDEX -------------
Exhibit Number Description Page - ------ ----------- ---- 2.1 Agreement and Plan of Merger, dated as of August 23, 1996, by and among MBI, Ameribanc and Regional. 2.2 Form of Voting Agreement, dated as of August 23, 1996, executed by MBI and certain of the shareholders of Regional. 3.1 MBI's Restated Articles of Incorporation, as amended and currently in effect, filed as Exhibit 3(i) to MBI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, are incorporated herein by reference. 3.2 MBI's By-Laws, as amended and currently in effect. 4.1 Form of Indenture Regarding Subordinated Securities between MBI and The First National Bank of Chicago, Trustee, filed as Exhibit 4.1 to MBI's Report on Form 8-K dated September 24, 1992, is incorporated herein by reference. 4.2 Rights Agreement dated as of May 23, 1988 between MBI and Mercantile Bank, as Rights Agent (including as exhibits thereto the form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock and the form of Right Certificate), filed as Exhibits 1 and 2 to MBI's Registration Statement No. 0-6045 on Form 8-A, dated May 24, 1988, is incorporated herein by reference. 5.1 Opinion of Thompson Coburn as to the legality of the securities being registered. 8.1 Opinion of Thompson Coburn regarding certain tax matters in the Merger. 10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan, as amended, filed as Exhibit 10-3 to MBI's Report on Form 10-K for the year ended December 31, 1989 (File No. 1- 11792), is incorporated herein by reference. 10.2 The Mercantile Bancorporation Inc. Executive Incentive Compensation Plan, filed as Appendix C to MBI's definitive Proxy Statement for the 1994 Annual Meeting of Shareholders is incorporated herein by reference. 10.3 The Mercantile Bancorporation Inc. Employee Stock Purchase Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K for the year ended December 31, 1989 (File No. 1-11792), is incorporated herein by reference. 10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K for the year ended December 31, 1990 (File No. 1-11792), is incorporated herein by reference. II-6 108 Exhibit Number Description Page - ------ ----------- ---- 10.5 Amendment Number One to the Mercantile Bancorporation Inc. 1991 Employee Incentive Plan, filed as Exhibit 10-6 to MBI's Report on Form 10-K for the year ended December 31, 1994, is incorporated herein by reference. 10.6 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan, filed as Appendix B to MBI's definitive Proxy Statement for the 1994 Annual Meeting of Shareholders, is incorporated herein by reference. 10.7 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan for Non-Employee Directors, filed as Appendix E to MBI's definitive Proxy Statement for the 1994 Annual Meeting of Shareholders, is incorporated herein by reference. 10.8 The Mercantile Bancorporation Inc. Voluntary Deferred Compensation Plan, filed as Appendix D to MBI's definitive Proxy Statement for the 1994 Annual Meeting of Shareholders, is incorporated herein by reference. 10.9 Form of Employment Agreement for Thomas H. Jacobsen, as amended, filed as Exhibit 10-8 to MBI's Report on Form 10-K for the year ended December 31, 1989 (File No. 1-11792), is incorporated herein by reference. 10.10 Form of Change of Control Employment Agreement for John W. McClure, W. Randolph Adams, John Q. Arnold and Certain Other Executive Officers, filed as Exhibit 10-10 to MBI's Report on Form 10-K for the year ended December 31, 1989 (File No. 1-11792), is incorporated herein by reference. 10.11 Amended and Restated Agreement and Plan of Reorganization dated as of December 2, 1994 by and among MBI and TCBankshares, Inc., filed as Exhibit 2.1 to MBI's Report on Form 8-K dated December 21, 1994, is incorporated herein by reference. 10.12 Agreement and Plan of Reorganization dated August 4, 1995, by and between MBI and Hawkeye Bancorporation, filed as Exhibit 2.1 to MBI's Registration Statement No. 33-63609, is incorporated herein by reference. 10.13 The Mercantile Bancorporation Inc. Supplemental Retirement Plan, filed as Exhibit 10-12 to MBI's Report on Form 10-K for the year ended December 31, 1992 (File No. 1-11792), is incorporated herein by reference. 10.14 Agreement and Plan of Reorganization, dated October 27, 1996, among MBI, Ameribanc and Mark Twain Bancshares, Inc., filed as Exhibit 2.1 to MBI's Current Report on Form 8-K, dated November 6, 1996, is incorporated herein by reference. 10.15 Agreement and Plan of Reorganization, dated December 22, 1996, by and between MBI and Roosevelt Financial Group, Inc., filed as Exhibit 2.1 to MBI's Current Report on Form 8-K, dated December 22, 1996, is incorporated herein by reference. II-7 109 Exhibit Number Description Page - ------ ----------- ---- 10.16 Amendment to Agreement and Plan of Reorganization, dated January 24, 1997, among MBI, Ameribanc and Mark Twain Bancshares, Inc. 23.1 Consent of Thompson Coburn (included in Exhibit 5.1). 23.2 Consent of KPMG Peat Marwick LLP with regard to the use of its reports on MBI's financial statements. 23.3 Consent of KPMG Peat Marwick LLP with regard to the use of its report on Regional's financial statements. 23.4 Consent of Ernst & Young LLP with regard to the use of its report on Mark Twain's financial statements. 23.5 Consent of KPMG Peat Marwick LLP with regard to the use of its report on Roosevelt's financial statements. 24.1 Power of Attorney (included on signature page). previously filed filed herewith
