SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.1 to FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
FIRSTBANK OF ILLINOIS CO.
(Exact name of registrant as specified in its charter)
DELAWARE 6711 37-6141253
(State or other jurisdiction of (Primary Standard Industrial (I.R.S.Employer
incorporation or organization) Classification Code Number) Identification No.)
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
(217) 753-7543
(Address, including ZIP Code, and telephone number, including
area code, of principal executive office)
MARK H. FERGUSON
Chairman and President
Firstbank of Illinois Co.
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
(217) 753-7543
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
Jeffery M. Wilday Gerard K. Sandweg, Jr.
Brown, Hay & Stephens Thompson & Mitchell
700 First National Bank Building One Mercantile Center, Suite 3300
Springfield, Illinois 62701 St.Louis, Missouri 63101-1693
(217) 544-8491 (314) 231-7676
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.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class of Amount to Proposed maximum Proposed maximum Amount of
securities to be be registered offering price aggregate offering Registration
registered per unit* price* fee
<S> <C> <C> <C> <C>
Common Stock;
$1.00 Par Value 500,000 $10.55 $5,273,000 $1,818.27**
</TABLE>
*Estimated solely for purposes of calculating the registration
fee pursuant to Rule 457(f)(2) based upon the aggregate book
value of 200,000 shares of Confluence Bancshares Corporation
Common Stock, $1.00 par value, as of June 30, 1995.
**The Registrant paid $1,818.27 with the original filing on
August 7, 1995.
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.
Page 1
CROSS REFERENCE SHEET
Firstbank of Illinois Co. Form S-4 Registration Statement
Item Location
Number in Prospectus
PART I INFORMATION REQUIRED IN THE PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Outside Front Cover
Statement and Outside Front Cover of Prospectus Page; Cross Reference
Sheet
2. Inside Front and Outside Back Cover Pages of Inside Front Cover
Prospectus Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges SUMMARY
and Other Information INFORMATION
4. Terms of the Transaction SUMMARY
INFORMATION;
THE MERGER
5. Pro Forma Financial Information THE MERGER
6. Material Contacts with the Company Being SUMMARY
Acquired INFORMATION;
THE MERGER
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to Be Underwriters
8. Interests of Named Experts and Counsel LEGAL MATTERS;
EXPERTS
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants INFORMATION
WITH RESPECT TO
FIRSTBANK OF
ILLINOIS CO.;
DOCUMENTS
INCORPORATED
BY REFERENCE
Page 2
11. Incorporation of Certain Information by Reference INFORMATION
WITH RESPECT TO
FIRSTBANK OF
ILLINOIS CO.;
INCORPORATION
BY REFERENCE
12. Information With Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information With Respect to Registrants Other Not Applicable
Than S-2 or S-3 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies Not Applicable
16. Information With Respect to S-2 or S-3 Companies Not Applicable
17. Information With Respect to Companies Other Than INFORMATION
S-2 or S-3 Companies WITH RESPECT TO
CONFLUENCE
BANCSHARES
CORPORATION
D. VOTING AND MANAGEMENT INFORMATION
18. Information If Proxies, Consents or
Authorizations Are to Be Solicited SUMMARY
INFORMATION;
SPECIAL MEETING
OF CONFLUENCE
SHAREHOLDERS;
THE MERGER;
INFORMATION
WITH RESPECT TO
CONFLUENCE
BANCSHARES
CORPORATION
19. Information If Proxies, Consents or Not Applicable
Authorizations Are Not To Be Solicited
in An Exchange Offer
Page 3
CONFLUENCE BANCSHARES CORPORATION
5500 Mexico Road
St. Peters, Missouri 63376
<date*notice*to*shareholders>, 1995
To the Shareholders of Confluence Bancshares Corporation:
You are cordially invited to attend a Special Meeting of
Shareholders to be held on the day of
, 1995, at 10:00 a.m., local time, in the meeting room located at
<to*be*determined> (the "Special Meeting").
At this important meeting, you will be asked to consider and
vote upon the Agreement and Plan of Merger dated June 15, 1995,
as amended on July 14, 1995 (the "Merger Agreement"), pursuant to
which Confluence Bancshares Corporation ("Confluence") will merge
(the "Merger") with and into Colonial Bancshares, Inc., a
Missouri corporation and a wholly owned subsidiary of Firstbank
of Illinois Co., a Delaware corporation ("Firstbank"). Under the
terms of the Merger Agreement, each share of the common stock of
Confluence will be converted into the right to receive 2.5 shares
of the common stock of Firstbank, subject to certain limitations
and adjustments, as more fully described in the accompanying
Proxy Statement/Prospectus. Approval of the Merger Agreement
requires the affirmative vote of holders of at least two-thirds
of the outstanding shares of Confluence common stock.
The Merger would provide to the shareholders of Confluence
the opportunity: (i) to receive a premium over the book value of
their shares of common stock of Confluence prior to the
announcement of the Merger Agreement , (ii) to participate in the
enhanced growth and other opportunities of a larger banking
organization, and (iii) to receive stock that is traded in the
over-the-counter market and reported on the National Market
System of The Nasdaq Stock Market in exchange for their shares
of common stock of Confluence which are not actively traded and
for which there is no established public trading market. The
Merger is intended to be tax-free for federal income tax purposes
to Confluence shareholders who exchange their shares solely for
shares of common stock of Firstbank.
THE CONFLUENCE BOARD OF DIRECTORS CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING
IN THE BEST INTEREST OF CONFLUENCE AND ITS SHAREHOLDERS. THE
CONFLUENCE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
The accompanying Proxy Statement/Prospectus and related
proxy materials set forth, or incorporate by reference,
information, including financial data, relating to Firstbank and
Confluence and describe the terms and conditions of the Merger.
The Board of Directors requests that you carefully review these
materials before completing the enclosed Proxy or attending the
Special Meeting.
Page 4
Approval by the shareholders of Confluence of the Merger
Agreement is a condition to the consummation of the Merger.
Accordingly, it is important that your shares be represented at
the Special Meeting, whether or not you plan to attend the
Special Meeting in person. Please complete, sign, and date the
enclosed Proxy and return it in the accompanying envelope (which
requires no postage if mailed within the United States). If you
later decide to attend the Special Meeting and vote in person, or
if you wish to revoke your Proxy for any reason prior to the vote
at the Special Meeting, you may do so and your Proxy will have no
further effect. You may revoke your Proxy by following the
procedures set forth in the accompanying Proxy
Statement/Prospectus. Attendance at the Special Meeting will not
in itself constitute a revocation of an earlier dated Proxy.
Should you require assistance in completing your Proxy or if
you have any questions about the voting procedure or accompanying
Proxy Statement/Prospectus, please feel free to contact Richard
C. Leuck, President, Confluence Bancshares Corporation, 5500
Mexico Road, St. Peters, Missouri 63376, Missouri, or call (314)
441-1600.
James L. Wilhite
Chairman of the Board
YOUR VOTE IS IMPORTANT
The Merger Agreement cannot be approved unless two-thirds of
all issued and outstanding shares of common stock of Confluence
are voted in favor of it. Thus, a failure to vote has the same
practical effect as a no vote. In the event sufficient shares
are not present at the Special Meeting, Confluence, at
shareholder expense, would continue to solicit votes in an
attempt to achieve the necessary number of votes. Shareholders
can help avoid the necessity and expense of follow-up
solicitation of proxies by promptly returning the enclosed Proxy.
Page 5
CONFLUENCE BANCSHARES CORPORATION
5500 Mexico Road
St. Peters, Missouri 63376
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD <date*special*meeting>, 1995
<date*notice*to*shareholders>, 1995
To The Shareholders of Confluence Bancshares Corporation:
Notice is hereby given that, pursuant to the call of its
Directors, a Special Meeting of Shareholders of Confluence
Bancshares Corporation will be held on <date*special*meeting>,
1995, at 10:00 a.m., local time, in the meeting room located
<to*be*determined>
, Missouri.
The purposes of the meeting are:
(1) To consider and vote upon a proposal to approve an
Agreement and Plan of Merger dated June 15, 1995 and amended
July 14, 1995 (as amended, the "Merger Agreement"), by and among
Firstbank of Illinois Co. ("Firstbank"), Colonial Bancshares,
Inc. ("Colonial"), and Confluence Bancshares Corporation
("Confluence"), pursuant to which Confluence will merge with and
into Colonial (the "Merger"), the separate existence of
Confluence will cease, and each share of common stock of
Confluence will be converted into the right to receive 2.5 shares
of common stock, $1.00 par value, of Firstbank, subject to
certain limitations and adjustments, all as described in the
enclosed Proxy Statement/Prospectus, which is hereby made a part
of this Notice; and
(2) To transact such other business as may properly be
brought before the meeting or any adjournment or adjournments
thereof.
Only shareholders of record at the close of business on
<date*record*date>, 1995, will be entitled to notice of, and to
vote at, the Special Meeting.
THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE SHARES
OF COMMON STOCK OF CONFLUENCE OUTSTANDING ON THE RECORD DATE IS
REQUIRED TO APPROVE THE MERGER AGREEMENT. WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT THAT YOU
MARK, SIGN, DATE, AND RETURN PROMPTLY THE PROXY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. YOU MAY WITHDRAW YOUR PROXY AT ANY
TIME PRIOR TO THE SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET
FORTH IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
James L. Wilhite
Chairman of the Board
Page 6
PROXY STATEMENT OF
CONFLUENCE BANCSHARES CORPORATION
AND
PROSPECTUS OF
FIRSTBANK OF ILLINOIS CO.
Special Meeting of Confluence Bancshares Corporation Shareholders
to be held on <date*special*meeting>, 1995.
This Proxy Statement/Prospectus is being furnished to the
shareholders of Confluence Bancshares Corporation, a Missouri
corporation ("Confluence"), in connection with the solicitation
of proxies by the Board of Directors of Confluence for use at the
Special Meeting of Shareholders to be held on
<date*special*meeting>, 1995. At that meeting, the Confluence
shareholders will consider and vote to approve an Agreement and
Plan of Merger, dated June 15, 1995 and amended July 14, 1995
(the "Merger Agreement"), by and among Confluence, Firstbank of
Illinois Co., a Delaware corporation ("Firstbank"), and Colonial
Bancshares Co., a Missouri corporation and wholly owned
subsidiary of Firstbank ("Colonial"). Pursuant to the Merger
Agreement, Confluence would merge with and into Colonial (the
"Merger"), and thereby become a wholly owned subsidiary of
Firstbank. This Proxy Statement/Prospectus also serves as the
Prospectus of Firstbank relating to up to 500,000 shares of
common stock of Firstbank ("Firstbank Common Stock") to be issued
to the shareholders of Confluence in connection with the Merger.
See "THE MERGER -- Terms of the Merger".
Upon consummation of the Merger, the business and operations
of Confluence will be continued through Colonial. The Merger
Agreement provides that each issued and outstanding share of
Confluence common stock, $1.00 par value (the "Confluence Common
Stock"), other than shares owned by Confluence shareholders who
exercise their dissenters' rights under Missouri law, will be
converted into the right to receive 2.5 shares of Firstbank
Common Stock, $1.00 par value. The Merger Agreement provides
that the number of shares of Firstbank Common Stock into which
each share of Confluence Common Stock will be converted pursuant
to the Merger is subject to equitable adjustments in the event of
certain changes in the capitalization of Firstbank or certain
acquisitions of the assets or voting securities of Firstbank.
The market value of Firstbank 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 "THE MERGER -- Terms of the Merger." No
fractional shares of Firstbank Common Stock will be issued in the
Merger, but cash will be paid in lieu of such fractional shares.
The transaction is intended to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended. The Merger generally is intended to achieve certain tax-
free benefits for federal income tax purposes for those
Confluence shareholders who receive shares of Firstbank Common
Stock in the Merger. See "THE MERGER -- Certain Federal Income
Tax Consequences of the Merger."
Firstbank Common Stock is traded in the over-the-counter
market and its quotations are reported on the National Market
System of The Nasdaq Stock Market under the symbol "FBIC."
Confluence Common Stock has not been actively traded, and there
is no established public trading market for such shares. On
<recent*date>, 1995, the closing price for Firstbank Common Stock
as reported by The Nasdaq Stock Market, was $<recent*date> per
share.
This Proxy Statement/Prospectus, the Notice of Special
Meeting and form of Proxy were first mailed to shareholders of
Confluence on or about _________________, 1995.
Page 7
THE SHARES OF FIRSTBANK COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE BANK INSURANCE FUND, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER GOVERNMENTAL AGENCY OR
ENTITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAVE THE SECURITIES AND EXCHANGE 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 date of this Proxy Statement/Prospectus is
, 1995.
Page 8
AVAILABLE INFORMATION
Firstbank is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and in
accordance therewith files reports, proxy statements, and other
information with the Securities and Exchange Commission (the
"Commission"). Firstbank also files such items with the National
Association of Securities Dealers, Inc. Such reports, proxy
statements, and other information can be inspected and copied at
Room 1024 of the Commission's offices at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 75 Park Place, 14th Floor,
New York, New York 10007, and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
Such reports and other information may also be inspected at the
offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
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 Firstbank 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. The Registration Statement is available
for copying and inspection at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Statements contained in this Proxy Statement/Prospectus as to the
contents of any contract or other document 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.
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 should not be relied upon as having been
authorized. This Proxy Statement/Prospectus does not constitute
an offer to sell or a solicitation of an offer to purchase the
securities offered by this Proxy Statement/Prospectus, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is unlawful to make such offer or solicitation
of an offer or proxy in such jurisdiction. Neither the delivery
of this Proxy Statement/Prospectus nor any offer made hereunder
nor any distribution of the securities to which this Proxy
Statement/Prospectus relates shall, under any circumstances,
imply that the information herein is correct as of any time
subsequent to its date.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS CONSIST
OF: FIRSTBANK'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1994; FIRSTBANK'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERS ENDING
MARCH 31, 1995 AND JUNE 30, 1995; FIRSTBANK'S CURRENT REPORTS ON FORM 8-K
DATED JANUARY 26, 1995 AND JUNE 22, 1995, REPRESENTING ALL SUCH REPORTS FILED
BY FIRSTBANK SINCE DECEMBER 31, 1994; ALL REPORTS FILED PURSUANT TO
SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SINCE
DECEMBER 31, 1994; THE DESCRIPTION OF FIRSTBANK COMMON STOCK SET FORTH AS
ITEM 1 IN FIRSTBANK'S REGISTRATION OF CERTAIN CLASSES OF SECURITIES ON
FORM 8-A, DATED MARCH 8, 1977; AND ALL REPORTS AND DOCUMENTS FILED BY
FIRSTBANK PURSUANT TO SECTIONS 13(a), 13(c), 14, and 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FROM THE DATE OF THIS PROXY STATEMENT/PROSPECTUS THROUGH
AND INCLUDING THE DATE OF THE SPECIAL MEETING OF SHAREHOLDERS OF CONFLUENCE.
SEE "INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS CO. -- INCORPORATION
BY REFERENCE." COPIES OF THESE DOCUMENTS, EXCEPT FOR THE EXHIBITS TO SUCH
DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO: MR. CHRIS R. ZETTEK, EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER, FIRSTBANK OF ILLINOIS CO., 205 SOUTH FIFTH
STREET, 9TH FLOOR, SPRINGFIELD, ILLINOIS 62701 (TELEPHONE: (217) 753-7543).
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST FOR COPIES OF DOCUMENTS SHOULD BE MADE BY
<date*5*business*days*before*shareholder*meeting>, 1995.
Page 9
Confluence Bancshares Corporation
and
Firstbank of Illinois Co.
Proxy Statement/Prospectus
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 9
DOCUMENT INCORPORATED BY REFERENCE 9
SUMMARY INFORMATION 12
SPECIAL MEETING OF CONFLUENCE SHAREHOLDERS 26
THE MERGER 27
The Merger Agreement 27
Background 27
Confluence's Reasons for the Merger 28
Firstbank's Reasons for the Merger 28
Terms of the Merger 29
Exchange Agent 30
Fractional Shares 30
Conduct of Business Prior to the Merger 31
Management and Operations of Confluence After the Merger 32
Conditions to the Merger 32
Resales of Firstbank Common Stock 34
Accounting Treatment 34
Federal Income Tax Consequences of the Merger 34
Comparison of Rights of Holders of Confluence Common
Stock and Holders of Firstbank Common Stock 36
Dissenters' Rights 40
Shareholders' Undertaking Agreements 41
Pro Forma Condensed Combining Financial Statements
(unaudited) 42
Material Contacts Between Firstbank and Confluence 49
INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS CO. 50
Annual Report of Firstbank 50
Incorporation by Reference 50
Interest Rate Sensitivity 50
Market Price of Common Stock and Dividends 50
NASDAQ Market Makers 51
INFORMATION WITH RESPECT TO CONFLUENCE
BANCSHARES CORPORATION 52
Business 52
Statistical Information About Confluence 52
Properties 62
Legal Proceedings 62
Market Price of Common Stock and Dividends 63
Security Ownership of Certain Beneficial Owners and
Management of Confluence 63
Management's Discussion and Analysis of Financial Condition
and Results of Operations 65
Page 10
REGULATION AND SUPERVISION 75
OTHER MATTERS 78
STOCKHOLDER PROPOSALS 78
LEGAL MATTERS 78
EXPERTS 78
FINANCIAL INFORMATION
Index to Financial Statements F-1
EXHIBIT A --
Section 351.455 of The General and Business Corporation
Law of the State of Missouri A-1
Page 11
SUMMARY INFORMATION
The following is a brief summary of certain information
contained elsewhere in this Proxy Statement/Prospectus. The
summary is necessarily incomplete and selective and is qualified
in its entirety by more detailed information contained herein or
incorporated herein by reference. Shareholders of Confluence are
urged to read this Proxy Statement/Prospectus and Exhibit A
hereto in their entirety.
Purpose of Special
Meeting: To obtain approval by the holders of
Confluence Common Stock of the Merger
Agreement and the transactions contemplated
thereby. See "SPECIAL MEETING OF CONFLUENCE
SHAREHOLDERS."
Time and Date of
Special Meeting: <date*special*meeting>, 1995, 10:00 a.m.
Place of Special
Meeting: The meeting room located on <to*be*determined>
Required Vote: The affirmative vote of persons holding two-
thirds of the issued and outstanding shares
of Confluence Common Stock is required to
approve the Merger Agreement. See "SPECIAL
MEETING OF CONFLUENCE SHAREHOLDERS."
Shares Outstanding and
Entitled to Vote: As of <record*date>, 1995, there were 200,000
shares of Confluence Common Stock issued and
outstanding. Shareholders of Confluence of
record at the close of business on
<date*record*date>, 1995, are entitled to
notice of, and to vote at, the Special
Meeting of Shareholders. See "SPECIAL
MEETING OF CONFLUENCE SHAREHOLDERS."
As of the <record*date>, 1995, directors and
officers of Confluence and their affiliates
owned beneficially an aggregate of 33,894
shares of Confluence Common Stock or 16.95%
of the shares entitled to vote at the Special
Meeting. All of Confluence's officers and
directors and their affiliates have indicated
their intention to vote in favor of the
approval of the Merger Agreement.
Proxies: Proxies are revocable at any time before
being exercised. See "SPECIAL MEETING OF
CONFLUENCE SHAREHOLDERS."
Merger Agreement: Firstbank, Colonial, and Confluence entered
into an Agreement and Plan of Merger, dated
June 15, 1995, as amended July 14, 1995 (the
"Merger Agreement"), providing for the merger
of Confluence with and into Colonial as a
result of which the separate existence of
Confluence will cease, and Colonial will be
the surviving corporation. See "THE MERGER."
Page 12
Terms of the Merger: Subject to the terms and conditions set
forth in the Merger Agreement, Confluence
will merge with and into Colonial. Upon
consummation of the Merger, Confluence's
corporate existence will terminate and
Colonial will continue as the surviving
entity. Simultaneously with the
effectiveness of the Merger, each share of
Confluence Common Stock issued and
outstanding immediately prior to the Merger,
other than shares owned by Confluence
shareholders who exercise their dissenters'
rights under Missouri law, will be cancelled
and be converted into the right to receive
2.5 shares of Firstbank Common Stock. The
Merger Agreement provides that the number of
shares of Firstbank Common Stock into which
each share of Confluence Common Stock will be
converted pursuant to the Merger is subject
to equitable adjustments in the event of
certain changes in the capitalization of
Firstbank or certain acquisitions of the
assets or voting securities of Firstbank.
The fair market value of Firstbank 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 "THE
MERGER -- Terms of The Merger."
Recommendation of the
Board of Directors of
Confluence: The Board of Directors of Confluence has
unanimously approved the Merger Agreement as
being in the best interests of Confluence and
its shareholders and unanimously recommends
that the shareholders of Confluence approve
the Merger Agreement.