II-8 EX-3.2 2 BY-LAWS 1 [Exhibit 3.2] MERCANTILE BANCORPORATION INC. BY-LAWS ADOPTED BY THE BOARD OF DIRECTORS JANUARY 15, 1997 2 MERCANTILE BANCORPORATION INC. BY-LAWS ARTICLE I. OFFICES ------------------- The principal office of the Corporation in the State of Missouri shall be located at Mercantile Tower, Seventh and Washington Streets, St. Louis, Missouri. The Corporation may have such other offices, either within or without the State of Missouri, as the Board of Directors may designate or as the business of the Corporation may require from time to time. The registered office of the Corporation required by the General and Business Corporation Law of Missouri to be maintained in the State of Missouri may be, but need not be, identical with the principal office in the State of Missouri, and the address of the registered office may be changed from time to time by the Board of Directors. ARTICLE II. SHAREHOLDERS ------------------------- Section 1. Annual Meeting. The annual meeting of the shareholders -------------------------- shall be held on the fourth Thursday in the month of April in each year, at the hour of 10:00 a.m., or on such other date and or at such other hour as may be determined by the Board of Directors, for the purpose of electing Directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Missouri, such meeting shall be held on the first immediately preceding Thursday which is not a legal holiday. Section 2. Special Meeting. Special meetings of the shareholders, --------------------------- for any purpose or purposes, unless otherwise prescribed by statute, may be called by, at any time in their sole discretion, the Chairman of the Board or by the Board of Directors by the affirmative vote or consent of at least sixty-six and two-thirds percent (66 2/3%) of the number of Directors authorized by, or any time in the manner provided in Article III, Section 2 of these By-Laws. At any special meeting of shareholders, only such business shall be conducted as shall have been set forth in the notice of meeting sent in accordance with Section 4 of this Article II. Section 3. Place of Meeting; Conduct of Meeting. The Board of ------------------------------------------------ Directors may designate any place, either within or without the State of Missouri, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors or the Chairman of the Board. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Missouri, as the place for the holding of such meeting. If no designation is made, the place of meeting shall be the -1- 3 principal office of the Corporation. Every meeting of shareholders shall be chaired by the Chairman of the Board of Directors or, in the absence thereof, any other officer of the Corporation chosen as meeting chairman by a majority of the votes cast by the shareholders present in person or by proxy and entitled to vote at such meeting. Section 4. Notice of Meeting. Written notice stating the place, day ----------------------------- and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten or more than seventy days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board or the Secretary, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Any previously scheduled meeting of the shareholders may be postponed, and any special meeting of the shareholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of shareholders. Section 5. Closing of Transfer Books or Fixing of Record Date. For -------------------------------------------------------------- the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. Section 6. Voting Lists. The officer or agent having charge of the ------------------------ stock transfer books for shares of the Corporation shall make a complete list of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholders during the whole time of the meeting, or for such other period as may be prescribed by statute, for the purposes of such meeting. -2- 4 Section 7. Quorum; Adjournments. A majority of the outstanding -------------------------------- shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. The Chairman of any shareholders' meeting may adjourn the meeting from time to time, whether or not there is a quorum present, unless otherwise prescribed by law. No notice of the time and place adjourned meetings need be given except as required by law. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 8. Proxies. At all meetings of shareholders, a shareholder ------------------- may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 9. Voting of Shares; Polls. Subject to the provisions of ----------------------------------- Section 12 of this Article II, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. At any meeting of shareholders, the Chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. Section 10. Voting of Shares by Certain Holders. Shares standing in ------------------------------------------------ the name of another corporation may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. -3- 5 Section 11. Informal Action by Shareholders. Any action required to -------------------------------------------- be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Section 12. Election of Directors. At each election for Directors, ---------------------------------- every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are Directors to be elected and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such Directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of candidates. Elections of Directors shall be by ballot, and, subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, a plurality of the votes cast thereat shall elect Directors. Section 13. Shares of Other Corporations. Shares of another ----------------------------------------- corporation owned by or standing in the name of the Corporation may be voted by such person or persons as may be designated by the Board of Directors and in the absence of any such designation, the Chairman of the Board, the President or any Vice Chairman of the Board or any Executive Vice President shall have the power to vote such shares. Section 14. Notice of Shareholder Nominees. Only persons who are ------------------------------------------- nominated in accordance with the procedures set forth in this Section 14 shall be eligible for election as