The Board of Directors of Confluence reached
these decisions after considering the
following principal factors: (i) shareholders
of Confluence will receive a premium over the
book value of Confluence Common Stock prior
to the announcement of the Merger Agreement;
(ii) the Merger should provide Confluence
shareholders with the opportunity to
participate in the enhanced growth and other
opportunities of a larger banking
organization; and (iii) Confluence
shareholders will receive in the Merger stock
which is traded in the over-the-counter
market and reported on the National Market
System of the Nasdaq Stock Market, and,
accordingly, the Merger should provide
Confluence shareholders with increased
liquidity in their holdings. See "THE MERGER
-- Background" and "THE MERGER --
Confluence's Reasons for the Merger."
The Parties: Firstbank of Illinois Co. ("Firstbank")
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
Telephone: (217) 753-7543
Page 13
Colonial Bancshares, Inc. ("Colonial")
12230 Manchester Road
Des Peres, Missouri 63131
Telephone: (314) 966-8100
Confluence Bancshares Corporation ("Confluence")
5500 Mexico Road
St. Peters, Missouri 63376
Telephone: (314) 441-1600
Business of Firstbank: Firstbank is a bank holding company
registered under the Bank Holding Company Act
of 1956, as amended. Firstbank is a Delaware
corporation, and owns directly or indirectly
all of the outstanding capital stock of seven
banks with 35 locations throughout downstate
Illinois and three banking offices in
Missouri. Additionally, Firstbank owns all
of the outstanding capital stock of two non-
banking subsidiaries, FFG Trust, Inc., a
trust company organized under the laws of the
State of Illinois, and FFG Investments Inc.,
an Illinois corporation and a registered
broker-dealer. At June 30, 1995, Firstbank
had consolidated total assets of $1.74
billion, loans (net of unearned discount) of
$1.14 billion, deposits of $1.51 billion,
and shareholders' equity of $176 million.
Business of Colonial: Colonial is a bank holding company
registered under the Bank Holding Company Act
of 1956, as amended. Colonial is a Missouri
corporation originally formed as a bank
holding company in 1982. Firstbank acquired
Colonial as a subsidiary in April 1994.
Colonial's wholly-owned subsidiary bank,
Colonial Bank, is located in Des Peres,
Missouri.
Business of Confluence: Confluence is a bank holding company
registered under the Bank Holding Company Act
of 1956, as amended. Confluence is a
Missouri corporation and owns all of the
capital stock of Duchesne Bank ("Duchesne
Bank"), a Missouri banking corporation. At
June 30, 1995, Confluence had consolidated
total assets of $78.6 million, loans (net of
unearned discount) of $53.1 million,
deposits of $72.6 million, and stockholders'
equity of $5.3 million.
Dissenters' Rights: Under Missouri law, holders of Confluence
Common Stock have the right to dissent from
the Merger, and receive cash for their shares
equal to the fair value of their shares if
the Merger is consummated, by following
certain procedures set forth in Section
351.455 of The Missouri General and Business
Corporation Law (the "Missouri Act"). See
"THE MERGER -- Dissenters' Rights."
Required Regulatory
Approval: Before the Merger may be consummated, the
transaction must be approved by the Board of
Governors of the Federal Reserve System (the
"Federal Reserve Board") and the Missouri
Division of Finance (the "Missouri
Division"). Firstbank filed the required
applications on July 25, 1995, with the
Federal Reserve Board and the Missouri
Division. No assurance can be given that all
required regulatory
Page 14
approvals will be obtained. See "THE MERGER
-- Conditions to the Merger."
Federal Income Tax
Consequences: A condition to the consummation of the Merger
is that Thompson & Mitchell, Confluence's
legal counsel, and Firstbank's legal counsel
or accountants, shall have delivered and not
withdrawn opinions that, assuming that the
Merger occurs in accordance with the Merger
Agreement, the Merger will constitute a
"reorganization" for federal income tax
purposes. Thompson & Mitchell, Confluence's
legal counsel, has delivered its opinion,
which opinion has not been withdrawn, to the
effect that assuming the Merger occurs in
accordance with the Merger Agreement and
conditioned on the accuracy of certain
representations made by Firstbank, Confluence
and certain shareholders of Confluence, the
Merger will constitute a "reorganization" for
federal income tax purposes and that, accordingly,
no gain or loss will be recognized by Confluence
shareholders who exchange their shares of
Confluence Common Stock solely for shares of
Firstbank Common Stock in the Merger. However,
the receipt of cash in lieu of fractional shares
and the receipt of cash pursuant to the exercise
of dissenters' rights may give rise to taxable
income.
Conditions to the
Merger: Consummation of the Merger is subject to
several conditions, including, but not
limited to (i) approval of the Merger
Agreement and the Merger by Confluence
shareholders holding at least two-thirds of
the issued and outstanding Confluence Common
Stock, (ii) approval by the Federal Reserve
Board and the Missouri Division of the
acquisition of Confluence by Firstbank, and
(iii) the occurrence or nonoccurrence of
certain events as described in the Merger
Agreement. See "THE MERGER -- Conditions to
the Merger."
Termination of the
Merger Agreement: The Merger Agreement may be terminated at any
time prior to the Effective Date, as defined
therein, by mutual consent of the Boards of
Directors of all parties to the Merger
Agreement, by the Board of Directors of any
party to the Merger Agreement at any time
after March 31, 1996, if the Merger has not
been consummated, or by the parties to the
Merger Agreement in the event of certain
other occurrences. See "THE MERGER -- Terms
of the Merger."
Amendment and Waiver
of Terms of the
Merger Agreement: Firstbank and Confluence may amend, modify, supplement
or waive certain terms and conditions of the Merger
Agreement prior to consummation of the Merger. No
material amendment of the Merger consideration will take
place without a resolicitation of proxies however. See
"THE MERGER -- Terms of the Merger."
Accounting Treatment: The Merger is expected to be accounted for as
a "pooling-of-interests" for financial reporting
purposes. See "THE MERGER -- Accounting Treatment."
Prices of Firstbank and
Confluence Common
Stock: On June 14, 1995, the last business day
before the Merger Agreement was announced,
the closing price of Firstbank Common Stock
as reported on The Nasdaq Stock Market was
$27.00 per share. Shares
Page 15
of Confluence Common Stock are not actively
traded and there is no established public trading
market for such shares. For information regarding
more recent prices, see "INFORMATION WITH
RESPECT TO FIRSTBANK OF ILLINOIS CO." and
"INFORMATION WITH RESPECT TO CONFLUENCE
BANCSHARES CORPORATION."
Summary Financial
Data: The following tables set forth for the
periods indicated certain summary historical
financial information for Firstbank and
Confluence. The balance sheet and income
statement data for Firstbank and Confluence
included in this summary for each of the
years in the five-year period ended December
31, 1994 are taken from audited consolidated
financial statements as of and for each of
those five years. The balance sheet and
income statement data for Firstbank and
Confluence which are included in this summary
for the six-month period ended June 30, 1995
are taken from unaudited consolidated
financial statements of Firstbank and
Confluence as of and for the six months ended
June 30, 1995. Results for the six months
ended June 30, 1995 are not necessarily
indicative of results for the entire year.
These data include all adjustments which, in
the opinion of the respective management of
Firstbank and Confluence, are necessary for
a fair presentation of these periods and are
of a normal recurring nature. The following
pages should be read in conjunction with the
consolidated financial statements of
Firstbank and Confluence, and related notes
thereto, incorporated into this Proxy
Statement/Prospectus by reference and
included elsewhere herein, respectively. See
"INFORMATION WITH RESPECT TO FIRSTBANK OF
ILLINOIS CO.," and "INFORMATION WITH RESPECT
TO CONFLUENCE BANCSHARES CORPORATION."
Page 16
THIS PAGE INTENTIONALLY LEFT BLANK
Page 17
<TABLE>
FIRSTBANK OF ILLINOIS CO.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
As of and for the
Six Months Ended As of and for the Years Ended December 31,
June 30, 1995 1994 1993 1992 1991 1990
(dollars in thousands, except per share data)
<S>
Balance Sheet Items <C> <C> <C> <C> <C> <C>
Investment securities $ 413,464 $ 458,253 $ 432,846 $ 522,088 $ 485,514 $ 353,439
Loans, net of unearned discount 1,143,641 1,132,039 1,097,392 1,050,515 1,105,744 920,018
Reserve for possible loan losses 17,769 17,801 17,861 16,288 14,421 11,500
Total assets 1,739,440 1,753,061 1,707,807 1,761,409 1,796,735 1,434,574
Total deposits 1,509,779 1,476,434 1,477,100 1,533,849 1,589,172 1,274,299
Long-term borrowings 200 10,638 21,377 27,111 31,585 4,077
Stockholders' equity 175,833 158,484 153,649 139,886 127,953 114,296
Results of Operations
Interest income $ 62,556 $ 120,029 $ 121,114 $ 137,488 $ 143,298 $ 129,939
Interest expense 26,148 43,380 44,168 61,255 78,682 75,802
Net interest income 36,408 76,649 76,946 76,233 64,616 54,137
Provision for possible loan losses 1,050 2,700 5,395 5,941 4,871 4,312
Net income before cumulative effect
of change in accounting principle 12,201 23,454 18,863 16,993 14,367 11,656
Cumulative effect of change in accounting
principle - - 386 - - -
Net income 12,201 23,454 19,249 16,993 14,367 11,656
Per Share Data
Net income before cumulative effect
of change in accounting principle $ 1.22 $ 2.36 $ 1.91 $ 1.73 $ 1.51 $ 1.25
Cumulative effect of change in accounting principle - - .04 - - -
Net income 1.22 2.36 1.95 1.73 1.51 1.25
Cash dividends declared 0.44 0.80 0.72 0.64 0.59 0.53
Book value 17.89 16.13 15.72 14.41 13.25 12.30
Tangible book value 16.30 14.48 13.90 12.40 11.10 10.81
Other Information
Return on average assets 1.43% 1.34% 1.10% .96% .89% .83%
Return on average equity 14.82 15.05 12.72 12.67 11.93 10.57
Net interest margin (tax-equivalent) 4.70 4.86 5.05 4.85 4.42 4.36
Stockholders' equity to assets 10.11 9.04 9.00 7.94 7.12 7.97
Primary capital to assets 11.02 9.95 9.94 8.79 7.86 8.70
Tangible capital to assets 9.29 8.19 8.04 6.91 6.04 7.07
Stock Price Information
Market value:
Period end $ 27.00 25.83 24.17 25.25 19.00 12.33
High 27.75 25.83 26.17 25.33 20.00 13.67
Low 25.50 22.67 23.33 18.50 11.50 10.33
</TABLE>
NOTE: The year-end information in this Summary is as
reported in Firstbank's Annual Report on Form 10-K (which
is incorporated by reference herein). All per share
information has been adjusted to reflect a three-for-two
split on Firstbank Common Stock which was effective April
1, 1995.
Pages 18 & 19
<TABLE>
CONFLUENCE BANCSHARES CORPORATION
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
As of and for the
Six Months Ended
June 30, 1995 1994 1993 1992 1991 1990
(dollars in thousands, except per share data)
<S>
Balance Sheet Items <C> <C> <C> <C> <C> <C>
Investment securities $ 14,929 $ 9,964 $10,200 $ 4,937 $ 2,854 $ 447
Loans, net of unearned discount 53,134 46,511 32,502 24,152 16,182 13,541
Allowance for possible loan losses 658 559 391 250 162 138
Total assets 78,573 63,841 51,095 35,812 27,101 21,278
Total deposits 72,643 58,556 46,600 31,645 23,051 18,292
Note payable 250 - - - - -
Stockholders' equity 5,273 4,827 4,276 4,040 3,939 2,852
Results of Operations
Interest income $ 2,934 $ 4,225 $ 2,896 $ 2,208 $ 1,990 $ 1,727
Interest expense 1,404 1,677 1,238 1,152 1,167 1,070
Net interest income 1,530 2,548 1,658 1,056 823 657
Provision for possible loan losses 103 242 140 73 48 85
Net income (loss) 338 580 236 101 87 (11)
Per Share Data
Net income (loss) $ 1.69 $ 2.90 $ 1.18 $ 0.51 $ 0.44 $ (0.06)
Cash dividends declared - - - - - -
Book value 26.37 24.14 21.38 20.20 19.70 14.26
Tangible book value 26.37 24.14 21.38 20.20 19.70 14.26
Other Information
Return on average assets 0.95% 1.01% 0.54% 0.33% 0.38% (0.06)%
Return on average equity 13.46 12.79 5.69 2.54 2.96 (0.39)
Net interest margin (tax-equivalent) 4.65 4.87 4.19 3.75 3.80 3.87
Stockholders' equity to assets 6.71 7.56 8.37 11.28 14.53 13.40
Primary capital to assets 7.49 8.36 9.06 11.90 15.04 13.96
Tangible capital to assets 6.71 7.56 8.37 11.28 14.53 13.40
</TABLE>
Stock Price Information*
* No established public trading market exists for Confluence
Common Stock. To the knowledge of management, there have been
no transfers of Confluence Common Stock since the organization
of Confluence in February 1995. The transfer of Confluence
Common Stock is restricted by the terms of a stock restriction
agreement by and among each of the shareholders of Confluence.
Pages 20 & 21
Comparative Per Share Data: The following table sets forth for
the periods presented selected
historical (unaudited) per share data of
Firstbank and Confluence and
corresponding pro forma per share
amounts for Firstbank after giving
effect to the Merger. The table also
sets forth the pro forma equivalents of
one share of Confluence Common Stock
after giving effect to the Merger.
The data presented are based upon the
historical consolidated financial
statements and related notes of
Firstbank and Confluence, and the pro
forma condensed combining financial
statements (unaudited) and related notes
included elsewhere herein and should be
read in conjunction therewith. The
assumptions used in the preparation of
this table are included in "Notes to Pro
Forma Condensed Combining Financial
Statements." These data are not
necessarily indicative of the results of
future operations of the combined
organization or the actual results that
would have occurred if the Merger had
been consummated on June 30, 1995. See
"THE MERGER -- Pro Forma Condensed
Combining Financial Statements,"
"INFORMATION WITH RESPECT TO FIRSTBANK
OF ILLINOIS CO.," and "INFORMATION WITH
RESPECT TO CONFLUENCE BANCSHARES
CORPORATION."
Page 22
Comparative Per Share Data
(unaudited)
Net Income
Per Common
Book Value Cash Dividends Share Before
Per Common Share Per Common Share Extraordinary
Item
For the six months
ended June 30, 1995:
Firstbank:
As reported $17.89 $0.44 $1.22
Pro forma combined 17.53 0.44 1.20
Confluence:
As reported $26.37 $ - $1.69
Equivalent pro forma 43.83 1.10 3.00
For the years ended
December 31:
1994:
Firstbank:
As reported $16.13 $0.80 $2.36
Pro forma combined 15.82 0.80 2.30
Confluence:
As reported $24.14 $ - $2.90
Equivalent pro forma 39.55 2.00 5.75
1993:
Firstbank:
As reported $15.72 $0.72 $1.91
Pro forma combined 15.37 0.72 1.84
Confluence:
As reported $21.38 $ - $1.18
Equivalent pro forma 38.43 1.80 4.60
1992:
Firstbank:
As reported $14.41 $0.64 $1.73
Pro forma combined 14.10 0.64 1.65
Confluence:
As reported $20.20 $ - $0.40
Equivalent pro forma 35.25 1.60 4.13
NOTE TO COMPARATIVE PER SHARE DATA:
Equivalent pro forma amounts for Confluence equal Firstbank pro
forma combined amounts multiplied by the common stock exchange
ratio of 2.5 shares of Firstbank Common Stock to be received for
each share of Confluence Common Stock. All per share information
has been adjusted to reflect a three-for-two split on Firstbank
Common Stock which was effective April 1, 1995.
Page 23
Comparative Market Prices: Firstbank Common Stock is quoted on
the National Market System of the Nasdaq
Stock Market under the symbol "FBIC".
There is no established public trading
market for Confluence Common Stock. The
following chart sets forth the closing
price of Firstbank Common Stock as of
June 14, 1995, the last trading day
preceding the announcement of the
Merger, and the pro forma equivalent for
one share of Confluence Common Stock,
had the Merger been effective as of June
14, 1995. To the knowledge of
Confluence's management, there have been
no transactions in Confluence Common
Stock or in the common stock of Duchesne
Bank. In 1991, Duchesne Bank issued
shares of its common stock to certain of
its shareholders at a price of $20 per
share.
Firstbank Common Stock price
as reported: $27.00
Confluence Common Stock
pro forma equivalent: $67.50
Summary of Selected Pro
Forma Combined Financial
Information: The following table provides a summary
of selected pro forma combined financial
information of Firstbank and Confluence.
This information should be read in
conjunction with the "THE MERGER -- Pro
Forma Condensed Combining Financial
Statements" for further discussion of
pro forma accounting treatment included
in the following table.
Page 24
<TABLE>
Summary of Selected Pro Forma Combined Financial Information
<CAPTION>
As of and for the As of and for the
Six Months Ended Years Ended December 31,
June 30, 1995 1994 1993 1992
(dollars in thousands, except per share data)
<S>
Balance Sheet Items <C> <C> <C> <C>
Investment securities $ 428,393 $ 468,217 $ 443,046 $ 527,025
Loans, net of unearned discount 1,196,775 1,178,550 1,129,894 1,074,667
Reserve for possible loan losses 18,427 18,360 18,252 16,538
Total assets 1,818,013 1,816,902 1,758,902 1,797,221
Total deposits 1,582,422 1,534,990 1,523,700 1,565,494
Long-term borrowings 450 10,638 21,377 27,111
Stockholders' equity 181,106 163,311 157,925 143,926
Results of Operations
Interest income $ 65,490 $ 124,254 $ 124,010 $ 139,696
Interest expense 27,552 45,057 45,406 62,407
Net interest income 37,938 79,197 78,604 77,289
Provision for possible loan losses 1,153 2,942 5,535 6,014
Net income before cumulative effect of
change in accounting principle and
extraordinary item 12,539 24,034 19,099 17,072
Per Share Data
Net income before cumulative effect of
change in accounting principle and
extraordinary item $ 1.20 $ 2.30 $ 1.84 $ 1.65
Cash dividends declared 0.44 0.80 0.72 0.64
Book value 17.53 15.82 15.37 14.10
Tangible book value 16.02 14.25 13.64 12.25
Other Information
Return on average assets 1.41% 1.33% 1.09% 0.95%
Return on average equity 4.78 14.99 12.53 12.36
Stockholders' equity to assets 9.96 8.99 8.98 8.01
Primary capital to assets 0.87 9.90 9.91 8.85
Tangible capital to assets 9.18 8.17 8.05 7.03
Page 25
SPECIAL MEETING OF CONFLUENCE SHAREHOLDERS
This Proxy Statement/Prospectus is being furnished in
connection with the solicitation by the Board of Directors of
Confluence of proxies to be voted at the Special Meeting of
Shareholders of Confluence to be held on <date*special*meeting*>,
1995, and any adjournment thereof. At the Special Meeting the
holders of Confluence Common Stock will consider and vote upon
the approval of the Merger Agreement providing for the Merger of
Confluence with and into Colonial. The meeting will take place
in the meeting room located <to*be*determined>.
The Board of Directors of Confluence has fixed
<date*record*date>, 1995, as the record date ("Record Date") for
determining the shareholders of Confluence entitled to notice of
and to vote at the meeting. On the Record Date, Confluence had
outstanding 200,000 shares of its Common Stock, each share
entitling its holder to one vote on each matter to be voted upon
at the meeting. The affirmative vote of the holders of two-
thirds of the issued and outstanding Confluence Common Stock is
required for approval of the Merger Agreement. As of the Record
Date, directors and officers of Confluence and their affiliates
beneficially owned an aggregate of 33,894 shares of Confluence
Common Stock, or approximately 16.95% of the outstanding shares
of Confluence Common Stock entitled to vote at the Special
Meeting. Each of the directors and executive officers of
Confluence have entered into a Shareholders' Undertaking Agreement
with Firstbank pursuant to which they have agreed to vote in favor
of the Merger Agreement. See "THE MERGER -- Shareholders'
Undertaking Agreement." The affirmative vote of the officers and
directors of Confluence would not alone be sufficient to approve
the Merger Agreement.
Confluence will bear the cost of soliciting proxies in the
accompanying form, other than the cost of printing this Proxy
Statement/Prospectus, which will be borne by Firstbank.
Officers, directors, and employees of Confluence may also solicit
proxies by mail, personal, conversation, telephone, facsimile
transmission, or telegraph. Compensation, other than regular
compensation for those individuals' regular duties, will not be
paid to those individuals for such solicitation services.
It is not intended that any business other than
consideration of the Merger Agreement and Merger described above
will be presented at the meeting. With respect to any other
matters or proposals that may legally come before the meeting,
however, it is the intention of the persons named as proxies to
vote said proxy in accordance with their best judgment.