Directors of the Corporation. Nomination of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation entitled to vote for the election of Directors at such meeting who complies with the procedures set forth in this Section 14. All nominations by shareholders shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. Notwithstanding anything in the previous sentence to the contrary, in the event that the number of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for Director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 14 shall also be considered timely, -4- 6 but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. For purposes of this Section 14, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). To be in proper written form, such shareholder's notice shall set forth in writing (a) as to each person whom the shareholder proposes to nominate for election or re-election as a Director, all information relating to such Person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; and (b) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made (i) the name and address, as they appear on the Corporation's books, of such shareholder and such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. In the event that a shareholder seeks to nominate one or more Directors, the Secretary shall appoint two inspectors, who shall not be affiliated with the Corporation, to determine whether a shareholder has complied with this Section 14. If the inspectors shall determine that a shareholder has not complied with this Section 14, the inspectors shall direct the chairman of the meeting to declare to the meeting that the nomination was not made in accordance with the procedures prescribed by the By-Laws of the Corporation, and the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 14, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matter set forth in this Section 14. Nothing in this Section 14 be deemed to affect any rights of holders of any series of Preferred Stock to elect Directors under specified circumstances. Section 15. Procedures for Submission of Shareholder Proposals at ------------------------------------------------------------------ Annual Meeting. At any annual meeting of the shareholders of the - -------------- Corporation, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation entitled to vote for the election of Directors at such meeting who complies with the procedures set forth in this Section 15. For business properly to be brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary -5- 7 of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. For purposes of this Section 15, "public announcement" shall have the same meaning as set forth in Section 14. To be in proper written form, a shareholder's notice to the Secretary shall set forth in writing as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of shares of the Corporation which are owned beneficially and of record by the shareholder and such beneficial owner and (iv) any material interest of the shareholder and such beneficial owner in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 15. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 15, and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 15, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 15. Nothing in this Section 15 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE III. BOARD OF DIRECTORS -------------------------------- Section 1. General Powers. The business and affairs of the -------------------------- Corporation shall be managed by its Board of Directors. Section 2. Number, Tenure and Qualifications. The number of --------------------------------------------- Directors to constitute the Board of Directors shall be nineteen (19); provided, however, that such number may be fixed, from time to time, at not less than twelve (12) nor more than twenty-four (24) by an amendment of this Article III, Section 2 of the By-Laws or by a resolution of the -6- 8 Board of Directors adopted, in either case, by the vote or consent of at least sixty-six and two-thirds percent (66-2/3%) of the number of Directors then authorized by, or in the manner provided in, this Article III, Section 2 of the By-Laws. Any such change shall be reported to the Secretary of State of the State of Missouri within thirty (30) calendar days of such change. The Directors shall be divided into three classes: Class I, Class II and Class III; and the number of Directors in such classes shall be as nearly equal as possible. The term of office of the initial Class I Directors shall expire at the annual meeting of shareholders of the Corporation in 1986; the term of office of the initial Class II Directors shall expire at the annual meeting of shareholders of the Corporation in 1987; and the term of office of the initial Class III Directors shall expire at the annual meeting of shareholders of the Corporation in 1988; or in each case until their respective successors are duly elected and qualified. At each annual election held after 1985, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the Directors they succeed and shall be elected for a term of three (3) years expiring at the third succeeding annual meeting or thereafter until their respective successors are duly elected and qualified. If the number of Directors is changed, any increase or decrease in the number of Directors shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible. Directors need not be residents of the State of Missouri or shareholders of the Corporation. Section 3. Regular Meetings. A regular meeting of the Board of ---------------------------- Directors shall be held without other notice than this By-Law immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Missouri, for the holding of additional regular meetings without other notice than such resolution. Section 4. Special Meetings. Special meetings of the Board of ---------------------------- Directors may be called by or at the request of the Chairman of the Board or any Director. The person authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Missouri, as the place for holding any special meeting of the Board of Directors called by him. Section 5. Notice of Special Meeting. Notice of any special meeting ------------------------------------- of Directors shall be given to each Director by written notice delivered personally or mailed or by courier service at his business address, or by telegram or facsimile or similar transmission or orally by telephone. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid at least seventy-two (72) hours before such meeting. If notice be given by telegram or by courier service, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph or courier company at least twenty-four (24) hours before such meeting. If by facsimile or similar transmission or by telephone, such notice shall be deemed adequately delivered when the notice is transmitted or given at least twelve (12) hours before such meeting. Any Director may waive notice of any meeting. The attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the -7- 9 express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 6. Quorum. A majority of the number of Directors fixed by, ------------------ or in the manner set forth in, Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. Section 7. Manner of Acting. Except as specifically provided in ---------------------------- these By-Laws, the act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 8. Action Without a Meeting; Telephonic Meetings. Any action --------------------------------------------------------- that may be taken by the Board of Directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so to be taken, shall be signed before such action by all of the Directors. Subject to the notice provisions of this Article III, the members of the Board of Directors or any committee thereof may be present at, and participate in, a meeting thereof by means of conference telephone or similar communications equipment, so long as all participants in the meeting can hear each other. Section 9. Vacancies and Removal. Any vacancy occurring in the Board --------------------------------- of Directors because of death, resignation, removal, or an increase in the number of Directors, may be filled by the affirmative vote of a majority of Directors surviving or remaining in office. Any Director elected to fill a vacancy in any class (whether such vacancy is caused by death, resignation, or removal, or by an increase in the number of Directors in such class) shall hold office for a term which shall expire with the term of the Directors in such class. At a meeting called expressly for that purpose, the entire Board of Directors, or any individual Director or Directors, may be removed without cause, only upon the affirmative vote of the holders of at least seventy-five percent (75%) of the total votes to which all of the shares then entitled to vote at a meeting of shareholders called for an election of Directors are entitled; provided, however, that, if less than the entire Board of Directors is to be so removed without cause, no individual Director may be so removed if the votes cast against such Director's removal would be sufficient to elect such Director if then cumulatively voted at an election of the class of Directors of which such Director is a part. At a meeting called expressly for that purpose, any Director may be removed by the shareholders for cause by the affirmative vote of the holders of a majority of the shares entitled to vote upon his election. Section 10. Compensation. By resolution of the Board of Directors, ------------------------- each Director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as Director or a fixed sum for attendance at each meeting of -8- 10 the Board of Directors or both. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 11. Presumption of Assent. A Director of the Corporation who ---------------------------------- is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. Section 12. Board Committees. The Board of Directors may designate ----------------------------- one or more committees, consisting of two or more members of the Board, each of which shall have the name, purpose, power and authority as may be established from time to time by resolution adopted by majority of the entire Board of Directors. ARTICLE IV. OFFICERS --------------------- Section 1. Officers. The principal executive officers of the --------------------- Corporation shall be the Chairman of the Board, the President, one or more Vice Chairmen of the Board, one or more Executive Vice Presidents, which shall be elected by the Board of Directors, and which shall have a precedence in said order. The Board shall also elect a Secretary. The Chairman of the Board may appoint or direct the appointment of such other officers and assistant officers as may be deemed necessary from time to time. Any two or more offices may be held by the same person, except the offices of President and Secretary. Election or appointment of an officer shall not of itself create contract rights. Section 2. Election and Term of Office. The officers of the ---------------------------------------- Corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3. Removal. Any officer, whether elected by the Board of -------------------- Directors or appointed by, or at the direction of, the Chairman of the Board, may be removed by the Chairman of the Board or in the judgment of the executive officer of the Corporation having direct or indirect supervisory control over such affected officer, when the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. -9- 11 Section 4. Vacancies. A vacancy in any office because of death, ---------------------- resignation, removal, disqualification