The Board of Directors of Confluence requests that
shareholders of Confluence mark, sign, and date the accompanying
form of Proxy and promptly return it to Confluence in the
enclosed envelope. If a Proxy is properly executed and returned
in time for voting, it will be voted as indicated thereon or, if
no voting instructions are indicated thereon, such Proxy will be
voted in favor of the Merger Agreement and Merger. Failure to
return a properly executed Proxy or to vote in person at the
Special Meeting will have the practical effect of a vote against
the Merger Agreement. A Proxy may be revoked by the person
giving it at any time prior to its being voted. Such revocation
may be accomplished by a letter, by a properly executed form of
Proxy bearing a later date, delivered to the Secretary of
Confluence, or if the person giving the Proxy is present at the
Special Meeting of Shareholders and wishes to vote in person, the
Proxy may be withdrawn at that time. Merely attending the
Special Meeting of Shareholders will not constitute revocation of
a Proxy.
Shares of Confluence Common Stock subject to abstentions
will be treated as shares present at the Special Meeting of
Shareholders for purposes of determining the presence of a quorum
but as unvoted for purposes of determining the number of shares
voting on a particular proposal. If a broker or other nominee
holder indicates on the Proxy that it does not have discretionary
authority to vote the shares it holds of record on a proposal,
those shares will not be considered as present for purposes of
determining a quorum or as voted for purposes of determining the
approval of shareholders on a particular proposal.
Page 26
THE MERGER
The Merger Agreement
The following information summarizes all of the material terms
of the Merger Agreement but is qualified in its entirety by reference
to the Merger Agreement, which is incorporated herein by reference to
Exhibits 2.1 and 2.2 of the Registration Statement of which this Proxy
Statement/Prospectus is a part. Each person to whom this Proxy
Statement/Prospectus is delivered may obtain a copy of the Merger
Agreement without charge upon written request addressed to
Richard C. Leuck, President, Confluence Bancshares Corporation,
5500 Mexico Road, St. Peters, Missouri 63376.
Background
Confluence has been approached from time to time by
companies seeking to acquire it. These discussions have
generally not been substantive. Firstbank had approached
Confluence on several occasions and most recently approached it
in May of 1995. On May 23, 1995, the parties executed a
confidentiality agreement and Firstbank began due diligence to
determine whether or not it would be willing to engage in a
transaction with Confluence.
On May 25, 1995, a special meeting of the Board of Directors
of Confluence was held to report on approaches made to Confluence
and on the general topic of being acquired. A full report was
made of the various expressions of interest that had been
received. The Board also discussed the banking climate in
general and recent federal legislation with respect to interstate
banking and branching. The consensus of the meeting was that it
was appropriate to explore the subject of a merger based upon the
existing climate, and the prospect, based upon the initial
overture of Firstbank, that a very significant premium might be
realized by the shareholders in excess of the current book value
per share of the Confluence Common Stock. The Directors also
discussed the Company's long term business plan and were advised
by Thompson & Mitchell concerning the Board's fiduciary duties of
due care and absolute loyalty. The Board of Directors of
Confluence were advised of and considered the subject of the
Board's responsibility to accept another offer in the event a
better offer was received and breakup fees that would have to be
paid in such an event that are typical in transactions. The
Board also discussed whether or not the engagement of an
investment advisor was appropriate. Subsequently, the Board
determined not to engage an investment advisor in view of the
very significant premium that was proposed to be paid by
Firstbank.
On June 9, 1995, a special meeting of the Board of Directors
was held. At this meeting, a draft of a proposed merger
agreement was reviewed and the substantive terms were discussed.
The nature of an appropriate due diligence examination of
Firstbank was determined and representatives were appointed to
conduct such due diligence within the due diligence period
provided for in the proposed agreement. The Board unanimously
approved entering into the Merger Agreement on substantially the
terms presented at the meeting.
On June 15, 1995, the parties entered into a definitive
agreement providing for the acquisition of Confluence by
Firstbank in exchange for 500,000 shares of Firstbank's Common
Stock.
Subsequently, on July 7, 1995 the Board received and
reviewed the due diligence report and determined not to exercise
its right to withdraw from the agreement, and decided to proceed
to present the Merger Agreement to the shareholders of Confluence
for their consideration.
Page 27
Confluence's Reasons for the Merger
The principal reason for the merger was the very substantial
premium offered by Firstbank in excess of the book value per
share of Confluence Common Stock. Using the book value of a
share of Confluence on March 31, 1995 of approximately $25.04,
the offer of Firstbank of 500,000 shares valued at $27.50 per
share, the approximate price of Firstbank shares during the
negotiations, results in a premium of approximately 174% over the
book value of a share of Confluence. In addition, the Board
believed that obtaining shares in a tax-free exchange and in a
publicly traded company would provide liquidity which was absent
in shares held in Confluence which were subject to a binding
agreement such that the shares could not be offered to the
public. The Board reviewed the dividend history of Firstbank and
the fact that Confluence has never paid a dividend. In the
course of reaching its determination to approve the Merger
Agreement and recommend it to the shareholders, without assigning
any relative weights, a number of additional factors were
reviewed, including the following material considerations:
(i) the current banking climate and the fact that the
financial services industry is generally consolidating and
further consolidation may be anticipated;
(ii) the price ranges of comparable transactions nationally
and within the State of Missouri;
(iii) the earnings history of Firstbank, its financial
condition, business, assets and liabilities, and the management
of both Firstbank and Confluence;
(iv) the benefits to be received as a result of the
combination of Confluence and Firstbank in terms of the
additional banking products that could be offered to customers
and the resultant contribution that Confluence would be able to
make to Firstbank's operating results;
(v) the federal and state legislative changes affecting the
banking industry in general, the outlook for Confluence in a
changing banking and financial services industry, and the
particular impact of interstate banking; and
(vi) the probable impact of the Merger on customers of
Confluence and the community served by Confluence.
FOR THESE REASONS, THE BOARD OF DIRECTORS OF CONFLUENCE
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CONFLUENCE COMMON STOCK
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Firstbank's Reasons for the Merger
One aspect of Firstbank's strategic plan is continued growth
through acquisition. In an effort to increase market share and
create opportunities for the most significant cost savings,
Firstbank has focused on opportunities in and around areas in
which it already operates. During the last five years, Firstbank
has spent significant time and effort evaluating merger
opportunities in the multi-county region surrounding the St.
Louis metropolitan area. This region, which includes counties in
Illinois and Missouri, has been attractive to Firstbank because
of its growth potential and retail, small and medium-sized
business concentration.
Since its acquisition of Colonial and its bank subsidiary,
Colonial Bank, headquartered in Des Peres, Missouri in April of
1994, Firstbank has been searching for merger candidates located
west of St. Louis. In addition to its attractive market area and
client base, Confluence possesses the potential for continued
growth in earnings and presents the opportunity for operation
efficiencies.
Page 28
Terms of the Merger
Pursuant to the Merger Agreement, Confluence will merge with
and into Colonial, a wholly owned subsidiary of Firstbank. Upon
consummation of the Merger, Confluence's corporate existence will
terminate and Colonial will continue as the surviving entity.
Simultaneously with the effectiveness of the Merger, each share
of Confluence Common Stock issued and outstanding immediately
prior to the Merger, other than shares owned by Confluence
shareholders who exercise their dissenters' rights under Missouri
law, will be cancelled and be converted into the right to receive
2.5 shares of Firstbank Common Stock (the "Conversion Ratio").
The fair market value of Firstbank 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 Merger Agreement provides that the Conversion Ratio is
subject to equitable adjustment in the event of certain stock
splits, stock dividends, combinations of shares, distributions of
warrants or other rights, and/or any other capital rearrangements
by Firstbank. Additionally, the Merger Agreement provides that
the Conversion Ratio shall be equitably adjusted in the event
Firstbank shall enter into an agreement, arrangement or
understanding with any person pursuant to which such person would
(i) purchase, lease or otherwise acquire 50% or more of the
assets of Firstbank or (ii) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or
similar transaction) beneficial ownership of securities
representing 30% or more of the voting power of Firstbank (each,
an "Acquisition"). If an Acquisition is consummated prior to the
date the Merger becomes effective ("Effective Date"), the
Conversion Ratio shall be equitably adjusted so that the holders
of the Confluence Common Stock who are entitled to receive
Firstbank Common Stock pursuant to the Merger will receive the
same number of shares of Firstbank Common Stock as such
shareholders would have been entitled to receive if the Merger
were effective prior to the consummation of the Acquisition.
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET VALUE
OF FIRSTBANK COMMON STOCK WILL BE EQUIVALENT TO THE FAIR MARKET
VALUE OF FIRSTBANK COMMON STOCK ON THE DATE SUCH STOCK IS
RECEIVED BY A CONFLUENCE SHAREHOLDER OR AT ANY OTHER TIME. THE
FAIR MARKET VALUE OF FIRSTBANK COMMON STOCK RECEIVED BY A
CONFLUENCE SHAREHOLDER MAY BE GREATER OR LESS THAN THE CURRENT
FAIR MARKET VALUE OF FIRSTBANK COMMON STOCK DUE TO NUMEROUS
MARKET FORCES.
No fractional shares of Firstbank Common Stock will be
issued in the Merger. In lieu thereof, shareholders of
Confluence who would otherwise be entitled to receive fractional
shares will receive cash in an amount to be determined by
multiplying the fractional share interest to which such holder
would otherwise be entitled by $27.50. See "THE MERGER --
Fractional Shares."
The Merger Agreement may be amended only in writing and
signed by each of the parties to the Merger Agreement. If the
shareholders of Confluence approve the Merger Agreement, after
such approval no amendments may be made to the Merger Agreement
that would have an adverse effect upon the shareholders of
Confluence.
The Merger Agreement may be terminated at any time prior to
the Effective Date by (i) mutual consent of the Boards of
Directors of all parties to the Merger Agreement; (ii) by the
Board of Directors of any party to the Merger Agreement at any
time after March 31, 1996, if the Merger Agreement has not been
consummated by that date; (iii) by the Board of Directors of any
party to the Merger Agreement if any federal and/or state
regulatory agency whose approval is required for the consummation
of the Merger Agreement denies approval of the transactions
contemplated by the Merger Agreement; (iv) by the Board of
Directors of Firstbank or of Confluence in the event of a
material breach by the other of any representation, warranty, or
agreement in the Merger Agreement
Page 29
which is not cured within the period given to cure such breach
as set forth in the Merger Agreement; and (v) by Firstbank if
Confluence or Duchesne Bank engage in certain activity relating
to the possibility of a merger with any party other than Firstbank.
The Merger Agreement additionally provides that in the event
that Confluence shall enter into an agreement with any third
party providing for a merger or certain other business
combinations and the entry of such agreement occurs during a
period within nine months of (i) failure of the Merger Agreement
to be approved by the shareholders of Confluence, (ii)
termination of the Merger Agreement by Firstbank for material
breach, or (iii) failure of certain closing conditions to occur,
then Confluence shall pay to Firstbank as liquidated damages
$500,000, plus all reasonable out-of-pocket expenses incurred by
Firstbank in connection with the transactions contemplated by the
Merger Agreement.
Exchange Agent
Upon the closing date of the Merger ("Closing Date"), the
total amount of the shares of Firstbank Common Stock to be issued
will be deposited with Colonial Bank, Des Peres, Missouri, which
will act as exchange agent (the "Exchange Agent"). Within 5
business days following the Closing Date, each holder of
Confluence Common Stock will receive, after the Effective Date,
a transmittal letter and instructions describing the procedure to
be followed to exchange his or her certificate(s) representing
shares of Confluence Common Stock for shares of Firstbank Common
Stock. Each holder of Confluence Common Stock, upon submission
to the Exchange Agent of a properly executed letter of
transmittal and surrender to the Exchange Agent of the stock
certificate(s) formerly representing shares of Confluence Common
Stock, will be entitled to receive a stock certificate evidencing
the shares of Firstbank Common Stock to which such shareholder is
entitled and shall be entitled to receive payment for any
fractional shares. Until so surrendered, the Confluence
certificate(s) to be exchanged for shares of Firstbank Common
Stock shall be deemed for all purposes to evidence the right to
receive the number of shares of Firstbank Common Stock which the
holder thereof would be entitled to receive upon surrender of the
Confluence certificate(s).
The Exchange Agent, under the Merger Agreement, will receive
and hold dividends declared by Firstbank on shares of Firstbank
Common Stock (without accruing interest thereon) until such time
as the Confluence certificate(s) shall have been properly
surrendered together with a duly executed and completed
transmittal letter. Interest will not be paid on any cash
balances held by the Exchange Agent. After 180 days following
the closing, the Exchange Agent will return any cash balances and
Firstbank stock certificates held by it to Firstbank. Any
Confluence shareholders who have not properly surrendered their
Confluence certificate(s) for exchange may then do so directly
with Firstbank.
Fractional Shares
No fractional shares of Firstbank Common Stock will be
issued pursuant to the Merger. In lieu thereof, each holder of
Confluence Common Stock who would otherwise be entitled to
receive fractional shares will receive cash in an amount to be
determined by multiplying the fractional share interest to which
such holder would otherwise be entitled by $27.50. Such amounts
received in lieu of fractional share interests may vary from the
market value of such fractional shares as of the Closing Date.
Cash received in lieu of a fractional share will be treated, for
federal income tax purposes, as cash received in redemption of
such fractional share interest. The receipt of such cash should
cause the recipient to recognize capital gain or loss, in an
amount equal to the difference between the amount of cash
received and the portion of such holder's adjusted tax basis
allocable to the fractional share interest. See "THE MERGER --
Certain Federal Income Tax Consequences."
Page 30
Conduct of Business Prior to the Merger
The Merger Agreement provides that Firstbank and Confluence
will take or refrain from taking certain actions prior to the
Merger. In general, Firstbank and Confluence have agreed that
they will continue to conduct their respective businesses in the
usual, regular, and ordinary course in substantially the same
manner that they have been conducted.
During the period from the date of the Merger Agreement to
the Closing Date, Confluence has agreed it will not, and will not
cause, vote in favor of, or otherwise authorize, approve, or
permit its subsidiary, Duchesne Bank to:
(a) Declare and/or pay any dividends on its outstanding
shares of capital stock, other than dividends from Duchesne Bank
to Confluence;
(b) Enter into or amend any employment, severance, or
similar agreements or arrangements with any director, officer,
key employee, or consultant; provided, however, that Confluence
may engage such person or persons, who may be directors of
Confluence, to perform a due diligence investigation of Firstbank
and its subsidiaries;
(c) Authorize, recommend, propose, or announce an intention
to authorize, recommend, or propose, or enter into an agreement
in principle with respect to, any merger, consolidation, or
acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities, other
than as may be necessary pursuant to the exercise of the
fiduciary duties of the Board of Directors of Confluence or
Duchesne Bank, or release or relinquish any material contract
rights not in the ordinary course of business;
(d) Propose or adopt any amendments to the articles of
incorporation of Confluence, the articles of association of
Duchesne Bank or any of their respective by-laws;
(e) Issue any shares of capital stock or effect any stock
split or otherwise change its capitalization as it existed as of
June 15, 1995;
(f) Grant, confer, or award any options, warrants,
conversion rights, or other rights not existing on June 15, 1995
to acquire any shares of its capital stock;
(g) Purchase or redeem any shares of its capital stock;
(h) Enter into or increase any loan or credit commitment
(including standby letters of credit), purchase securities, or
invest or agree to invest in any person or entity in an amount in
excess of $100,000 without first consulting with Firstbank and
Colonial; provided, however, that nothing in the Merger Agreement
shall prohibit Duchesne Bank from honoring any contractual and
legally binding obligation in existence on June 15, 1995;
(i) Agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any
transaction, or take or omit to take any other act which would
make any of Confluence's representations and warranties 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 act;
(j) Directly or indirectly (including through its officers,
directors, employees, or other representatives) initiate,
solicit, or encourage any discussions, inquiries, or proposals
with any party (other than Firstbank and Colonial) relating to
the disposition of any significant portion of the business or
assets of Confluence or Duchesne Bank, or the acquisition of the
capital stock (or rights or options exercisable for, or
securities convertible or exchangeable into, capital stock) of
Confluence or
Page 31
Duchesne Bank, or the merger of Confluence or
Duchesne Bank, with any person, corporation, partnership,
business trust, or other entity (each such transaction being
referred to as an "Acquisition Transaction"), or provide any such
person with information (other than information required to be
given under applicable law, rule or regulation) or assist or
negotiate with any such person with respect to an Acquisition
Transaction other than as may be necessary pursuant to the
exercise of the fiduciary duties of the Board of Directors of
Confluence or Duchesne Bank;
(k) Take back or commence foreclosure on any property; or
(l) Take any actions, or fail to take any actions which
alone, or together with any other action or inaction, shall
create, alter, or eliminate any rights, benefits, obligations, or
liabilities of any person (including, but not limited to the
participants, beneficiaries, Confluence, Duchesne Bank, or, after
the Merger, Firstbank or Colonial) with respect to any employee
benefit plans or policies.
Both parties have agreed that if there is any material
adverse change in their business or condition, they will notify
the other of such change. Confluence has also agreed to allow
Firstbank to review its books and records prior to the Merger.
Management and Operations of Confluence After the Merger
On the Closing Date of the Merger, Confluence will be merged
with and into Colonial and the separate corporate existence of
Confluence will cease. Colonial's Board of Directors and
officers will be the board and officers of the surviving
corporation after the Effective Date. The operations of
Confluence's sole subsidiary, Duchesne Bank, are expected to
continue with no material changes following the Effective Date.
As a result of the Merger, Firstbank will continue to own
all of the issued and outstanding stock of Colonial and will
indirectly own all of the outstanding stock of Duchesne.
Conditions to the Merger
The Merger Agreement provides that consummation of the
Merger is subject to certain conditions, unless any such
condition is waived by the party(ies) in whose favor the
condition exists, including, but not limited to, the following:
(1) The Merger Agreement shall have been validly approved
by a vote of shareholders owning two-thirds of the
issued and outstanding shares of Confluence Common
Stock.
(2) Confluence and Firstbank shall have complied with their
respective agreements, covenants, and conditions and
their representations and warranties shall have been
confirmed as set forth in the Merger Agreement.
(3) The Merger Agreement and the transactions contemplated
thereby shall have been approved by the Federal Reserve
Board, the Missouri Division, and any other Federal
and/or State regulatory agencies necessary for the
consummation of the Merger.
(4) The Registration Statement (of which this Proxy
Statement/Prospectus forms a part) shall have been
declared effective and shall not be subject to a stop
order or threatened stop order.
(5) Neither Confluence, Firstbank nor Colonial shall be
subject to any order, decree, or injunction of a court
or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
Page 32
(6) There shall have been no material adverse change since
June 15, 1995, in the business, financial condition,
operations, or prospects of Firstbank and its
subsidiaries, taken as a whole, or Confluence and its
subsidiary, taken as a whole, other than changes in
banking laws or regulations, or interpretations
thereof, that affect the banking industry generally or
changes in the general level of interest rates.
(7) Each of Confluence and Firstbank shall have received
from legal counsel for the other party an opinion of
such counsel relating to certain matters as set forth
in the Merger Agreement.
(8) Confluence shall have received an opinion of (i)
Thompson & Mitchell and (ii) Firstbank's counsel or
accountants, each such opinion to the effect that (A)
the transactions contemplated by the Merger Agreement
will constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and that each constituent party
to the transaction constitutes a "party to a
reorganization" within the meaning of Section 368(b) of
the Code, (B) no gain or loss will be recognized by the
shareholders of Confluence as a result of the Merger,
(C) each shareholder of Confluence who exchanges his or
her shares of Confluence Common Stock solely for shares
of Firstbank Common Stock will recognize no gain or
loss, (D) the basis of such Firstbank Common Stock will
equal the basis of the Confluence Common Stock for
which it is exchanged, and (E) the holding period of
the Firstbank Common Stock will include the holding
period of the Confluence Common Stock for which it is
exchanged, assuming that such Confluence Common Stock
is a capital asset in the hands of the holder thereof
at the Effective Date.
(9) Firstbank shall have received an opinion of its
counsel or accountants to the effect that (A) the
transactions contemplated by the Merger Agreement will
constitute a reorganization within the meaning of
Section 368 of the Code , and that each constituent
party to the transaction constitutes a "party to a
reorganization" within the meaning of Section 368(b) of
the Code, (B) no gain or loss will be recognized by the
constituent parties as a result of the Merger, (C) each
shareholder of Confluence who exchanges his or her
shares of Confluence Common Stock solely for shares of
Firstbank Common Stock will recognize no gain or loss,
(D) the basis of such Firstbank Common Stock will equal
the basis of the Confluence Common Stock for which it
is exchanged, and (E) the holding period of the
Firstbank Common Stock will include the holding period
of the Confluence Common Stock for which it is
exchanged, assuming that such Confluence Common Stock
is a capital asset in the hands of the holder thereof
at the Effective Date.
(10) Firstbank shall have received from KPMG Peat Marwick
LLP an unqualified opinion stating that the Merger
shall be properly accounted for as a pooling of
interests transaction.
(11) Firstbank shall not have received any objection from
the Securities and Exchange Commission regarding the
pooling of interests accounting treatment for the
merger transaction.
(12) Firstbank shall have received from designated
shareholders of Confluence a Shareholders' Undertaking
and an Agreement of Affiliates.
Page 33
(13) The average of the high and low prices of Firstbank
Common Stock as reported in The Wall Street Journal,
Midwest Edition, for the 20 consecutive trading days
prior to the Closing Date shall not be less than $24.75
per share.
(14) Firstbank and Colonial shall have obtained any and all
material permits, authorizations, consents, waivers
and approvals required for the lawful consummation of
the Merger.
Resales of Firstbank Common Stock
All shares of Firstbank Common Stock received by
shareholders of Confluence as a result of the Merger will be
transferable without further restriction or registration under
the Securities Act of 1933, as amended, (the "Securities Act")
except those shares issued to any persons who will be
"affiliates" of Firstbank after completion of the Merger or who
have been "affiliates" of Confluence prior to the Merger, as such
term is defined and used in Rules 144 and 145 promulgated under
the Securities Act. Only those persons deemed to control
Confluence, directly or indirectly, through one or more
intermediaries are affiliates of Confluence. Each affiliate of
Confluence who desires to resell Firstbank Common Stock received
in the Merger must sell such stock either pursuant to an
effective registration statement under the Securities Act, as
amended, or in accordance with an applicable exception, such as
the application provisions of Rule 145(d) of the Securities Act.
It is a condition of consummation of the Merger that each
Confluence shareholder who is deemed to be an "affiliate" of
either Firstbank or Confluence has entered into a written
agreement to the effect that such person agrees: (i) not to sell
any shares of Firstbank Common Stock except upon compliance with
the Securities Act and the rules and regulations promulgated
thereunder; and (ii) not to engage in any sales or pledges that
would disqualify the Merger from being properly accounted for as
a pooling-of-interests.
Accounting Treatment
It is a condition to Firstbank's obligation to consummate
the Merger that it shall have received an unqualified opinion
from its independent accountants that the Merger shall properly
be accounted for as a pooling-of-interests. In the event the
Merger does not qualify for the pooling-of-interests method of
accounting, Firstbank will have the right, but not the
obligation, to terminate the Merger Agreement and not consummate
the Merger.
Under the pooling-of-interests method of accounting, the
historical basis of the assets and liabilities of Firstbank and
Confluence will be combined and carried forward at their
previously recorded amounts. See "THE MERGER -- Pro Forma
Condensed Combining Financial Statements."
Federal Income Tax Consequences of the Merger
The following discussion has been prepared by Thompson & Mitchell,
counsel to Confluence ("Counsel"), and, except as otherwise indicated,
reflects Counsel's opinion. The discussion is a general summary of the
material federal income tax consequences of the Merger to Confluence
stockholders 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 Confluence stockholders subject to special federal income
tax treatment including (without limitation) foreign persons, insurance
companies, tax-exempt entities, retirement plan, dealers in securities,
and persons who acquired their Confluence Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation. The
discussion addresses neither the effect of any applicable state, local,
or foreign tax laws, nor the effect of any federal tax laws other than
those pertaining to the federal income tax. In view of the individual
nature of federal income tax consequences, each Confluence stockholder
is urged to consult his own tax advisor to determine the specific tax
consequences of the Merger to him.
Page 34
The discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), regulations proposed or promulgated thereunder,
and administrative interpretations and judicial precedents relating
thereto, 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 discussion is also based on certain assumptions regarding
the factual circumstances that will exist at the Effective Time,
including certain representations of Firstbank, Confluence, and certain
stockholders of Confluence. If any of these factual assumptions is
inaccurate, the tax consequences of the Merger could differ from those
described herein. The discussion assumes that shares of Confluence
Common Stock are held as capital assets (within the meaning of
Section 1221 of the Code).
Assuming the Merger occurs in accordance with the Merger Agreement,
the Merger will constitute a "reorganization" for federal income tax
purposes under Section 368(a)(1) of the Code, with the following federal
income tax consequences:
(1) Confluence shareholders will recognize no gain or loss
as a result of the exchange of their Confluence Common
Stock solely for shares of Firstbank Common Stock
pursuant to the Merger, except with respect to cash
received in lieu of fractional shares, if any, as
discussed below.
(2) The aggregate adjusted tax basis of the share of
Firstbank Common Stock received by each Confluence
shareholder in the Merger (including any fractional
share of Firstbank Common Stock deemed to be received,
as described in paragraph 4 below) will be equal to the
aggregate adjusted tax basis of the shares of
Confluence Common Stock surrendered.
(3) The holding period of the shares of Firstbank Common
Stock received by each Confluence shareholder in the
Merger (including any fractional share of Firstbank
Common Stock deemed to be received, as described in
paragraph 4 below) will include the holding period of
the shares of Confluence Common Stock exchanged
therefor.
(4) A Confluence shareholder who receives cash in the
Merger in lieu of a fractional share of Firstbank
Common Stock will be treated as having received and
then redeemed such fractional share 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 Firstbank Common Stock allocable to the
fractional share.
(5) A Confluence shareholder who receives only cash as a
result of the exercise of dissenters' rights will
realize gain or loss for federal income tax purposes
(determined separately as to each block of Confluence
Common Stock exchanged) in an amount equal to the
difference between (x) the amount of cash received by
such shareholder, and (y) such shareholder's tax basis
for the shares of Confluence Common Stock surrendered
in exchange therefor, provided that the cash payment
does not have the effect of the distribution of a
dividend. Any such gain or loss will be recognized for
federal income tax purposes and will be treated as
capital gain or loss. In general, if a Confluence
shareholder does not actually or constructively own any
Firstbank Common Stock after the Merger, the
distribution will not have the effect of the
distribution of a dividend. However, if the cash
payment does have the effect of the distribution of a
dividend, the amount of taxable income recognized
generally will equal the amount of cash received; such
income generally will be taxable as a dividend; and no
loss (or other recovery of such shareholder's tax basis
for the shares of Confluence Common Stock surrendered
in the exchange) generally will be recognized by such
shareholder. The determination of whether a cash
payment has the effect of the distribution of a
dividend will be made pursuant to the provisions and
limitations of Section 302 of the Code, taking into
account the constructive stock ownership rules of
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 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.
Page 35
Firstbank's obligations to consummate the Merger are subject to
the condition that it shall have received from its legal counsel or
accountants an opinion that the federal income tax consequences of
the Merger to the Confluence shareholders will in all material respects
be as described in this section and that such opinion shall not have
been withdrawn prior to the consummation of the Merger. Confluence's
obligations to consummate the Merger are subject to the condition that
it shall have received from Thompson & Mitchell and Firstbank's legal
counsel or accountants an opinion that the federal income tax
consequences of the Merger to the Confluence shareholders will in all
material respects be as described in this section and that such opinion
shall not have been withdrawn prior to the consummation of the Merger.
Thompson & Mitchell has delivered to Confluence such opinion, which
opinion has not been withdrawn as of the date of this Proxy Statement/
Prospectus. A copy of such opinion is attached as an exhibit to this
Proxy Statement/Prospectus. Thompson & Mithell's opinion is subject
to the conditions and assumptions stated therein and relies on various
representations made by Firstbank, Confluence and certain
shareholders of Confluence. Copies of Thompson's & Mitchell's opinion
are also available, without charge. Copies of the opinions will be
available, without charge, to Confluence shareholders upon written
request to Firstbank. An opinion of counsel, unlike a private letter
ruling from the Internal Revenue Service (the "Service"), has no
binding effect on the Service. The Service could take a position
contrary to Thompson & Mitchell's opinion and, if the matter were
litigated, a court may reach a decision contrary to the opinion.
The Service is not expected to issue a ruling on the tax effects of
the Merger, and no such ruling has been requested and no such ruling
has been requested. Firstbank and Confluence have not sought any
opinion with respect to state or local tax consequences of the
Merger to Confluence shareholders.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR
GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE
INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH
CONFLUENCE SHAREHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT,
THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING
DISCUSSION MAY NOT APPLY TO EACH CONFLUENCE SHAREHOLDER. IN VIEW
OF THE INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, EACH
CONFLUENCE SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
SHAREHOLDER, 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.
Comparison of Rights of Holders of Confluence Common Stock and
Holders of Firstbank Common Stock
Firstbank is incorporated under the laws of the State of
Delaware and Confluence is incorporated under the laws of the
State of Missouri. Accordingly, stockholders of Firstbank and
Confluence are generally subject to different rights and
restrictions under their respective state laws. Upon
consummation of the Merger, holders of Confluence Common Stock
who receive Firstbank Common Stock will become stockholders of
Firstbank, and their rights, in addition to being governed by the
Delaware General Corporation Law, will be governed by the
Certificate of Incorporation and Bylaws of Firstbank, the
provisions of which differ from the Missouri Act and the Articles
of Incorporation and Bylaws of Confluence. The material
differences in these provisions are discussed below.
Page 36
State Corporate Law
Changes in Control. Firstbank's Certificate of
Incorporation (the "Certificate") and its Bylaws ("Bylaws") have
certain provisions described below intended to encourage any
person interested in acquiring Firstbank to obtain the approval
of its Board of Directors and to discourage takeovers by persons
intending to eliminate the remaining stockholders' interest in
Firstbank through a reorganization. Firstbank believes that, in
such a situation, the ability of the Board of Directors to
represent effectively the interests of its stockholders will
thereby be enhanced. However, a change in control of Firstbank
which is opposed by the Board of Directors could be made more
difficult by these provisions, even if such a change were desired
by a majority of the stockholders of Firstbank. Firstbank is not
aware of any person who intends to acquire Firstbank or seek a
change in control of Firstbank. Confluence does not have any of
the foregoing provisions in its Articles of Incorporation or
Bylaws.
Authorized Stock. The Certificate of Incorporation of
Firstbank authorizes 20,000,000 shares of Firstbank Common stock,
par value $1.00 per share. As of June 30, 1995, 9,828,682 shares
of Firstbank Common Stock were issued and outstanding. Firstbank
is also authorized to issue up to 1,000,000 shares of no par
preferred stock from time to time (without stockholder action) in
one or more series and to fix for each series, by resolution of
the Board of Directors, the number of shares to be issued, the
rights of such shares as to voting, dividend, redemption
(including sinking fund provisions), liquidation, exchange, and
conversion. No shares of preferred stock of Firstbank are issued
and outstanding. Other than any rights or preferences that may
be granted to preferred stockholders in the future, the Firstbank
Common Stock holders are entitled to receive, ratably, all
dividends and distributions. No right of redemption or
conversion exists with respect to the Firstbank Common Stock.
Confluence is authorized to issue 200,000 shares of Common
Stock, par value $1.00 per share. As of June 30, 1995, 200,000
shares of Confluence Common Stock were issued and outstanding.
Stockholders of Firstbank do not have any pre-emptive rights
with respect to any of the authorized but unissued shares of
Firstbank Common Stock and do not have any pre-emptive rights
with respect to the Preferred Stock. Confluence may not issue
any additional shares of stock unless and until it has complied
with all the provisions of the First Stock Restriction Agreement
previously executed by the shareholders of Confluence. See "THE
MERGER -- First Stock Restriction Agreement."
Issuance of shares of preferred stock could have an impact
on the voting rights of the holders of Firstbank Common Stock by
the creation of series voting rights on particular matters. The
issuance of shares of preferred stock with conversion rights
which are convertible into shares of Firstbank Common Stock could
increase the potential number of shares of Firstbank Common Stock
outstanding. It is probable that if shares of preferred stock
are issued they would be preferred to the Firstbank Common Stock
as to dividends and distributions in the event of liquidation.
In addition, Firstbank's Board of Directors may provide that the
holders of any series of preferred stock will be entitled, in
addition to their preferential rights, to participate with the
holders of Firstbank Common Stock in dividends and in
distributions in liquidation.
Although Firstbank has no arrangements, agreements,
understandings, or plans at the present time for the issuance or
use of the shares of preferred stock, Firstbank believes that the
availability of such shares will provide Firstbank with increased
flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs which might
arise. The authorized shares of preferred stock are available
for issuance at such times and for such purposes as the Board of
Directors
Page 37
may deem advisable without further action by the
stockholders, except as may be required by law or regulatory
authorities.
In the event of a proposed merger, tender offer, or other
attempt to gain control of Firstbank of which management does not
approve, it might be possible for the Board of Directors to
authorize the issuance of a series of preferred stock with rights
and preferences which could impede the completion of such a
transaction and therefore deter a future takeover attempt. The
Board of Directors of Firstbank does not intend to issue any
preferred stock except on terms that the Board deems to be in the
best interests of Firstbank and its then existing stockholders.
Stockholder Action Without a Meeting and Power to Call
Special Meetings. The Certificate of Firstbank provides that any
corporate action which is permitted or required to be taken by
stockholders may be taken without a meeting by written consent of
not less than a majority of all of the stock entitled to vote
upon the action if a meeting were held to approve such action.
However, the written consent of stockholders having not less than
the minimum percent of shares required by Delaware law must be
obtained and prompt notice of any action taken without a meeting
must be given to all stockholders. The Bylaws of Firstbank
provides that special meetings of the stockholders may be called
by the Board of Directors of Firstbank or by any officer
instructed by the Directors to call such meeting.
Confluence's Bylaws provide that the shareholders may take
action without a meeting by written consent setting forth the
action so taken signed by all of the shareholders entitled to
vote with respect to the subject thereof, except as otherwise
restricted by Missouri law. Special meetings of the shareholders
of Confluence may be called at any time by the President, by the
Board of Directors, or upon written request of the holders of at
least fifty-one percent (51%) of all of the issued and
outstanding shares entitled to vote.
Board of Directors. The Board of Directors of Firstbank is
divided into three classes and at each annual meeting of
stockholders one class of directors is elected for a term of
three years. Each class must be as nearly equal in number as is
possible. Under its Certificate, vacancies occurring on the
Board of Directors of Firstbank may be filled by a majority vote
of the remaining directors for the remainder of the full terms.
The classification system in electing directors tends to maintain
the incumbency of the existing directors and makes it more
difficult for stockholders to change a majority of the directors.
A holder of a majority of the shares of voting stock of Firstbank
may need two or three years to replace a majority of the
directors.
The Bylaws of Firstbank authorize the Board of Directors by
a majority vote of the full Board to vary the number of directors
up to a maximum of 25. The currently established number is 10.
The authorized number of directors may be changed by resolution
adopted by the Board of Directors.
The Certificate of Firstbank provides for cumulative voting
in the election of directors. Cumulative voting gives each
stockholder voting in an election of directors the number of
votes equal to the number of directors to be elected multiplied
by the number of shares owned by the stockholder, and each
stockholder may cast such votes for one nominee or distribute
them in such a manner as he or she sees fit among any number of
nominees. Therefore, an acquisition of more than a majority of
Firstbank Common Stock may be necessary to completely replace the
Board of Directors.
The Certificate of Firstbank provides that nomination of
directors by stockholders must be in writing and be delivered or
mailed to the Secretary of Firstbank generally no less than 14
days prior to any meeting of stockholders called for the election
of directors; provided, however, that if less than 21 days notice
of such meeting is given to stockholders, then such nomination
must be given to the Secretary not later than the close of the
seventh day following the day on which notice of the meeting
Page 38
is mailed to stockholders. The notification must contain the
information specified in the Certificate. Nominations by
stockholders not made in accordance with the Certificate shall be
disregarded.
The Bylaws of Confluence provide that the Board of Directors
shall consist of thirteen (13) shareholders. The Bylaws also
provide that all vacancies shall be filled by election by the
shareholders except that vacancies not exceeding one-third (1/3)
of the whole number of the board may be filled by an affirmative
vote of the majority of the directors then in office, and the
directors so elected may hold office until such vacancies are
filled by election by the shareholders at a special or annual
meeting.
The Certificate of Firstbank provides for the elimination of
the liability of directors for monetary damages for breach of
fiduciary duties, as permitted by Section 102(b)(7) of the
Delaware General Corporation Law. No similar provision exists in
the Missouri Act.
Stockholder Vote Required for Bylaws Amendments. The
Certificate of Firstbank allows the Board of Directors by a
majority vote of the full Board to adopt, amend, or repeal the
Bylaws. Approval of the holders of at least 70 percent of the
voting power of then outstanding voting stock is required for
stockholders to adopt, amend, or repeal the Bylaws. This
provision is intended primarily to deter changes in the Bylaws to
reduce the authority of the Board of Directors, thereby
circumventing the effect of provisions for a classified Board of
Directors. It would, however, apply to all Bylaw amendments,
regardless of subject matter. This provision would enable
holders of more than 30 percent of the voting power to prevent an
amendment to the Bylaws by the stockholders even if it were
favored by the holders of a majority of the voting stock.
The Bylaws of Confluence may be amended or repealed and new
Bylaws may be adopted by a majority vote of the Board of
Directors.
Business Combinations. Section 203 of The Delaware General
Corporation Law requires that certain types of business
combinations (including mergers, combinations, and sale or other
disposition of significant assets of a corporation) may not be
accomplished with an interested stockholder (generally, any
person holding 15 percent or more, directly or indirectly through
affiliates or associates, of the issued and outstanding shares of
voting stock of the corporation) within 3 years of the date the
person became an interested stockholder unless: (i) prior to such
date the Board of Directors of the corporation approved of the
business combination or transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon
consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85 percent of the voting stock (excluding shares
of stock owned by persons who are both directors and officers,
and by certain employee stock plans); or (iii) on or subsequent
to such date, the business combination is approved by the Board
of Directors and by the affirmative vote of stockholders holding
at least two-thirds of the issued and outstanding voting stock of
the corporation. Section 203 applies to Firstbank. The
provisions of Section 203 do not apply to Confluence.
The Missouri Act has a provision similar in nature to
Section 203 of the Delaware General Corporation Law (Section
351.459 of the Missouri Act). However, by its terms, this
provision does not apply to Confluence, as Confluence has fewer
than 100 shareholders.
The Missouri Act requires the affirmative vote of not less
than two-thirds (2/3) of the issued and outstanding shares of
Confluence Common Stock for the authorization of a merger,
consolidation, or sale or other disposition of substantial assets
of Confluence.
Stockholder Vote Required to Amend or Repeal Certain
Provisions of the Certificate. The provisions of the Certificate
of Firstbank with respect to the requirement for stockholder
action to take place at a meeting, calling special meetings,
removal of directors, the classification of the Board of
Directors, and the provision relating to amendment of the
Certificate are subject to repeal or
Page 39
amendment only upon approval of the holders of at least 70 percent
of the voting stock. This provision would prevent holders of less
than 70 percent of the voting power from circumventing any or all
of the foregoing provisions by amending the Certificate to delete
or modify one or more of them.
First Stock Restriction Agreement. Confluence and each of
the shareholders of Confluence is a party to a First Stock
Restriction Agreement (the "Stock Restriction Agreement") which
by its terms requires Confluence not to issue any shares of
Confluence Common Stock or transfer any shares of Confluence
Common Stock to any person unless such person agrees to accept
the terms of the Stock Restriction Agreement and be bound
thereby. The Stock Restriction Agreement provides, among other
things, that: (i) no shareholder shall transfer any shares of
Confluence Common Stock without first giving written notice of
the transfer to Confluence; (ii) such notice of transfer shall
constitute an irrevocable option by the proposed transferor to
other shareholders to purchase all of the shares of Confluence
Common Stock proposed to be transferred; (iii) upon certain
involuntary transfers of shares of Confluence Common Stock,
similar irrevocable options for purchase of such Common Stock are
given to the non-transferring shareholders of Confluence. The
number of shares of Confluence Common Stock as contemplated by
the Merger would be exempt from the provision of the Stock
Restriction Agreement if such transfer is approved in writing or
by a vote at a meeting of the shareholders of Confluence by the
holders of two-thirds (2/3) of the issued and outstanding shares.
Stockholders of Firstbank have no rights similar to those
existing under the Stock Restriction Agreement, and if the Merger
is consummated, former shareholders of Confluence will not have
any such rights with respect to shares of Firstbank Common Stock
held by them (whether received as a part of the Merger
consideration or otherwise acquired).