or otherwise, may be filled by the Board of Directors or by, or at the direction of, the Chairman of the Board, as appropriate, for the unexpired portion of the term. Section 5. Chairman of the Board. The Chairman of the Board shall be ---------------------------------- the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Corporation. He shall, when present, preside at a meeting of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of Chairman of the Board and such other duties as may be prescribed by the Board of Directors from time to time. Section 6. President. Subject to the powers of the Chairman of the ---------------------- Board, as in these By-Laws set forth, and the powers of the Board of Directors, the President shall have general supervision over the operations of the Corporation and of its business, affairs and property, and the powers and duties pertaining by law, regulation or practice to the office of President. The President may sign with the Secretary, or any other proper officer of the Corporation, certificates for shares of the Corporation and shall perform such other duties as from time to time be assigned to him by the Chairman of the Board or by the Board of Directors. Section 7. Vice Chairman of the Board. The Vice Chairmen of the --------------------------------------- Board, who may be, but need not be, members of the Board of Directors, subject to the powers of the Chairman of the Board and to the powers of the President, as in these By-Laws set forth, and of the powers of the Board of Directors, shall have and may exercise all the rights, powers, duties of an executive officer of the Corporation, and the signature and acknowledgment of a Vice Chairman of the Board to all instruments which shall be lawfully executed by the Corporation shall be valid and sufficient; and they shall perform such other duties and exercise such other powers as the Chairman of the Board or the President may from time to time prescribe. Section 8. Executive Vice President. The Executive Vice Presidents, ------------------------------------- subject to the control of the Chairman of the Board and others having precedence in their order, shall have and may exercise all rights, powers and duties of an executive officer of the Corporation, and the signature and acknowledgment of an Executive Vice President to all instruments which may be lawfully executed by the Corporation shall be valid and sufficient; and they shall perform such other duties and exercise such other powers as the Chairman of the Board or others have precedence in their order may from time to time prescribe. -10- 12 Section 9. The Secretary. The Secretary shall: (a) keep the minutes -------------------------- of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the Chairman of the Board, or the Vice Chairman of the Board, or the President, or a Vice President, certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the Corporation; and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Chairman of the Board or by the Board of Directors. Section 10. The Chief Financial Officer. The Board of Directors may ----------------------------------------- designate any Vice Chairman of the Board, Executive Vice President or Senior Vice President as the Chief Financial Officer of the Corporation. Upon such designation of such officer shall be the chief financial officer of the Corporation and shall have custody of all money and securities of the Corporation. Such officer shall see that adequate and correct accounts of the Corporation's receipts and disbursements are kept, including records of customers' credits and collections. The Chief Financial Officer shall see that the funds of the Corporation are deposited in the name of the Corporation in such depositories as the Board of Directors may from time to time designate. He shall have such other powers and perform such other duties as are assigned to or vest in him by the Board of Directors, the Chairman of the Board, or the President. Section 11. The Treasurer. During any time when no Chief Financial --------------------------- Officer has been designated, the Treasurer shall have the powers and duties set out in these By-Laws for the Chief Financial Officer. During any time when the Board of Directors has designated a Chief Financial Officer, the Treasurer shall assist him in carrying out the powers and duties of that office subject to the precedence of the Chief Financial Officer. He shall have such other powers and perform such other duties as are assigned to or vested in him by the Board of Directors, the Chairman of the Board, the President or the Chief Financial Officer. Section 12. Special Powers of Designated Officers. Each officer --------------------------------------------------- elected by the Board of Directors or appointed by, or at the direction of, the Chairman of the Board shall have the authority to execute any instrument, agreement and/or document relating to the business and property of the Corporation which may be lawfully executed by the Corporation in the transaction of its business, except as otherwise proscribed by the Board of Directors, the executive officers of the Corporation and others having precedence in their order over the affected officer. -11- 13 Section 13. Salaries. The salaries of the officers shall be fixed ---------------------- from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. ARTICLE V. CONTRACTS, CHECKS AND DEPOSITS ------------------------------------------ Section 1. Contracts. The Board of Directors may authorize any --------------------- officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the ----------------- Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 3. Checks, Drafts, etc. All checks, drafts or other orders -------------------------------- for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. Section 4. Deposits. All funds of the Corporation not otherwise -------------------- employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER ------------------------------------------------------- Section 1. Certificates for Shares. Certificates representing shares ----------------------------------- of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman of the Board or a Vice-Chairman or the President or a Vice President and by the Secretary or an Assistant Secretary and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon the certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or one of its employees. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. -12- 14 Section 2. Transfer of Shares. Transfer of shares of the Corporation ------------------------------ shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. ARTICLE VII. INDEMNIFICATION ----------------------------- Section 1. The right to indemnification conferred in this By-Law shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that the payment of such expenses, incurred by a person to whom indemnification is or may be available under Article 12 of the Articles of Incorporation of the Company, in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such person, to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified under this By-Law or otherwise. Section 2. To obtain indemnification under this By-Law, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Such determination shall be made by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors, or if such a quorum is not obtainable (or even if obtainable if a quorum of Disinterested Directors so directs), by Independent Counsel selected by the Board of Directors in a written opinion; provided that, if within the two year period preceding the commencement of the action, suit or proceeding for which indemnification is claimed, a "Change of Control" (as defined in [Employment Agreement/Severance Agreement/Option Plan]) has occurred, only such Independent Counsel shall be selected by the claimant (unless the claimant shall request that such selection be made by the Board of Directors). If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination. Section 3. If a claim under Section 1 of this By-Law is not paid in full by the Corporation within thirty days after a written claim pursuant to Section 2 of this By-Law has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It -13- 15 shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the General and Business Corporation Law of the State of Missouri for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General and Business Corporation Law of the State of Missouri, nor an actual determination by the Corporation (including its Board of Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 4. If a determination shall have been made pursuant to Section 2 of this By-Law that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Section 3 of this By-Law. Section 5. The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 3 of this By-Law that the procedures and presumptions of this By-Law are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this By-Law. Section 6. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this By-Law shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or Disinterested Directors or otherwise. No repeal or modification of this By-Law shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification. Section 7. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this By-Law with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. Section 8. If any provision or provisions of this By-Law shall be held to be invalid, illegal, or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this By-Law (including without limitation, each portion of any Section of this By-Law containing any such provision held to be invalid, -14- 16 illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this By-Law (including, without limitation, each such portion of any Section of this By-Law containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Section 9. For purposes of this By-Law: 1. "Disinterested Director" means a director of the Corporation who is not and was not a part to the matter in respect of which indemnification is sought by the claimant. 2. "Independent Counsel" means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant's rights under this By-Law. Section 10. Any notice, request or other communication required or permitted to be given to the Corporation under this By-Law shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary. ARTICLE VIII. FISCAL YEAR -------------------------- The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December in each year. ARTICLE IX. DIVIDENDS ---------------------- The Board of Directors may, from time to time, declare and the Corporation may pay dividends on its outstanding shares in the manner, and upon the terms and conditions provided by law. ARTICLE X. CORPORATE SEAL -------------------------- The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal." -15- 17 ARTICLE XI. WAIVER OF NOTICE ----------------------------- Whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these By-Laws or under the provisions of the General and Business Corporation Law of Missouri, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XII. AMENDMENTS ------------------------ These By-Laws may be altered, amended or repealed and new By-Laws may be adopted by action of the Board of Directors at any regular or special meeting provided that any amendment, alteration, change or repeal by the Board of Directors of Sections 2 or 9 of Article III or this Article XII or the adoption of any provision inconsistent therewith shall require the affirmative vote or consent of sixty-six and two-thirds percent (66-2/3%) of the number of Directors then authorized by, or in the manner provided in, the By-Laws. Notwithstanding the