Dissenters' Rights
Each holder of Confluence Common Stock has the right to
dissent from the Merger and receive the fair value of such shares
of Confluence Common Stock in cash if the shareholder follows the
procedures required under Section 351.455 of the Missouri Act set
forth in Exhibit A, the material provisions of which are
summarized below. Under Section 351.455 of the Missouri Act, a
holder of Confluence Common Stock may dissent and Colonial will
pay to such shareholder the fair value of such shareholder's
shares of Confluence Common Stock as of the day prior to the
Special Meeting if such shareholder: (1) files with Confluence
prior to or at the Special Meeting a written objection to the
Merger; and (2) does not vote in favor thereof; and (3) within 20
days after the Closing Date of the Merger, makes written demand
on Colonial for payment of the fair value of the shares held by
such shareholder as of the day prior to the date of the Special
Meeting. Such demand shall state the number and class of shares
owned by such dissenting shareholder. Any shareholder failing to
make demand within the 20-day period shall be conclusively
presumed to have consented to the Merger and shall be bound by
the terms thereof. Promptly after the Closing Date of the
Merger, Firstbank will notify all shareholders of Confluence of
the Closing Date. A PROXY OR VOTE AGAINST THE MERGER WILL NOT,
BY ITSELF, BE REGARDED AS A WRITTEN OBJECTION FOR PURPOSES OF
ASSERTING DISSENTERS' RIGHTS.
If within 30 days after the Closing Date of the Merger the
value of such shares is agreed upon between the dissenting
shareholder and Colonial, payment therefor shall be made within
90 days after the Closing Date of the Merger, upon the surrender
by such shareholder of the certificate or certificates
representing said shares. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such
shares or in Confluence or Colonial.
If within such period of 30 days, the shareholder and
Colonial do not agree as to value, then the dissenting
shareholder may, within 60 days after the expiration of the 30-
day period, file a complaint in any court of competent
jurisdiction within the County in which the registered office of
the surviving or new corporation is situated, asking for a
finding and determination of the fair value of
Page 40
such shares, and shall be entitled to judgment against Colonial
for the amount of such fair value as of the day prior to the
date of the Special Meeting, with interest thereon to the date
of such judgment. The "fair value" determined by the court may
be more or less than the amount offered to Confluence
shareholders under the Merger Agreement. The judgment shall
be payable only upon and simultaneously with the surrender
to Colonial of the certificate or certificates representing the
shares of Confluence Common Stock. Upon the payment of
the judgment, the dissenting shareholder shall cease to have
any interest in such shares or in Confluence or Colonial. Unless
the dissenting shareholder shall file such complaint within the
60-day period, such shareholder and all persons claiming under
him or her shall be conclusively presumed to have approved and
ratified the Merger, and shall be bound by the terms thereof.
THE ABOVE SUMMARY OF THE PROVISIONS REGARDING DISSENTERS'
RIGHTS UNDER THE MISSOURI ACT IS QUALIFIED IN ITS ENTIRETY BY THE
TEXT OF SECTION 351.455 OF THE MISSOURI ACT. THE TEXT OF SECTION
351.455 IS ATTACHED HERETO AS EXHIBIT A.
SHAREHOLDERS OF CONFLUENCE INTENDING TO EXERCISE DISSENTERS'
RIGHTS ARE URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO
COMPLY WITH ALL REQUIREMENTS OF SECTION 351.455 OF THE MISSOURI
ACT WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Shareholders' Undertaking Agreements
As a precondition to Firstbank entering into the Merger
Agreement, each of the officers and directors of Confluence and
their affiliates entered into Shareholders' Undertaking Agreements.
As of June 30, 1995, these individuals beneficially owned 33,894
shares of Confluence Common Stock, constituting approximately 16.95
percent of the outstanding shares of Confluence Common Stock. The
affirmative vote of the officers and directors of Confluence would
not alone be sufficient to approve the Merger Agreement.
The Shareholders' Undertaking Agreements provide that, with
respect to each shareholder of Confluence entering into the
agreements: (i) he or she will not, without the prior written
consent of Firstbank, enter into any negotiations, discussions,
agreements, or understandings, or entertain any proposals, for
the purpose of merging or consolidating Confluence or any of its
subsidiaries with any other entity or causing Confluence or any
of its subsidiaries to sell its assets or any shares of its
capital stock to any other person or to issue or grant any
options or rights to purchase shares of any class of its stock;
(ii) he or she will not with the prior written consent of
Firstbank, enter into any negotiations, discussions, agreements,
or undertakings, or entertain any proposals, for the purpose of
selling any of his or her shares of stock of Confluence; and
(iii) he or she will vote all shares of Confluence he or she owns
or controls, directly or indirectly, in favor of the transactions
described in the Agreement and will use his or her best efforts
to encourage the remaining shareholders of Confluence to vote his
or her stock of Confluence in a similar manner.
Page 41
PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
The following financial information is set forth
at the pages indicated: Page
Pro Forma Condensed Combining
Balance Sheet of Firstbank of Illinois Co. and Subsidiaries
and Confluence Bancshares Corporation and Subsidiary
as of June 30, 1995 43
Pro Forma Condensed Combining
Statements of Income of Firstbank of Illinois Co. and
Subsidiaries and Confluence Bancshares Corporation
and Subsidiary:
For the years ended December 31, 1994, 1993, and 1992 44-46
For the six month period ended June 30, 1995 47
Notes to Pro Forma Condensed Combining Financial Statements 48
The unaudited pro forma condensed combining balance sheet
as of June 30, 1995, gives effect to the Merger between Firstbank
and Confluence, as if the transaction had been consummated on
June 30, 1995 and was accounted for under the pooling-of-
interests method of accounting. The following unaudited
condensed combining statements of income for the six months
ended June 30, 1995 and for the years ended December 31, 1994,
1993 and 1992 set forth the consolidated operations of Firstbank
combined with the consolidated operations of Confluence for the
periods presented as if the Merger had occurred on January 1,
1992 (the beginning of the earliest year presented), and was
accounted for under the pooling-of-interests method of
accounting.
These pro forma condensed combining financial statements,
which have been prepared by Firstbank management based upon
historical financial statements of Firstbank and Confluence,
should be read in conjunction with the accompanying notes to such
pro forma condensed combining financial statements and the
consolidated financial statements and related notes thereto of
Firstbank, incorporated herein by reference, and Confluence,
included elsewhere herein. The historical interim financial
information for the six months ended June 30, 1995 , used as a
basis for the pro forma combined consolidated financial
statements, include all necessary adjustments, which in the
opinions of management of Firstbank and Confluence, are necessary
to present the data fairly. These pro forma condensed combining
financial statements may not be indicative of the results that
actually would have occurred if the Merger had been in effect on
the dates indicated or the results of operations which may be
obtained in the future.
Page 42
</TABLE>
<TABLE>
Pro Forma Condensed Combining Balance Sheet of Firstbank of
Illinois Co.
and Subsidiaries and Confluence Bancshares Corporation and
Subsidiary
June 30, 1995
(in thousands of dollars)
(unaudited)
<CAPTION>
Historical Adjust- Pro Forma
<S> Firstbank Confluence Combined ments Combined
ASSETS <C> <C> <C> <C> <C>
Cash and due from banks $ 81,834 $ 2,912 $ 84,746 - $ 84,746
Short-term investments 30,516 5,536 36,052 - 36,052
Investment securities 413,464 14,929 428,393 - 428,393
Loans, net of unearned discount 1,143,641 53,134 1,196,775 - 1,196,775
Reserve for possible loan losses (17,769) (658) (18,427) - (18,427)
Premises and equipment 40,747 1,982 42,729 - 42,729
Other Assets 47,007 738 47,745 - 47,745
$1,739,440 $78,573 $1,818,013 - $1,818,013
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 233,115 $ 9,735 $ 242,850 - $ 242,850
Interest-bearing 1,276,664 62,908 1,339,572 - 1,339,572
Total deposits 1,509,779 72,643 1,582,422 - 1,582,422
Short-term borrowings 36,144 - 36,144 - 36,144
Other Liabilities 17,484 407 17,891 - 17,891
Long-term borrowings 200 250 450 - 450
Total liabilities 1,563,607 73,300 1,636,907 - 1,636,907
Shareholders' equity:
Preferred stock (none issued)
Common stock 9,839 200 10,039 300 10,339
Surplus 39,490 3,800 43,290 (300) 42,990
Retained Earnings 128,587 1,194 129,781 - 129,781
Unrealized holding gains (losses)
on investment securities
available-for-sale (1,812) 79 (1,733) - (1,733)
Treasury stock (271) - (271) - (271)
Total shareholders' equity 175,833 5,273 181,106 - 181,106
$1,739,440 $78,573 $1,818,013 - $1,818,013
</TABLE>
See accompanying notes to pro forma condensed combining financial statements.
Page 43
Pro Forma Condensed Combining Statements of Income of Firstbank
of Illinois Co. and Subsidiaries
and Confluence Bancshares Corporation and Subsidiary
For the Year Ended December 31, 1994
(in thousands of dollars except per share data)
(unaudited)
Pro Forma
Firstbank Confluence Combined
Interest income $ 120,029 $ 4,225 $ 124,254
Interest expense 43,380 1,677 45,057
Net interest income 76,649 2,548 79,197
Provision for possible loan losses 2,700 242 2,942
Noninterest income 18,784 118 18,902
Noninterest expense 57,906 1,520 59,426
Net income before
income tax expense 34,827 904 35,731
Income tax expense 11,373 324 11,697
Net income $ 23,454 580 24,034
PRO FORMA PER SHARE DATA:
Weighted average number
of shares outstanding 9,945,122 10,445,122
Net income $ 2.36 $ 2.30
See accompanying notes to pro forma condensed combining financial
statements.
Page 44
Pro Forma Condensed Combining Statements of Firstbank of Illinois
Co. and Subsidiaries
and Confluence Bancshares Corporation and Subsidiary
For the Year Ended December 31, 1993
(in thousands of dollars except per share data)
(unaudited)
Pro Forma
Firstbank Confluence Combined
Interest income $ 121,114 $ 2,896 $ 124,010
Interest expense 44,168 1,238 45,406
Net interest income 76,946 1,658 78,604
Provision for possible loan losses 5,395 140 5,535
Noninterest income 18,144 98 18,242
Noninterest expense 61,582 1,245 62,827
Net income before income tax
expense and cumulative effect
of change in 28,113 371 28,484
accounting principle
Income tax expense 9,250 135 9,385
Net income before cumulative
effect of change in
accounting principle $ 18,863 236 19,099
PRO FORMA PER SHARE DATA:
Weighted average number
of shares outstanding 9,896,216 10,396,216
Net income before cumulative
effect of change in
accounting principle $ 1.91 $ 1.84
See accompanying notes to pro forma condensed combining financial
statements.
Page 45
Pro Forma Condensed Combining Statements of Income of Firstbank
of Illinois Co.
and Subsidiaries and Confluence Bancshares Corporation and
Subsidiary
For the Year Ended December 31, 1992
(in thousands of dollars except per share data)
(unaudited)
Pro Forma
Firstbank Confluence Combined
Interest income $ 137,488 $ 2,208 $ 139,696
Interest expense 61,255 1,152 62,407
Net interest income 76,233 1,056 77,289
Provision for possible loan losses 5,941 73 6,014
Noninterest income 16,163 36 16,199
Noninterest expense 62,430 915 63,345
Net income before income tax
expense and extraordinary item 24,025 104 24,129
Income tax expense 7,032 25 7,057
Net income before extraordinary
item 16,993 79 17,072
PRO FORMA PER SHARE DATA:
Weighted average number
of shares outstanding 9,831,863 10,331,863
Net income before extraordinary
item $ 1.73 $ 1.65
See accompanying notes to pro forma condensed combining financial
statements.
Page 46
Pro Forma Condensed Combining Statements of Income of Firstbank
of Illinois Co.
and Subsidiaries and Confluence Bancshares Corporation and
Subsidiary
(in thousands of dollars except per share data)
For the Six Months Ended June 30, 1995
(unaudited)
Pro Forma
Firstbank Confluence Combined
Interest income $ 62,556 $ 2,934 $ 65,490
Interest expense 26,148 1,404 27,552
Net interest income 36,408 1,530 37,938
Provision for possible loan losses 1,050 103 1,153
Noninterest income 10,121 70 10,191
Noninterest expense 26,591 951 27,542
Net income before income taxes 18,888 546 19,434
Income tax expense
6,687 208 6,895
Net income $ 12,201 $ 338 $ 12,539
PRO FORMA PER SHARE DATA:
Weighted average number
of shares outstanding 9,977,511 10,477,511
Net income $ 1.22 $ 1.20
See accompanying notes to pro forma condensed combining financial
statements.
Page 47
NOTES TO PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
Background
Firstbank proposes to acquire Confluence through the
exchange of 500,000 shares of Firstbank Common Stock for all of
the 200,000 issued and outstanding shares of Confluence Common
Stock. Confluence owns 100 percent of the issued and outstanding
shares of capital stock of Duchesne Bank.
Assumptions
1. The pro forma condensed combining balance sheet of
Firstbank of Illinois Co. and Subsidiaries and
Confluence Bancshares Corporation and Subsidiary as of
June 30, 1995, has been prepared in accordance with the
following financial assumptions:
a. The Merger between Firstbank and Confluence, in
which 500,000 shares of Firstbank Common Stock are
exchanged for all of the 200,000 issued and
outstanding shares of Confluence Common Stock,
occurred on June 30, 1995.
b. The Merger is accounted for using the pooling-of-
interests method of accounting and, accordingly,
the balance sheets of Firstbank and Confluence as
of June 30, 1995, are combined.
2. The pro forma condensed combining statements of income
presented herein have been prepared in accordance with
the following financial assumption:
a. The Merger between Firstbank and Confluence
occurred at the beginning of the earliest period
presented; i.e., January 1, 1992, and is accounted
for using the pooling-of-interests method of
accounting. Accordingly, the results of
operations of Firstbank and Confluence are
combined for all periods presented.
Page 48
Material Contacts Between Firstbank and Confluence
The only material contracts, arrangements, understandings,
relationships, negotiations, or transactions between Firstbank
and Confluence are the agreements entered into as a result of the
proposed Merger. These agreements are the Merger Agreement and
the Shareholders' Undertaking Agreements. For a discussion of
these documents, see, respectively, "THE MERGER -- The Merger
Agreement" and "THE MERGER -- Shareholders' Undertaking
Agreements."
Page 49
INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS CO.
Firstbank is a multi-bank holding company owning
directly or indirectly all of the issued and outstanding
common stock of seven banks with locations throughout
downstate Illinois and in the St. Louis metropolitan area of
Missouri. Additionally, Firstbank owns all of the
outstanding capital stock of two non-bank subsidiaries, FFG
Trust Inc., a trust company organized under the laws of the
State of Illinois, and FFG Investments, Inc., an Illinois
corporation and a registered broker-dealer. On June 30,
1995, Firstbank has consolidated total assets of $1.74
billion, loans (net of unearned discount) of $1.14 billion,
total deposits of $1.51 billion, and shareholders' equity of
$176 million.
Annual Report of Firstbank
Firstbank's 1994 Summary Annual Report to Stockholders
distributed to Firstbank stockholders in March 1995 and
Firstbank's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and Firstbank's Quarterly Report on
Form 10-Q for the six months ended June 30, 1995, filed by
Firstbank with the Securities and Exchange Commission, have
been delivered with this Proxy Statement/Prospectus.
Confluence shareholders are encouraged to review carefully
these disclosure documents.
Incorporation by Reference
The following information is hereby incorporated by
reference into this Proxy Statement/Prospectus.
1. Firstbank's Annual Report on Form 10-K for the
year ended December 31, 1994.
2. Firstbank's Quarterly Report on Form 10-Q for the
quarters ending March 31, 1995 and June 30, 1995.
3. Firstbank's current reports on Form 8-K dated
January 26, 1995 and June 22, 1995, representing
all such reports filed since December 31, 1994.
4. All reports filed pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 since
December 31, 1994.
5. The description of Firstbank Common Stock set
forth as Item 1 in Firstbank's Registration of
Certain Classes of Securities on Form 8-A, dated
March 8, 1977.
6. All reports and documents filed by Firstbank
pursuant to Sections 13(a), 13(c), 14, and 15(d)
of the Securities Exchange Act of 1934 from the
date of this Proxy Statement/Prospectus through
and including the date of the Special Meeting of
Shareholders of Confluence.
Interest Rate Sensitivity
The Company's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q, incorporated by reference above, include
interest rate gap analyses. Such analyses, which report the
difference between rate-sensitive assets and rate-sensitive
liabilities, are a static measurement of the Company's sensitivity
to changes in interest rates through various time horizons.
At December 31, 1994 and June 30, 1995, the static gap analyses
indicate substantial liability sensitivity in the short-term periods
(6 months or less). Generally, such a position would indicate that
an overall rise in interest rates would result in an unfavorable impact
on the Company's net interest margin as liabilities would reprice more
quickly than assets. Conversely, the net interest margin would be
expected to improve with an overall decline in interest rates. As
savings, NOW and money market accounts are subject to withdrawal on
demand, they are presented in the analyses as immediately repriceable.
Based on the Company's experience, pricing on such deposits is not
expected to change in direct correlation with changes in the general
level of short-term interest rates. Accordingly, management believes
that a gradual increase in the general level of interest rates will
not have a material effect on the Company's net interest income.
This traditional method of measuring interest rate risk does not,
in management's opinion, adequately assess many of the variables that
affect the Company's net interest margin. As a result, the Company places
more emphasis on the use of simulation analysis. The impact of various
interest rate scenarios on the Company's net interest margin are analyzed
and management strategies adjusted to maintain the interest margin within
certain tolerance ranges.
Market Price of Common Stock and Dividends
Firstbank Common Stock is traded in the over-the-
counter market under the symbol FBIC. The following table
represents cash dividends declared and the rage of high and
low sales prices for the Company's stock during the periods
indicated, as quoted by the NASDAQ National Market System.
These quotations reflect inter-dealer prices, without retail
markups, markdowns, or commissions. As of June 30, 1995,
Firstbank Common Stock was held by 2,143 stockholders of
record.
Page 50
Cash
Dividends
High Low Declared
1995
1st Quarter $27.75 $26.75 $0.22
2nd Quarter 27.00 25.50 0.22
3rd Quarter* 27.75 27.00 0.22
Cash
Dividends
High Low Declared
1994
1st Quarter $24.33 $22.67 $0.20
2nd Quarter 25.83 22.83 0.20
3rd Quarter 25.83 25.00 0.20
4th Quarter 25.83 25.00 0.20
Cash
Dividends
High Low Declared
1993
1st Quarter $26.17 $23.33 $0.18
2nd Quarter 25.00 23.33 0.18
3rd Quarter 25.00 23.83 0.18
4th Quarter 25.17 23.83 0.18
_______________
*Through August 3, 1995
NASDAQ Market Makers
The following broker-dealers currently act as market
makers of Firstbank Common Stock:
Robert W. Baird & Co., Inc.
Bear, Stearns & Co., Inc.
The Chicago Corporation
Herzog, Heine, Geduld, Inc.
Howe, Barnes & Johnson, Inc.
Keefe, Bruyette & Woods, Inc.
M. A. Schapiro & Co., Inc.
Stifel, Nicolaus & Co.
Page 51
INFORMATION WITH RESPECT TO CONFLUENCE BANCSHARES CORPORATION
Business
Confluence was incorporated under the laws of the State of Missouri
in November 1994 to serve as a single bank holding company for Duchesne
Bank. In February 1995, the Federal Reserve Bank of St. Louis approved
the shareholders' request to change ownership control of Duchesne Bank.
On February 15, 1995, the shareholders of Duchesne Bank received one share
of Confluence Common Stock in exchange for each share of Duchesne Common
Stock. The merger represented a combination of entities under common control,
and, accordingly, was accounted for in a manner similar to a pooling-of-
interests. As of June 30, 1995, Confluence had total assets of $78,573,000;
deposits of $72,643,000; and stockholders' equity of $5,273,000.
Confluence employs 22 full time employees and seven part-time employees.
Duchesne Bank was chartered under the laws of the State of Missouri
in December 1988 to operate in the City of St. Peters in St. Charles County.
The City of St. Peters and St. Charles County are western suburbs of St.
Louis County and the City of St. Louis, Missouri, and represent Duchesne
Bank's primary and secondary markets, respectively. St. Charles County
is the fastest growing county in the State of Missouri, and ranks in the top
25 fastest growing counties in the United States. The current population of
the county is estimated to be 234,300, and the St. Charles Economic
Development Council is projecting the population for the year 2000 to be
276,500. Approximately 55 percent of the county's work force is employed
in St. Louis County. The dynamics of the market have positively impacted the
growth and performance of Duchesne Bank.
Duchesne Bank opened for business in March 1989, and operated from leased
space of approximately 2,000 square feet until March 1992. In March 1992,
Duchesne Bank moved to its main banking facility located at 5500 Mexico
Road in St. Peters. Duchesne Bank opened its City of St. Charles branch
in January 1993 at 3201 North Highway 94. Duchesne Bank operated
primarily as a commercial bank with limited retail activity during its first
four years.
Duchesne Bank is a full-service community bank offering banking services
to both the commercial and retail market sectors. Services include commercial
loans; commercial and personal real estate loans, both construction and
balloon term loans; money market accounts; checking, savings, and time
deposit accounts; and mortgage loan services. Duchesne Bank's lending
business focuses primarily on financing commercial real estate,
construction and permanent financing for local community residences, and
operating loans for privately held businesses.
Duchesne Bank is subject to aggressive competition from other banking
institutions operating in its service area individually and through a network
of 37 branches in St. Charles County. In addition, Duchesne Bank competes
with other financial institutions, including savings and loan associations,
regional credit unions, insurance companies, and finance companies.
Duchesne Bank controlled approximately 4.3 percent of St. Charles County's
Federal Deposit Insurance Corporation ("FDIC") reported $1.25 billion deposit
base as of June 30, 1994.
Confluence and Duchesne Bank are subject to supervision, regulation,
and examination by the Missouri Division of Finance and the FDIC. The
deposits of Duchesne Bank are insured by the Bank Insurance Fund (BIF) of
the FDIC. As a bank holding company, Confluence is regulated by the
Federal Reserve Board.
Statistical Information About Confluence
In the following pages, various statistical information about
Confluence and Duchesne Bank is presented for review. 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 included elsewhere herein.
Page 52
<TABLE>
Distribution of Average Assets, Liabilities and Stockholders' Equity, and Interest Rates.
The following table shows the condensed average balance sheets for the periods presented and the percentage of each
principal category of assets, liabilities, and stockholders' equity to total assets. Also shown is the average yield
on each category of interest-earning assets and the average rate paid on interestbearing liabilities for each
of the periods presented.
<CAPTION>
Years Ended December31,
1994 1993 1992
Percent Interest Average Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate Balance Assets Expence Rate
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1) $40,918 71.55% $3,696 9.03% $27,360 62.77% $2,413 8.82% $18,815 60.96% $1,761 9.36%
Investment
securities:
Taxable 8,071 14.11 376 4.66 7,673 17.60 341 4.44 5,407 17.52 307 5.68
Nontaxable (2) 582 1.02 35 6.01 149 0.34 11 7.38 - - - -
Federal funds sold 2,838 4.96 119 4.19 4,453 10.22 133 2.99 3,942 12.77 140 3.55
Other short-term
investments 202 0.35 11 5.45 40 0.09 2 5.00 - - - -
Total earning assets 52,611 91.99 4,237 8.05 39,675 91.02 2,900 7.31 28,164 91.25 2,208 7.84
Nonearning assets:
Cash and due from banks 2,637 4.61 1,923 4.41 1,071 3.47
Allowance for possible
loan losses (469) (0.82) (295) (0.68) (186) (0.60)
Office properties,
furniture, and
equipment 1,992 3.48 1,930 4.43 1,523 4.93
Other assets 423 0.74 355 0.82 293 0.95
Total assets $57,194 100.00% $43,588 100.00% $30,865 100.00%
LIABILITIES
Interest-bearing:
Deposits:
Savings, NOW and
money market accounts $17,857 31.22% $ 505 2.83% $15,308 35.12% $ 438 2.86% $ 8,892 28.81% $ 358 4.02%
Time deposits 26,503 46.34 1,172 4.42 18,644 42.77 800 4.29 14,916 48.33 794 5.32
Total interest- bearing
liabilities 44,360 77.56 1,677 3.78 33,952 77.89 1,238 3.65 23,808 77.14 1,152 4.84
Noninterest-bearing
deposits 7,983 13.96 5,297 12.15 2,940 9.52
Other liabilities 315 0.55 191 0.44 148 0.48
Total liabilities 52,658 92.07 39,440 90.48 26,896 87.14
STOCKHOLDERS' EQUITY 4,536 7.93 4,148 9.52 3,969 12.86
Total liabilities and
shareholders' equity $57, 194 100.00% $43,588 100.00% $30,865 100.00%
Net interest income/net
yield on earning assets $2,560 4.87% $1,662 4.19% $1,056 3.75%
(1) Average balances include non-accrual loans. The income on such loans is included in interest but is recognized
only upon receipt. Loan fees included in interest income are approximately $300,000, $231,000, and $167,000 for
December 31, 1994, 1993, 1992, respectively.
(2) Non-taxable investment income presented on a fully tax-equivalent basis assuming a tax rate of 34%.
</TABLE>
Page 53
<TABLE>
Interest Differential
The following table sets forth, on a tax-equivalent basis for the
periods indicated, a summary of the changes in interest income and
interest expense resulting from changes in yield/rates:
<CAPTION>
Amount of Increase (Decrease)
Change From 1993 Change From 1992
to 1994 Due to to 1993 Due to
Volume Yield/ Volume Yield/
(1) Rate (2) Total (1) Rate (2) Total
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans $1,224 $ 59 $1,283 $759 $(107) $652
Investment securities:
Taxable 18 17 35 111 (77) 34
Nontaxable (3) 26 (2) 24 11 0 11
Total investment
securities 44 15 59 122 (77) 45
Federal funds sold (57) 43 (14) 17 (24) (7)
Other short-term investments 9 0 9 2 0 2
Total interest income 1,220 117 1,337 900 (208) 692
Interest expense:
Deposits:
Savings, NOW and
money market accounts 72 (5) 67 204 (124) 80
Time deposits 347 25 372 177 (171) 6
Total interest expense 419 20 439 381 (295) 86
Net interest income $ 801 $ 97 $ 898 $519 $ 87 $606
</TABLE>
(1) Change in volume multiplied by yield/rate of prior period.
(2) Change in yield/rate multiplied by volume of prior period.
(3) Nontaxable investment securities are presented on a fully tax-equivalent
basis assuming a tax rate of 34%
NOTE: The change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
Page 54
Investment Portfolio
The table below sets forth the book value of investment securities held by
Confluence for the periods indicated:
December 31,
1994 1993 1992
Percent Percent Percent
Of Total Of Total Of Total
Amount Securities Amount Securities Amount Securities
(in thousands of dollars)
U.S. Treasury and
other U.S. Government
agencies and corporations $6,877 69.0% $ 6,667 65.4% $4,427 89.7%
Obligations of state and
political subdivisions 1,738 17.5 1,747 17.1 510 10.3
Other debt securities 1,349 13.5 1,786 17.5 - -
Total $9,964 100.0% $10,200 100.0% $4,937 100.0%
Effective January 1, 1994, Confluence adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("SFAS 115") for which the cumulative effect was
recorded on the consolidated balance sheet on that date. On January 1,
1994, debt securities with an amortized cost of $8,493,000 were classified
as held-to-maturity securities; debt securities with an amortized cost
of $1,707,000 were classified as available-for-sale securities; a market
valuation account was established for the available-for-sale securities of
approximately $1,000, to increase the recorded balance of such securities at
January 1, 1994 to their fair value on that date; a deferred tax
liability was also recorded to reflect the tax effect of the market
valuation account; and the net increase resulting from the market
valuation adjustment at January 1, 1994 was recorded as a separate
component of stockholders' equity.
As of December 31, 1994, debt securities with an amortized cost of $4,763,000
were classified as held-to-maturity securities; debt securities with an
amortized cost of $5,246,000 were classified as available-for-sale securities;
the market valuation account for the available-for-sale securities was
adjusted to approximately $(45,000) to decrease the recorded balance of such
securities at December 31, 1994 to their fair value on that date; the deferred
tax liability was adjusted to a deferred tax asset of approximately
$16,000 to reflect the tax effect of the market valuation account; and the
separate component of stockholders' equity was adjusted to a $(29,000)
balance, resulting from the market valuation adjustment at December 31, 1994.
The change in the market valuation account and related components resulted
from an overall increase in the interest rate environment during 1994, as a
direct result of the Federal Reserve increasing the discount rate.
As of June 30, 1995, debt securities with an amortized cost of $6,394,000
were classified as held-to-maturity securities; debt securities with an
amortized cost of $8,416,000 were classified as available-for-sale securities;
the market valuation account for the available-for-sale securities was
adjusted to approximately $119,000 to increase the recorded balance of such
securities at June 30, 1995 to their fair value on that date; the deferred
tax asset was adjusted to a deferred tax liability of approximately $40,000
to reflect the tax effect of the market valuation account; and the
separate component of stockholders' equity was adjusted to a $79,000
balance, resulting from the market valuation adjustment at June 30, 1995.
The significant change in the market valuation account and related
components resulted from an overall decrease in the interest rate
environment during the six months ended June 30, 1995.
Page 55
In addition, securities identified as available-for-sale at December 31, 1994
and maturing prior to June 30, 1995 were reinvested in securities which
have market values at June 30, 1995 in excess of their amortized cost basis.
The following table summarizes maturity and yield information on the
investment portfolio at December 31, 1994:
Weighted
Average Tax-
Book Equivalent
Value Yield
(in thousands of dollars)
U.S. Treasury and other U.S. Government
agencies and corporations:
0 to 1 year $3,509 4.9%
1 to 5 years 2,672 5.2
5 to 10 years 696 6.9
Over 10 years - -
Total $6,877 5.2
State and political subdivisions:
0 to 1 year $ 567 6.1%
1 to 5 years 1,072 5.6
5 to 10 years - -
Over 10 years 99 8.8
Total $1,738 5.9
Other securities:
0 to 1 year $ 403 4.5%
1 to 5 years 372 4.8
5 to 10 years - -
Over 10 years 574 4.6
Total $1,349 4.6
Total securities:
0 to 1 year $4,479 5.0%
1 to 5 years 4,116 5.3
5 to 10 years 696 6.9
Over 10 years 673 5.2
Total $9,964 5.3
NOTE: Presented on a fully tax-equivalent basis assuming a tax
rate of 34%.
Page 56
Loan Portfolio
Types of Loans:
The composition of the loan portfolio is summarized as follows:
December 31,
1994 1993 1992
Percent Percent Percent
Of Total Of Total Of Total
Amount Loans Amount Loans Amount Loans
(in thousands of dollars)
Commercial, financial
and agricultural $ 8,275 17.8% $6,453 19.8% $ 4,861 20.1%
Real estate:
Commercial 19,541 42.0 13,607 41.8 11,280 46.7
Construction 9,045 19.4 7,014 21.6 4,762 19.7
Residential 7,464 16.1 4,317 13.3 2,470 10.2
Total 36,050 77.5 24,938 76.7 18,512 76.6
Consumer 1,911 4.1 1,111 3.4 787 3.3
Other 298 0.6 30 0.1 10 -
Total Loans $46,534 100.0% $32,532 100.0% $24,170 100.0%
Page 57
<TABLE>
The following table sets forth the maturity and sensitivities composition of
total loans at December 31, 1994:
<CAPTION> December 31, 1994
Maturing
After One
In One Through After
Year or Five Five
Less Years Years Total
(in thousands of dollars)
<S> <C> <C> <C> <C>
Fixed Rate Loans
Commercial, financial and agricultural $ 1,827 $ 2,601 $ - $ 4,428
Real estate:
Commercial 6,363 8,790 374 15,527
Construction 4,502 624 - 5,126
Residential 1,945 4,372 - 6,317
12,810 13,786 374 26,970
Consumer 270 1,532 - 1,802
Other - 6 - 6
Total fixed rate loans $14,907 $17,925 $ 374 $33,206
Variable Rate Loans
Commercial, financial,
and agriculture $ 876 $ 2,343 $ 628 $ 3,847
Real estate:
Commercial 544 2,634 836 4,014
Construction 3,077 842 - 3,919
Residential 432 571 144 1,147
4,053 4,047 980 9,080
Consumer - 109 - 109
Other 292 - - 292
Total variable rate loans $ 5,221 $ 6,499 $ 1,608 $13,328
Total Loans
Commercial, financial and
agricultural $ 2,703 $ 4,944 $ 628 $ 8,275
Real estate:
Commercial 6,907 11,424 1,210 19,541
Construction 7,579 1,466 - 9,045
Residential 2,377 4,943 144 7,464
16,863 17,833 1,354 36,050
Consumer 270 1,641 - 1,911
Other 292 6 - 298
Total loans $20,128 $24,424 $1,982 $46,534
</TABLE>
Page 58
Risk Elements involved in Lending Activities:
The following table details the nonperforming asset information for the
periods presented:
June 30, December 31,
1995 1994 1993 1992
(in thousands of dollars)
Non-accrual loans $ 131 $ 118 $ - $ 552
Loans past due 90 days or more 258 56 - 9
Restructured loans - - - -
Total nonperforming loans 389 174 - 561
Foreclosed propery - - - -
Total nonperforming assets $ 389 $ 174 $ - $ 561
Nonperforming loans to loans .73% 0.37% -% 2.32%
Nonperforming assets to loans
plus foreclosed property .73 0.37 - 2.32
Nonperforming assets to total
assets .50 0.27 - 1.57
Total assets $78,573 $63,841 $51,095 $35,812
Total loans 53,156 46,534 32,532 24,170
Total loans plus foreclosed
property 53,156 46,534 32,532 24,170
It is generally the policy of Duchesne Bank 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.
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 current, the borrowers presently 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 non-
performing. At June 30, 1995 and December 31, 1994, such loans (excluding
all nonperforming loans described above) amounted to $1,136,000 and $899,000,
respectively.
Loan Concentrations:
A substantial portion of the loan portfolio is secured by real estate
located in Duchesne Bank's service area. In addition, Duchesne Bank has a
concentration of credit in the residential construction economic sector. The
majority of the construction loans are made to local home builders to fund
the construction of both presold and speculative residential homes.
These residential homes are located throughout Duchesne Bank's primary
market area. The ability of Duchesne Bank's borrowers to honor their
contractual obligations is dependent on the local economy and its effect
on the real estate market.
Page 59
Other Interest-Bearing Assets
Other interest-bearing assets, consisting of federal funds sold and interest-
bearing deposits with other financial institutions, would not be considered
nonperforming at December 31, 1994 and 1993 if such assets were loans.
Summary of Loan Loss Experience
The following table summarizes changes in the allowance for possible loan
losses 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:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994 1993 1992
(in thousands of dollars)
<S> <C> <C> <C> <C>
Allowance balance at beginning of period $ 559 $ 391 $ 250 $ 162
Loans charged-off:
Commercial, financial and agricultural 5 46 - -
Real estate:
Commercial - - - -
Residential - 30 - -
Total - 30 - -
Consumer 4 6 - -
Total charge-offs 9 82 - -
Recoveries of loans previously
charged-off:
Commercial, financial and agricultural 5 8 1 14
Real estate:
Commercial - - - -
Residential - - - -
Total - - - -
Consumer - - - 1
Total recoveries 5 8 1 15
Net charge-offs (recoveries) 4 74 (1) (15)
Additions to allowance charged to operations 103 242 140 73
Allowance balance at end of period $ 658 $ 559 $ 391 $ 250
Net charge-offs (recoveries) to average loans 0.01% 0.18% - % (0.08%)
Allowance for possible loan losses to loans 1.24 1.20 1.20 1.03
Allowance for possible loan losses to
nonperforming loans 169.15 321.26 - 44.56
Average loans $49,090 $40,918 $27,360 $18,815
Total loans 53,156 46,534 32,532 24,170
Nonperforming loans 389 174 - 561
</TABLE>
In determining whether there is an adequate balance in the allowance for
possible loan losses, Duchesne Bank's management places its emphasis as
follows: evaluation of the loan portfolio with regard to potential future
exposure on loans to specific customers and industries, reevaluation of each
nonperforming loan, loans classified by supervisory authorities, loans
identified by management as potential problems and listed on internal watch
lists, and an overall view of the remaining portfolio in light of past loan
loss experience. While the Company has benefited from very low historical
net charge-off experience during an extended period of rapid loan growth,
management remains cognizant that historical loan loss and nonperforming
asset experience may not be indicative of future results. If the historical
experience were to deteriorate and additional provisions for possible loan
losses were required, future operating results would be negatively impacted.
Page 60
Historical loan loss performance has been favorable for Duchesne Bank as
evidenced above. The allowance for possible loan loss has steadily
increased from 1.03% of aggregate loans at December 31, 1992 to 1.20% at
December 31, 1994 and to 1.24% at June 30, 1995.
<TABLE>
Management views the allowance for possible 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, Duchesne Bank management has estimated
those portions of the allowance that could be attributable to major categories
of loans as detailed in the table below:
<CAPTION>
June 30, December 31,
1995 1994 1993 1992
Categories Categories Categories Categories
% of % of % of % of
Total Total Total Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allowance allocation:
Commercial, financial and
agricultural $ 79 15.7% $ 67 17.8% $ 47 19.8% $ 30 20.1% %
Real estate:
Commercial 183 41.8 168 42.0 117 41.8 75 46.7
Construction 242 20.7 196 19.4 137 21.6 88 19.7
Residential 38 18.1 28 16.1 20 13.3 13 10.2
Total real estate 463 80.6 392 77.5 274 76.7 176 76.6
Consumer 45 3.7 34 4.1 23 3.4 15 3.3
Other - - - 0.6 - 0.1 - -
Unallocated 71 - 66 - 47 - 29 -
$658 100.0% $559 100.0% $391 100.0% $250 100.0%
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 are the same when estimating the allocation by major
category, as specified in the allowance category.
</TABLE>
Deposits
<TABLE>
The following table shows, for each type of deposit, the average monthly
amount and the average rate paid on each type of deposit for the years
ended December 31, 1994, 1993, and 1992:
<CAPTION>
December 31,
1994 1993 1992
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Noninterest- bearing demand
deposits $ 7,983 -% $ 5,297 -% $ 2,940 -%
Interest-bearing demand
deposits 16,332 2.86 14,322 2.88 8,664 4.03
Savings, NOW and money
market deposits 1,525 2.49 986 2.64 228 3.95
Time deposits 26,503 4.42 18,644 4.29 14,916 5.32
$52,343 3.20% $39,249 3.15% $26,748 4.31%
</TABLE>
Page 61
The following table shows the maturity of time deposits of $100,000 or
more at December 31, 1994 (in thousands of dollars):
Three months or less $ 2,649
Over three through six months 1,634
Over six months through twelve months 4,240
Over twelve months 3,332
$11,855
Return on Equity and Assets
The following ratios are among those commonly used in analyzing banks and
bank holding companies:
1994 1993 1992
(in thousands of dollars)
Return on Average Assets:
Net Income $ 580 $ 236 $ 101
Average Assets 57,194 43,588 30,865
1.01% 0.54% 0.33%
Return on Average Equity:
Net Income $ 580 $ 236 $ 101
Average Equity 4,536 4,148 3,969
12.79% 5.69% 2.54%
Dividend Payout Ratio
Not applicable - No cash dividends have been paid on Confluence Common
Stock.
Equity to Assets Ratio:
Average Equity $ 4,536 $ 4,148 $ 3,969
Average Assets 57,194 43,588 30,865
7.93% 9.52% 12.86%
Properties
Duchesne Bank's principal banking office is located at 5500 Mexico Road,
St. Peters, Missouri. Duchesne Bank also operates a branch facility at
3201 North Highway 94 in the City of St. Charles, Missouri. All facilities
are owned by Duchesne Bank. The main banking office was designed and real
property is available for an additional 12,000 to 18,000 square feet of
commercial office space.
Legal Proceedings
At this time, there are no legal proceedings against either Confluence or
Duchesne Bank.
Page 62
Market Price of Common Stock and Dividends
There is no established public trading market for Confluence Common Stock.
To the knowledge of management, there have been no transactions in Confluence
Common Stock or in the common stock of Duchesne Bank. In 1991, Duchesne Bank
issued shares of its common stock to certain of its shareholders at a price
of $20 per share. The transfer of Confluence Common Stock is restricted by
the terms of the Stock Restriction Agreement by and among each of the
shareholders of Confluence.
Security Ownership of Certain Beneficial Owners and Management of Confluence
The following table sets forth, as of June 30, 1995, beneficial ownership
of Confluence Common Stock by: (i) each beneficial owner of more than five
percent (5%) of Confluence common stock, (ii) each director and executive
officer of Confluence, and (iii) all directors and executive officers of
Confluence as a group.
Shares of Confluence
Common Stock Percent of
Name of Beneficial Owner Beneficially Owned Class (1)
John C. Hannegan
1519 Kandahar
St. Charles, Mo 63301 69,065 34.53%
Trust Estate of John W. Tlapek
147 Glenridge Parkway
ElDorado, AR 71730 63,421 31.71
Gordon A. Gundaker
833 Durrow Drive
St. Louis, MO 63141 15,000 7.50
James L. Wilhite 7,836(2) 3.92
Jerome A. Burkemper 7,500(3) 3.75
John W. Hammond 5,054(4) 2.53
Ernest W. Dempsey 2,554(5) 1.28
William H. Weber 2,554(6) 1.28
Raymond E. Botz 2,500(7) 1.25
W. Dale Finke 1,779 (8)
Henry W. Clever, Jr. MD 1,501(9) (8)
Henry J. Elmendorf 1,334(10) (8)
Charles W. Bennett 1,001(11) (8)
David P. Seifert 155(12) (8)
Richard C. Leuck 125(13) (8)
Page 63
Thomas W. Keyes 1 (8)
All directors and executive
officers as a group (13 persons) 33,894 16.95
(1) Share ownership percentages are based upon 200,000 shares of Confluence
Common Stock issued and outstanding as of June 30, 1995.