foregoing or anything contained in the Articles of Incorporation to the contrary, the amendment, alteration, change or repeal by the shareholders of the Corporation of Sections 2 or 9 of Article III or this Article XII of the By-Laws or the adoption of any provision inconsistent therewith shall require the affirmative vote of at least seventy-five percent (75%) of the total votes to which all of the then outstanding shares of capital stock of the Corporation are entitled, voting together as a single class unless such amendment, alteration, change or repeal has previously been expressly approved by the Board of Directors by the affirmative vote or consent of at least sixty-six and two-thirds percent (66-2/3%) of the number of Directors then authorized by or in the manner provided in, the By-Laws, in which case the shareholder vote requirement determined by statute, the Articles of Incorporation or these By-Laws shall control. -16- EX-10.16 3 AMENDMENT TO AGREEMENT 1 AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION This Amendment to Agreement and Plan of Reorganization (this "Amendment") is made and entered into as of January 24, 1997, by and among Mercantile Bancorporation Inc., a Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation and a wholly owned subsidiary of Mercantile ("Merger Sub"), and Mark Twain Bancshares, Inc., a Missouri corporation (together with its predecessors, "Bancshares"), W I T N E S S E T H: -------------------- WHEREAS, Mercantile, Merger Sub and Bancshares are parties to that certain Agreement and Plan of Reorganization dated October 27, 1996 (the "Agreement"); and WHEREAS, the parties desire to amend Section 4.02(a) of the Agreement to permit Bancshares to declare and pay a higher quarterly dividend than initially provided therein. NOW THEREFORE, in consideration of the premises and agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. AMENDMENT. Section 4.02(a) of the Agreement is hereby ---------- amended in its entirety to read as follows: (a) declare, set aside or pay any dividends or other distributions, directly or indirectly, in respect of its capital stock (other than dividends from a Subsidiary of Bancshares to Bancshares or other Subsidiary of Bancshares), except that Bancshares may declare and pay cash dividends on the Bancshares Common Stock (x) in respect of the quarterly period ended on March 31, 1997 of not more than $.35 per share; and (y) in respect of each quarterly period thereafter of not more than the greater of (i) .952 times the regular quarterly dividend on a share of Mercantile Common Stock paid or payable during such quarterly period or (ii) $.35, in each case per share; provided, that Bancshares shall not declare or pay any dividends on Bancshares Common Stock for any period in which its stockholders will be entitled to receive any regular quarterly dividend on the shares of Mercantile Common Stock to be issued in the Merger; or, 2. AUTHORIZATION. Each party hereby represents to the -------------- other parties hereto that this Amendment has been duly authorized, executed and delivered by such party in accordance with Section 7.03 of the Agreement and constitutes a valid and binding obligation of such party enforceable against such party in accordance with its terms. 2 3. MISCELLANEOUS. Except as amended hereby, the Agreement -------------- shall remain in full force and effect. This Amendment shall be governed in all respects by the laws of the State of Missouri. This Amendment may be executed in counterparts which together shall constitute a single agreement. IN WITNESS WHEREOF, Mercantile, Merger Sub and Bancshares have caused this Amendment to be signed and, by such signature, acknowledged by their respective officers thereunto duly authorized, and such signatures to be attested to by their respective officers thereunto duly authorized, all as of the date first written above. Attest: MERCANTILE BANCORPORATION INC. /s/ Jon W. Bilstrom By: /s/ John H. Beirise - -------------------------- ----------------------------------- Name: Jon W. Bilstrom Name: John H. Beirise Title: Secretary Title: Group President Attest: AMERIBANC, INC. /s/ Jon W. Bilstrom By: /s/ John W. Rowe - -------------------------- ----------------------------------- Name: Jon W. Bilstrom Name: John W. Rowe Title: Secretary Title: Vice President Attest: MARK TWAIN BANCSHARES, INC. /s/ Carl A. Wattenberg By: /s/ John Dubinsky - -------------------------- ----------------------------------- Name: Carl A. Wattenberg Name: John Dubinsky Title: Secretary Title: President and Chief Executive Officer EX-23.2 4 CONSENT OF EXPERT 1 [Exhibit 23.2] Independent Auditors' Consent ----------------------------- The Board of Directors and Stockholders Mercantile Bancorporation Inc.: We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP St. Louis, Missouri February 3, 1997 EX-23.3 5 CONSENT OF EXPERT 1 [Exhibit 23.3] Independent Auditors' Consent ----------------------------- The Board of Directors and Stockholders Regional Bancshares, Inc.: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP St. Louis, Missouri February 3, 1997 EX-23.4 6 CONSENT OF EXPERT 1 [Exhibit 23.4] Consent of Ernst & Young LLP We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 16, 1996, with respect to the financial statements and schedules of Mark Twain Bancshares, Inc. included in the Registration Statement (Form S-4 No. 333-17757) and related Prospectus of Mercantile Bancorporation Inc. for the registration of 600,419 shares of its common stock. /s/ Ernst & Young LLP January 29, 1997 St. Louis, Missouri EX-23.5 7 CONSENT OF EXPERT 1 [Exhibit 23.5] Independent Auditors' Consent ----------------------------- The Board of Directors and Stockholders Roosevelt Financial Group, Inc.: We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP St. Louis, Missouri February 3, 1997 -----END PRIVACY-ENHANCED MESSAGE-----