(2) Shares include 7,835 shares held of record by James L. Wilhite, Trustee
under Agreement dated 12/16/81.
(3) Shares include 7,499 shares held of record by Jerome A. Burkemper,
Trustee Under the Jerome A. Burkemper Trust Agreement dated November 23,
1993.
(4) Shares include 5,054 shares held of record by John W. Hammond and Sandra
L. Hammond.
(5) Shares include 2,527 shares held of record by Edward D. Jones & Co.,
custodian FBO Ernest W. Dempsey IRA.
(6) Shares include 2,500 shares held of record by Weber Investments, a
Missouri Partnership.
(7) Shares include 2,499 shares held of record by Raymond E. Botz, Trustee
Under Agreement dated 6/5/81 for the Benefit of Raymond E. Botz.
(8) Less than one percent.
(9) Shares include 1,500 shares held of record by Henry W. Clever, Jr., M.D.
and Roseann Clever.
(10)Shares include 1,333 shares held of record by Dale R. Rollings, Trustee
of the Henry J. Elmendorf Trust Agreement.
(11)Shares include 1,000 shares held of record by Charles W. Bennett and
Doris R. Bennett.
(12)Shares include 155 shares held of record by David P. Seifert and
Justine V. Seifert.
(13)Shares include 124 shares held of record by Richard C. Leuck and Celeste
E. Leuck.
Page 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF DUCHESNE BANK
Introduction
The following discussion and analysis is intended to review the significant
factors affecting the financial condition and results of operations of
Confluence and Duchesne Bank (collectively referred to herein as the
"Company") for the six months ended June 30, 1995 and 1994 and the three-
year period ended December 31, 1994. It provides a more comprehensive
review which is not otherwise apparent from the consolidated financial
statements alone. Reference should be made to those statements and
the selected financial data presented elsewhere herein for an understanding
of the following review.
Net Income Analysis
Net income for 1994 was $580,000 as compared to $236,000 for 1993 and $101,000
for 1992. The increase in net income for 1994 as compared to 1993 was due
primarily to an increase in net interest income of $890,000, partially
offset by a $275,000 increase in noninterest expense. The increase in net
income for 1993 as compared to 1992 was primarily due to a $602,000 increase
in net interest income, partially offset by a $330,000 increase in noninterest
expense. The Company is beginning to realize the benefits from the economies
of size associated with growth of its earning asset base.
Net income was $338,000 as compared to $203,000 for the six months ended
June 30, 1995 and 1994, respectively. The earnings increase was due primarily
to an increase in net interest income, loan fee income and noninterest
expense control in relationship to asset growth.
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 nonperforming
assets. The Company's net interest income increased by 53.7% to
$2,548,000 during 1994 after an increase of 57.0% in 1993. The net interest
margin, which is calculated by dividing taxequivalent net interest income
by average interest-earning assets, was 4.87% in 1994 as compared to 4.19%
and 3.75% in 1993 and 1992, respectively.
The increase in the net interest margin during 1994 primarily
resulted from the overall rise in the level of interest rates and an
increase in the Company's loan to deposit ratio. The Company increased
its loan to deposit ratio from 69.75% to 79.43% between December 31, 1993
and December 31, 1994. The Company also increased its average yield on
earning assets from 7.31% in 1993 to 8.05% in 1994. For the same period, the
average cost of interest-bearing liabilities only increased from 3.65% to
3.78%. Management was able to hold interest rates lower on its deposits
for most of the year. Management shifted its mix of earning assets from
taxable investment securities and federal funds sold to loans. The Company's
average federal funds position dropped from $4,453,000 in 1993 to $2,838,000
in 1994. This shift in asset mix further impacted the net interest margin.
The increase in the net interest margin during 1993 versus 1992 primarily
resulted from an $11,511,000 increase in average interest-earning assets,
offset by a $10,144,000 increase in average interest-bearing liabilities.
Additionally, the mix of interest-bearing liabilities changed as
management was able to attract deposit growth through interest-bearing
demand deposits accounts. The average cost of funds was lower for these
types of accounts as compared to time deposit accounts. As a result of this
change in mix and the decline in interest rates in 1992 which remained low
throughout 1993, the average yield on interest bearing liabilities dropped
from 4.84% in 1992 to 3.65% in 1993.
Page 65
During 1994, an increase in the average volume of loans and taxable and
non-taxable investment securities resulted in an increase in interest income
of $1,268,000. This increase was partially offset by a $57,000 decrease in
interest income associated with a decrease in the average volume of federal
funds sold. The rise in interest rates on the average volume of all
interest-earning assets increased interest income by only $117,000. Increases
in the average volume of interest-bearing demand deposits, savings and money
market accounts and time deposits resulted in an increase in interest
expense of $419,000. Changes in interest rates on the average volume of
interest-bearing liabilities resulted in an increase in interest expense of
$20,000. The net effect of the volume and rate changes associated with all
categories of interest-earning assets during 1994 as compared to 1993
increased interest income by $1,337,000 while the net effect of the volume
and rate changes associated with all categories of interest-bearing
liabilities increased interest expense by $439,000.
During 1993, increases in the average volume of all interestearning assets
resulted in an increase in interest income of $900,000. Changes in interest
rates on the average volume of loans, taxable investment securities, and
federal funds sold resulted in a decrease in interest income of $208,000.
Increases in the average balances of all interest-bearing liabilities
resulted in an increase in interest expense of $381,000. Changes in interest
rates on the average volume of interest-bearing liabilities resulted in a
decrease in interest expense of $295,000. The net effect of the volume and
rate changes associated with all categories of interestearning assets during
1993 as compared to 1992 increased interest income $692,000, while the net
effect of the volume and rate changes associated with all categories of
interest-bearing liabilities increased interest expense by $86,000.
Net interest income was $1,530,000 for the first six months of 1995, a 36.1%
increase from the same period of 1994. Interest income increased $1,101,000
for the first six months of 1995, and interest expense increased $695,000.
This increase is primarily attributable to the overall rise in the level of
interest rates in the economy, the increased volume of loans and the increased
volume of both taxable and non-taxable investment securities. Loan demand
remains fairly strong in Duchesne Bank's primary market of St. Charles
County.
Provision For Possible Loan Losses
The provision for possible loan losses charged to expense was $242,000 in
1994. During 1993 and 1992, the provision for possible loan losses charged to
expense was $140,000 and $73,000, respectively. Management made the decision
during 1992 to increase the allowance for possible loan losses from 1.00% to
1.20% of aggregate loans outstanding.
Although the Company has not experienced significant loan losses with any one
particular category or class of loans, management remains cognizant of the
credit risks associated with the business and the Company's continual
increase in loan volume. The Company has chargedoff a total of $116,000
in principal from March 1989 through June 30, 1995. Total recoveries for the
same period are $30,000, resulting in historical net charge-off experience of
$86,000.
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential losses. The provision for possible 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 estimated 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 possible 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 possible loan losses. Such agencies may
require the Company to increase the allowance for possible loan losses based
on their judgements and interpretations about information available to them at
the time of their examinations.
Page 66
While the Company has benefited from very low historical net charge-off
experience during an extended period of rapid loan growth, management remains
cognizant that historical loan loss and nonperforming asset experience may
not be indicative of future results. If the historical experience were to
deteriorate and additional provisions for possible loan losses were required,
future operating results would be negatively impacted. Both Management and
the Board continually monitor changes in asset quality, market conditions,
concentration of credit and other factors which impact the credit risk
associated with its loan portfolio.
Management continues to take an aggressive position towards nonperforming
loans. In 1992, Duchesne Bank experienced credit problems with one large
commercial real estate transaction. Duchesne Bank was able to take possession
and subsequently liquidate the property within a one week time frame. This
action was performed at no loss to the Company. Nonperforming loans at
December 31, 1994 are well secured and expected to be liquidated during 1995
without loss to Duchesne Bank.
The provision for possible loan losses was $103,000 for the six months ended
June 30, 1995. This figure compares to $120,000 for the same period in 1994.
The allowance for possible loan losses is within the Board of Director's
guidelines of a minimum 1.20% reserve at June 30, 1995. During this
period in 1994, management increased the provision for possible loan losses
due to a specific problem credit. This credit was ultimately sold back to the
U.S. Small Business Administration, and a charge-off of approximately
$69,000 was made against the allowance for possible loan losses. The
allowance for possible loan losses to nonperforming loans is 169.2% at
June 30, 1995.
Nonperforming loans increased during the six months ended June 30, 1995 by
$215,000. This increase is due primarily to two loan relationships. The
Bank and customers are working toward bringing the loans current. At the
present time, it is not anticipated that either loan wil become a work-out
situation and payments on both credits were subsequently received which
brought the loans under 90 days past due. Potential problem loans increased
by $237,000 primarily due to a construction loan customer being placed on
the Bank's internal watch list. No risk of loss has been identified by
management on this loan.
Noninterest Income
The Company's noninterest income was $118,000, representing a 20.4% increase
from 1993 results. In comparison, 1993 noninterest income represented a
172.2% increase over 1992 results. Service charges on deposit accounts
increased by $22,000 or 40.7% in 1994 due to an increase in deposits.
Noninterest income performance has been poor for the Company due to its weak
retail market presence prior to March 1992, and desire to attract core
commercial and retail demand account deposits. Several institutions and
credit unions in the market offer "free" demand deposit accounts.
Noninterest income is expected to increase in 1995 based on management's
decision to compete for mortgage loan originations. Residential building is
a major business in Duchesne Bank's market with over 3,300 single family
residential permits issued in 1994. New home volume is expected to
decrease by only 10% to 12% in 1995. The mortgage loan program will
compliment the Company's construction lending program. Based on projected
loan closings, the Company expects to see positive results from this program
beginning in the third quarter of 1995.
Noninterest income for the first six months of 1995 was $70,000 as compared
to $58,000 for the same period in 1994.
Noninterest Expense
Noninterest expense increased 22.1% and 36.1%, respectively for 1994 and
1993 over the previous year. Salaries and employee benefits, the largest
component of noninterest expense, increased by $170,000 or 29.4% in 1994 and
$169,000 or 41.4% in 1993. These increases are primarily attributable
to the rapid growth experienced by Confluence. Asset growth was 24.9% and
42.7%, respectively for 1994 and 1993. Assets to full time equivalent ("FTE")
employees was $3,143,000 at June 30, 1995. This productivity measure has
fluctuated between $2,600,000 and $3,200,000 in assets per FTE employee in
each of the past five years.
Salary and employee benefit expenses for 1994 were impacted by a transition
in executive management, and the implementation of a 401(k) program.
Salaries and benefits were also effected by the new branch facility in 1993,
and the expenses associated with its opening. As a percentage of average
assets, total noninterest expense for 1994 was 2.65% following 2.86% and 2.96%
in 1993 and 1992, respectively. Noninterest expense items other than salaries
and employee benefits show an increase of 15.7% from 1994 to 1993, and an
increase of 31.8% from 1993 to 1992. The Company has experienced increases to
all expense categories as a result of average asset growth.
Noninterest expense was $951,000 or an increase of 29.4% for the first six
months of 1995 compared to $735,000 for the first six months of 1994.
Salaries and employee benefits increased by $135,000. The increase
Page 67
is primarily attributable to the Company's growth. Annualized salaries and
employee benefits at June 30, 1995 would be $946,000 as compared to
$747,000 for the year ended December 31, 1994. These expenses are well
below peer group averages as reported in the Federal Financial Institutions
Examination Council Uniform Bank Performance Report. Increases in other
expenses, comprised of occupancy, furniture and equipment, FDIC insurance,
and miscellaneous expenses, have contributed to the increase in noninterest
expense exclusive of salaries and employee benefits.
Occupancy and furniture and equipment expenses increased $25,000 for the six
month period ended June 30, 1995 as the result of additional staffing and a
data processing conversion. Advertising and marketing expenses increased as
a result of the Company's efforts to promote its mortgage loan operation and
its Advisory Board of Directors. Data processing fees fell $26,000 for the
first six months of 1995 as compared to 1994 due to reduced charges and one
time expenses incurred during the first six months of 1994.
Income Taxes
Income tax expense was $324,000 for 1994, $135,000 for 1993, and $25,000
for 1992. Income tax expense of $208,000 and $124,000 was recorded for
the six months ended June 30, 1995, and 1994, respectively. The effective
tax rate was 35.8%, 36.4%, and 24.0% for the years ended December 31, 1994,
1993, and 1992, respectively. The decrease in the effective tax rate between
1994 and 1993 is primarily the result of an increase in the percentage of
nontaxable income on investment securities to income before income tax
expense. The Company benefited from operating loss carry forwards in 1992
due to start-up expenses incurred during 1989 and 1990. The effective income
tax rate was 38.1% and 37.9% for the six months ended June 30, 1995 and
1994, respectively.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes"
("SFAS 109"). The Company implemented SFAS 109 during the first quarter of
1993 on a prospective basis; however, no adjustment was necessary to reflect
the cumulative effect of adoption in the Company's 1993 consolidated statement
of income.
Page 68
Liquidity and Interest Rate Sensitivity
Liquidity is provided to the Company earning assets including short-term
investments in federal funds sold, maturities in the construction loan
portfolio and through maturities in the investment portfolio.
<TABLE>
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 the Company's GAP analysis (rate sensitive assets minus rate
sensitive liabilities) as of June 30, 1995 and December 31, 1994:
<CAPTION>
June 30, 1995
Over Over
3 Months 1 Year
3 Months Through Through After
or Less 12 Months 5 Years 5 Years Total
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt securities $ 666 $ 1,743 $ 8,702 $ 3,818 $14,929
Loans 22,039 6,849 23,091 1,177 53,156
Federal funds sold 5,335 - - - 5,335
Interest-bearing deposits - - 201 - 201
Total interest-sensitive assets $28,040 $ 8,592 $31,994 $ 4,995 $73,621
Liabilities:
Interest-bearing demand deposits $14,635 $ - $ - $ - $14,635
Saving, NOW and money market
deposits 1,449 - - - 1,449
Time deposits 3,069 18,373 25,382 - 46,824
Note payable 250 - - - 250
Total interest-senstive liabilities $19,403 $18,373 $25,382 $ - $63,158
GAP by period $ 8,637 $(9,781) $ 6,612 $ 4,995 $10,463
Cumulative GAP $ 8,637 $(1,144) $ 5,468 $10,463
</TABLE>
As is indicated in the preceding table, the Company was asset sensitive on a
cumulative basis in the near term (3 months or less) at June 30, 1995 based
on contractual maturities. In this regard, a decrease in the general level
of interest rates would generally have a negative effect on the Company's net
interest income as the repricing of the larger volume of interest sensitive
assets would create a larger reduction in interest revenue as compared to the
reduction in interest expense created by the repricing of the smaller volume
of interest sensitive liabilities.
<TABLE>
<CAPTION>
December 31, 1994
Over Over
3 Months 1 Year
3 Months Through Through After
or Less 12 Months 5 Years 5 Years Total
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt securities $ 1,492 $ 2,987 $ 4,116 $ 1,369 $ 9,964
Loans 17,121 11,114 17,925 374 46,534
Federal funds sold 1,715 - - - 1,715
Interest-bearing deposits - - 202 - 202
Total interest-sensitive assets $20,328 $14,101 $22,243 $ 1,743 $58,415
Liabilities:
Interest-bearing demand deposits $14,169 $ - $ - $ - $14,169
Saving, NOW and money market
deposits 1,476 - - - 1,476
Time deposits 5,202 13,242 14,920 - 33,364
Total interest-senstive liabilities $20,847 $13,242 $14,920 $ - $49,009
GAP by period $ (519) $ 859 $ 7,323 $ 1,743 $ 9,406
Cumulative GAP $ (519) $ 340 $ 7,663 $ 9,406
</TABLE>
As is indicated in the preceding table, the Company was liability sensitive on
a cumulative basis in the near term (3 months or less) at December 31, 1994
based on contractual maturities. In this regard, an increase in the general
level of interest rates would generally have a negative effect on the
Company's net interest income as the repricing of the larger volume of
interest sensitive liabilities would create a larger amount of interest
expense than the additional amount of interest income created by the
repricing of the smaller volume of interest sensitive assets.
Page 69
The following table summarizes certain trends in the Company's balance
sheet during the three-year period ended December 31, 1994:
December 31,
1994 1993 1992
(in thousands of dollars)
Total assets $63,841 $51,095 $35,812
Earning assets 58,392 47,680 33,089
Deposits 58,556 46,600 31,645
Loans to deposits (loans, net
of unearned discount) 79.43% 69.75% 76.32%
Loans to total assets (loans,
net of unearned discount) 72.85 63.61 67.44
Debt securities to total assets 15.61 19.96 13.79
Loans $46,534 $32,532 $24,170
Unearned discount (23) (30) (18)
Loans, net of unearned discount $46,511 $32,502 $24,152
Investment securities -
available-for-sale $ 5,201 $ - $ -
Investment securities -
held-to- maturity 4,763 10,200 4,937
Total investments $ 9,964 $10,200 $ 4,937
Investment securities -
available-for-sale $ 5,201 $ - $ -
Investment securities -
held-to-maturity 4,763 10,200 4,937
Federal funds sold 1,715 4,775 4,000
Interest-bearing deposits 202 203 -
Loans 46,534 32,532 24,170
Unearned discount (23) (30) (18)
Total earning assets $58,392 $47,680 $33,089
Since inception, the Company has experienced rapid loan and deposit growth
primarily due to an aggressive marketing program, an expansion in banking
facilities, and sustained economic growth in the local market served by the
Company. Management has pursued small to mid-sized businesses who desire a
close working relationship with a locally managed full service bank. Also,
various promotions have been undertaken to attract time deposit and
transaction account customers. With the move to the main banking facility
in March 1992 and the opening of the branch office in January 1993, the
Company's visibility and market presence were greatly enhanced.
The composition of total assets and earning assets changed during 1994 as
funds were shifted from investment securities to loans. Investment
securities were a smaller percentage of total assets in 1994 as
compared to 1993. This percentage was 15.61% and 19.96%, respectively, for
1994 and 1993. A second factor effecting the Company's composition of total
assets was a $3,060,000 decrease in federal funds sold between 1994 and 1993.
These funds were shifted into loans due to strong loan demand and potentially
higher asset yields.
During 1993, the composition of total assets and earning assets changed due
to a $14,955,000 increase in deposits. These funds were placed into
$8,362,000 of loans and $5,263,000 of investment securities. Deposit growth
exceeded the Company's ability to generate new loans. Additionally, the
Company experienced a change in the deposit mix during 1993 as average
interestbearing demand, savings, money market deposits increased faster than
time deposits. This trend was primarily attributable to the lower interest
rate environment experienced during 1993 as maturing, longer term time
deposits were reinvested in more liquid short term investments.
Earning assets increased $10,712,000 from December 31, 1993 to December 31,
1994 while total assets increased $12,746,000 during the same period.
Interest-bearing deposits increased $11,661,000 while total deposits
increased $11,956,000. The increase in deposits resulted from promotions on
time deposits and interest-bearing demand deposit accounts offered by the
Company.
The Company's earning assets increased $15,207,000 from December 31, 1994
to June 30, 1995 while total assets increased $14,732,000 during the same
period. Total deposit growth for the period was $14,087,000. The majority of
the Company's deposit growth resulted from two time deposit promotions.
Page 70
Capital Adequacy
The Company's stockholders' equity was $5,273,000 at June 30, 1995. This
represented an increase of 9.24% over stockholders' equity at December 31,
1994. The $446,000 increase in stockholders' equity was the result of
$338,000 in earnings for the first six months of 1995, and a $108,000 increase
in the unrealized holding gain on investment securities available-forsale
(adjusted for taxes).
In February 1995, Confluence obtained a $2,000,000 line of credit secured
by 100% of its investment in Duchesne Bank. The line of credit is used to
supplement Duchesne Bank's capital base. Duchesne Bank is situated in a high
growth market, and current earnings cannot sustain Duchesne Bank's asset
growth. The line of credit is a two year interest only note floating at
one-quarter under prime. The note is governed by the following restrictions:
the principal balance cannot exceed 30% of Duchesne Bank's capital base,
Duchesne Bank must generate a minimum .50% return on assets and classified
loans must not exceed 30% of capital. The current outstanding principal
balance on the loan is $250,000 and $220,000 was used to make a capital
contribution to Duchesne Bank. The Company is operating within the loan
covenants.
The Company's stockholders' equity was $4,827,000, $4,276,000, and
$4,040,000 at December 31, 1994, 1993, and 1992, respectively. During
1994, stockholders' equity increased $551,000 or 12.9% as a result of net
income of $580,000 offset by a $29,000 unrealized holding loss on
investment securities available-for-sale. During 1993, stockholders'
equity increased $236,000 or 5.8%. This increase was solely attributable
to net income.
Risk-based capital guidelines for financial institutions were adopted by
regulatory authorities 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 the
Company 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 stockholders' 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
securities 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.
The following table summarizes on a consolidated basis the Company's risk-
based capital and leverage ratios:
December 31,
1994 1993 1992
Tier I capital ratio 9.21% 10.83% 14.24%
Total risk based capital ratio 10.27 11.82 15.12
Leverage ratio 7.61 8.37 11.28
Additionally, financial analysts often track primary capital levels as an
indicator of capital adequacy. Primary capital includes equity capital,
allowance for possible loan losses, and debt considered equity for
regulatory capital purposes. Tangible primary capital represents primary
capital reduced by total intangible assets included in the balance sheet.
At December 31, 1994, on a consolidated basis the Company's primary capital
was $5,415,000 compared to $4,667,000 and $4,290,000 at December 31, 1993
and 1992, respectively. The Company's primary capital to asset ratio on a
consolidated basis was 8.41%, 9.06%, and11.90% at December 31, 1994, 1993,
and 1992, respectively. The Company's tangible primary capital is
identical to primary capital as there were no intangible assets included
in the Company's balance sheet at December 31, 1994, 1993 and 1992.
Page 71
Risk Management
The Company's management objective in structuring the balance sheet is
to maximize the return on stockholder's equity while minimizing the associated
risks. The major risks involved in the banking industry are market, credit,
and liquidity risks. The following discussion is a discussion of the
Company's management of these risks.
Market Risk Management
The Company's management believes its loan and investment portfolios are
sufficiently diversified to minimize the effect of a downturn in any
particular industry or market. The Company does have a concentration of credit
in the residential construction economic sector. This market risk is managed
by using contracted title companies for disbursement of loan funds,
third party construction inspectors, and closely monitoring individual projects
and credits to detect industry trends. Approximately $36,050,000 or 77.5% of
the loan portfolio was concentrated and secured by real estate at
December 31, 1994. The commercial loan portfolio, which includes loans made
primarily to businesses located and served by the Company, is generally
secured by business assets such as real estate, inventory, accounts receivable,
and equipment. Of the $36,050,000 in loans secured by real estate, $7,464,000
or 16.1% of total loans are secured by one- to four-family residential
mortgages. Consumer loans as of December 31, 1994 totaled $1,911,000 or
4.1% of the loan portfolio. At December 31, 1994, the total investment
portfolio was $9,964,000, a 2.3% decrease from the same period in 1993.
Approximately 69.0% of the portfolio is comprised of U.S. government issues.
Credit Risk Management
The risks the Company's management assumes in providing 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 the Company'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 .73% of total loans at June 30, 1995 compared
to .37%, 0.00%, and 2.32% at December 31, 1994, 1993, and 1992, respectively.
The Company does not have any other real estate owned as a result of
foreclosure at June 30, 1995. The Company was in a similar position at
December 31, 1994, 1993, and 1992, respectively.
Liquidity Risk Management
Liquidity is a measurement of the Company's ability to meet the borrowing
needs and the deposit withdrawal requirements of its customers. The Company
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 appropriate portion
of total assets which should be comprised of readily marketable assets
available to meet future liquidity needs. Much of this liquidity risk
management has been discussed previously in connection with the liquidity
and rate sensitivity.
Implementation of New Accounting Pronouncements
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS 114") and Statement of Financial Accounting Standards
No. 118, "Accounting by Creditors for Impairment of a Loan Income Recognition
and Disclosures" ("SFAS 118"), which amends SFAS 114.
Page 72
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
are required to be discounted at the loan's effective interest rate.
Alternatively, impairment can 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 a creditor to use existing methods for
recognizing interest income on an impaired loan. The Company has elected
to continue to use its existing nonaccrual methods for recognizing interest
on impaired loans. The Company continues to apply all payments received on
impaired loans to the outstanding balance of the loan until such a time as
the loan balance is reduced to zero, after which payments are applied to
interest income until such time as the foregone interest in recovered, or
until such a time as an improvement in the condition of the loan has occurred
which would warrant resumption of interest accruals.
As of the adoption date of January 1, 1995 and at June 30, 1995, the
Company had one impaired loan in the amount of approximately $118,000
which is represented by the loan on nonaccrual status December 31, 1994.
No specific reserve has been allocated to this impaired loan at January 1,
1995 and June 30, 1995. The adoption of SFAS 114 and SFAS 118 resulted in
no adjustment to the provision for possible loan losses.
Impact of New Accounting Pronouncements
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("SFAS 107"). During October 1994, the FASB
issued Statement of Financial Accounting Standards No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments" ("SFAS 119").
SFAS 107 requires disclosure of the fair value of financial instruments for
which it is practicable to estimate that value in the body of the financial
statements or in the accompanying notes to the financial statements. The
methods and significant assumptions used to estimate the fair value of
financial instruments must also be disclosed.
SFAS 107 defines a financial instrument as cash, evidence of an ownership
interest in an entity, or a contract that both: (1) imposes on one entity
a contractual obligation to deliver cash or another financial instrument to
a second entity or to exchange other financial instruments with the second
entity; and (2) 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 with the first entity.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Quoted market prices,
if available, are the best evidence of the fair value of financial
investments. If quoted market prices are not available, management's best
estimate of fair value may be based on the quoted market price of a financial
nstrument with similar characteristics or on valuation techniques. If it is
not practicable for an entity to estimate the fair value of a financial
instrument or a class of financial instruments, the entity must disclose
information pertinent to estimating the fair value of that financial
instrument or class of financial instruments such as the carrying amount,
effective interest rate, and maturity, and the reasons why its not practicable
to estimate fair value.
SFAS 107 is effective for financial statements issued for fiscal years ending
after December 15, 1992, except for entities with less than $150 million in
total assets. For those entities, the effective date shall be for financial
Page 73
statements issued for fiscal years ending after December 15, 1995. Management
of the Company does not believe SFAS 107 will have a material effect on the
Company's consolidated financial condition when implemented.
SFAS 119 requires disclosures about the amounts, nature, and terms of
derivative financial instruments that are not subject to SFAS No. 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 account 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 is effective for financial
statements issued for fiscal years ending after December 15, 1994, except
for entities with less than $150 million in total assets. For those entities,
SFAS 119 is effective for financial statements issued for fiscal years
ending after December 31, 1995. Management of the Company does not believe
SFAS 119 will have a material effect on their consolidated financial condition
when implemented.
Effect of Inflation
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operation 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 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.
Although it is obvious that inflation affects the growth of total assets, it
is difficult to measure the impact precisely. Only new assets acquired in
each year are directly affected, so a simply adjustment of asset totals by use
of an inflation index is not meaningful. The results of operations also have
been affected by inflation, but again, there is no simple way to measure the
effect on the various categories of income and expense.
Page 74
REGULATION AND SUPERVISION
Firstbank and Confluence are bank holding companies
within the meaning of the Bank Holding Company Act of 1956,
as amended (the "Bank Holding Company Act"), and are
registered as such with the Federal Reserve Board. Under
the Bank Holding Company Act, and the regulations
promulgated thereunder, Firstbank and Confluence are
required to file quarterly reports on their respective
operations and such additional information as the Federal
Reserve Board may require. They are also subject to
examination by the Federal Reserve Board which has
jurisdiction to regulate the terms of certain debt issues of
each company, including the authority to impose reserve
requirements.
All of the subsidiary banks of Firstbank are state
banks chartered under the Illinois Banking Act, except for
The First National Bank of Central Illinois and Colonial
Bank. The Illinois state banks are subject to regulation
and examination by the Illinois Commissioner of Banks and
Trust Companies under the provisions of the Illinois Banking
Act and by the FDIC under the provisions of the Federal
Deposit Insurance Act. Elliott State Bank, a subsidiary
of Firstbank, is an Illinois state "member" bank of the
Federal Reserve System, and is subject to regulation and
examination by the Federal Reserve Board. The First
National Bank of Central Illinois, a subsidiary of
Firstbank, is chartered under the National Banking Act and
is subject to supervision and regulation by the Office of
the Comptroller of the Currency (the "Comptroller").
Colonial Bank, a subsidiary of Colonial, is chartered as a
Missouri banking corporation by the Missouri Division of
Finance under the laws of the State of Missouri and is
subject to regulation and supervision by the Missouri
Division and the FDIC under the provisions of the Federal
Deposit Insurance Act.
The subsidiary bank of Confluence, Duchesne Bank, is
chartered as a Missouri banking corporation by the Missouri
Division of Finance under the laws of the State of Missouri.
It is subject to regulation and supervision by the Missouri
Division and the FDIC under the provisions of the Federal
Deposit Insurance Act.
The federal and state laws and regulations generally
applicable to banks regulate, among other things, the scope
of business of the aforesaid subsidiary banks, their
investments, their reserves against deposits, and the nature
and amount of and collateral for loans, and include
restrictions on the number of banking offices and activities
which may be performed at such offices. These laws and
regulations are generally designed for the protection of the
bank's depositors and not the shareholders of a banking
institution.
The primary source of cash for Firstbank and Confluence
comes in the form of dividends from subsidiary banks. Banks
organized under Federal, Illinois and Missouri law must meet
certain requirements respecting the amount of their capital
and surplus, and in certain instances, must obtain
regulatory approval before declaring dividends. Under the
National Banking Act and the Illinois Banking Act, until a
bank's surplus equals or exceeds the amount of its capital,
no dividends may be declared unless at least one-tenth of
the bank's net profit earned since declaration of the last
dividend has been transferred to surplus. A Missouri bank
may not pay a dividend if its surplus fund does not equal
forty percent of the capital of the bank, until one-tenth of
its net earnings shall be credited to the surplus fund (or
such capital). Illinois banks are prohibited from paying
dividends in an amount greater than net profits then on hand
less losses and bad debts. In addition, approval of the
Comptroller, or his designate, is required for any dividend
by a national bank if the total of all dividends declared by
the bank in any calendar year would exceed the total of its
net profits for that year combined with its retained net
profits for the preceding two years, less any required
transfers to surplus. Sound banking practices also require
the maintenance of adequate levels of capital. Federal
regulatory authorities have adopted standards for the
maintenance of capital by banks, and adherence to such
standards may further limit the ability of The First
National Bank of Central Illinois to pay dividends.
Page 75
Illinois state banks are allowed to establish branches
without limit as to number or geographic location, thus
giving Illinois state banks the same branching rights
enjoyed by national banks in Illinois. Missouri similarly
allows unrestricted branching of Missouri state banks.
Subsidiary banks of a bank holding company are subject
to certain restrictions under the Federal Reserve Act and
the Federal Deposit Insurance Act on loans and extensions of
credit to the bank holding company or to its subsidiaries,
investments in the stock or other securities of the bank
holding company or its subsidiaries, or advances to any
borrower collateralized by such stock or other securities.
The Bank Holding Company Act requires every bank
holding company to obtain the prior approval of the Federal
Reserve Board before merging with or consolidating into
another bank holding company, acquiring substantially all
the assets of any bank, or acquiring direct or indirect
ownership or control of more than five percent of the voting
shares of any bank. The Federal Reserve Board may not
approve an acquisition by a bank holding company unless such
acquisition has been specifically authorized by applicable
statute.
The Bank Holding Company Act also prohibits a bank
holding company, with certain exceptions, from acquiring
direct or indirect ownership or control of more than five
percent of the voting shares of any company which is not a
bank and from engaging in any business other than that of
banking, managing and controlling banks, or furnishing
services to banks and their subsidiaries. Firstbank and
Confluence, however, may engage in, and may own shares of
companies engaged in, certain businesses determined by the
Federal Reserve Board to be so closely related to banking or
managing or controlling banks as to be a proper incident
thereto. The Bank Holding Company Act does not place
territorial restrictions on the activities of bank holding
companies or their non-bank subsidiaries. The Federal
Reserve Board has adopted minimum capital ratios and
guidelines to provide a framework for assessing the adequacy
of the capital of bank holding companies by the Reserve
Bank. The guidelines apply to all bank holding companies
regardless of size and are used in the examination and
supervisory process as well as in the analysis of
applications to be acted upon by the Federal Reserve Board.
The Federal Reserve Board has established minimum
capital ratios under its risk-based capital guidelines. The
risk-based guidelines are used by the Federal Reserve Board
for the purposes of assessing the capital adequacy of
Firstbank and Confluence. Currently the risk-based capital
guidelines require Firstbank and Confluence to meet a
minimum Total Capital ratio of 8 percent, of which at least
4 percent 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 Federal
Reserve Board, and (c) minority interests in the equity
accounts of consolidated subsidiaries; less goodwill and any
other intangible assets and investments in subsidiaries that
the Federal Reserve Board determines should be deducted from
Tier 1 capital.
The Federal Reserve Board has also adopted an
additional capital standard for bank holding companies.
Under this new standard, a 3 percent leverage ratio of Tier
1 Capital to total assets is the minimum requirement for
banking organizations that are deemed the strongest and most
highly rated by the Federal Reserve Board. A higher minimum
leverage ratio is required of less highly rated banking
organizations.
Illinois bank holding companies are permitted to
acquire banks and bank holding companies, and be acquired by
bank holding companies, located in any state which
authorizes such acquisitions under qualifications and
conditions which are not unduly restrictive, as determined
by the Commissioner, when compared to those imposed under
Illinois law. Recently enacted federal
Page 76
legislation permits bank holding companies to acquire
savings and loanassociations located anywhere in the United
States.
Effective September 29, 1995, pursuant to the
provisions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate Banking
Act"), an Illinois bank holding company may acquire either
control or substantially all the assets of a bank located
outside of Illinois, regardless of whether the acquisition
would be prohibited by state law. The Interstate Banking
Act also will permit, effective June 1, 1997, merger
transactions between insured banks with different home
states, regardless of prohibitions under state law, which
converts existing bank offices into branches of the
resulting bank. The Act imposes certain concentration
limitations and permits a state, during the interim period,
to either "opt in" or "opt out" of the interstate branching
provisions.
The Federal Deposit Insurance Corporation Improvement
Act of 1991 (the "FDICIA") requires the federal banking
regulatory agencies to take prompt corrective action against
undercapitalized financial institutions. Under the FDICIA,
financial institutions are assigned to one of five
categories, based upon the adequacy of their capital: well-
capitalized; adequately capitalized; undercapitalized;
significantly undercapitalized; or critically
undercapitalized. The FDICIA requires each federal banking
regulatory agency to specify by regulation the capital
levels for each category. Undercapitalized, significantly
undercapitalized, and critically undercapitalized financial
institutions are subject to prompt imposition of newly
authorized corrective measures. Each of the federal banking
agencies have regulations defining these five categories.
The FDICIA also places restrictions on capital distributions
and operations of undercapitalized financial institutions.
All insured financial institutions are prohibited from
making capital distributions or paying management fees to
any person or company who controls the financial institution
if such distribution or payment would leave the financial
institution undercapitalized. A financial institution which
is not well-capitalized generally cannot accept brokered
deposits or pay rates on deposits which are significantly
higher than the prevailing rates of interest on insured
deposits. Undercapitalized financial institutions may not
increase total average assets, make acquisitions, establish
new branch offices, or engage in any new line of business
unless certain statutory conditions have been met, including
prior approval by the FDIC of the financial institution's
capital restoration plan. FDICIA also gives the appropriate
federal banking regulatory agency discretion to take any of
the corrective actions authorized for significantly
undercapitalized financial institutions, if the agency
determines that such actions are necessary to protect the
deposit insurance funds.
The FDICIA further provides that if an insured
depository institution receives a less than satisfactory
examination rating for asset quality, management, earnings,
or liquidity, the examining agency may deem such financial
institution to be engaging in an unsafe or unsound practice.
The potential consequences of being found to have engaged in
an unsafe or unsound practice are significant, because under
FDICIA the appropriate federal banking regulatory agency
may: (i) for a financial institution otherwise classified as
well-capitalized, reclassify the financial institution as
adequately capitalized; (ii) for a financial institution
classified as adequately capitalized, take any of the prompt
corrective actions authorized for undercapitalized financial
institutions and impose restrictions on capital
distributions and management fees; and (iii) for a financial
institution classified as undercapitalized, take any of the
prompt corrective actions authorized for significantly
undercapitalized financial institutions.
OTHER MATTERS
The Special Meeting of Shareholders of Confluence is
called for the purpose set forth in the Notice of Special
Meeting and discussed herein. The Board of Directors of
Confluence does not know of any matters for action by
shareholders at such meeting other than the matters
described in the notice. If any other matter should
properly come before the Special Meeting, the persons named
as
Page 77
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
Confluence.
STOCKHOLDER PROPOSALS
If the Merger is approved, the other conditions of the
Merger are satisfied and the Merger is consummated,
shareholders of Confluence will become stockholders of
Firstbank at the Effective Date. Firstbank stockholders may
submit to Firstbank proposals for formal consideration at
the 1996 annual meeting of Firstbank's stockholders and
inclusion in Firstbank's proxy statement for such meeting.
All such proposals must be received in writing by the
Secretary of Firstbank at Firstbank of Illinois Co., The
First National Bank Building, 205 South Fifth Street,
Springfield, Illinois, 62701 by December 9, 1995, in order
to be considered for inclusion in Firstbank's proxy
statement and proxy for the 1996 annual meeting.
LEGAL MATTERS
Certain legal matters with respect to the Merger and
the legality of the Firstbank Common Stock offered hereby
will be passed upon by counsel for Firstbank, Brown, Hay &
Stephens, 700 First National Bank Building, P.O. Box 2459,
Springfield, Illinois 62705-2459. Certain legal matters
will be passed upon for Confluence by Thompson & Mitchell,
One Mercantile Center, Suite 3300, St. Louis, Missouri
63101-1693.
EXPERTS
The consolidated financial statements of Firstbank and
subsidiaries as of December 31, 1994, and 1993 and for each
of the years in the three-year period ended December 31,
1994, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants,
incorporated herein by reference, and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of Confluence and
subsidiary as of December 31, 1994, and 1993 for each of the
years in the three-year period ended December 31, 1994, have
been included herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
Page 78
FINANCIAL INFORMATION
Index to Financial Statements
Page
Confluence Bancshares Corporation and Subsidiary:
Independent Auditors' Report F-2
Consolidated Balance Sheets - June 30, 1995
and December 31, 1994 and 1993 F-3
Consolidated Statements of Income - Six Months Ended
June 30, 1995 and 1994 and Years Ended December 31, 1994,
1993 and 1992 F-4
Consolidated Statements of Stockholders' Equity - Six Months
Ended June 30, 1995 and Years Ended December 31, 1994,
1993 and 1992 F-5
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1995 and 1994 and Years Ended December 31, 1994,
1993 and 1992 F-6
Notes to Consolidated Financial Statements -
December 31, 1994, 1993 and 1992 F-7
Page F-1
Independent Auditors' Report
The Board of Directors and Stockholders
Confluence Bancshares Corporation:
We have audited the accompanying consolidated balance sheets of
Confluence Bancshares Corporation and subsidiary as of
December 31, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31,
1994. These consolidated financial statements are the
responsibility of Confluence Bancshares Corporation's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated 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 our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Confluence Bancshares Corporation and subsidiary as
of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in notes 1 and 2 to the consolidated financial
statements, Confluence Bancshares Corporation and subsidiary
changed their method of accounting for investments in debt
securities to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," on January 1, 1994. As discussed in notes 1 and 6,
Confluence Bancshares Corporation and subsidiary changed their
method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
KPMG Peat Marwick LLP
St. Louis, Missouri
June 30, 1995
Page F-2
CONFLUENCE BANCSHARES CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and December 31, 1994 and 1993
(dollars expressed in thousands, except share data)
June 30, December 31
ASSETS 1995 1994 1993
(Unaudited)
Cash and due from banks $ 2,912 3,470 1,459
Federal funds sold 5,335 1,715 4,775
CASH AND CASH EQUIVALENTS 8,247 5,185 6,234
Interest-bearing deposits with other 201 202 203
financial institutions
Investment securities:
Available-for-sale, at estimated market value 8,535 5,201 -
Held-to-maturity (estimated market value of $6,438,
$4,559, and $10,225 at June 30, 1995 and December 31,
1994 and 1993, respectively) 6,394 4,763 10,200
Loans 53,156 46,534 32,532
Less:
Unearned discount and deferred loan fees 22 23 30
Allowance for possible loan losses 658 559 391
LOANS, NET 52,476 45,952 32,111
Office properties, furniture, and equipment, net of
accumulated depreciation 1,982 1,984 1,946
Accrued interest receivable 526 364 279
Other assets 212 190 122
TOTAL ASSETS $78,573 63,841 51,095
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing 9,735 9,547 9,252
Interest-bearing 62,908 49,009 37,348
TOTAL DEPOSITS 72,643 58,556 46,600
Note payable 250 - -
Accrued interest payable 274 187 90
Other liabilities 133 271 129
TOTAL LIABILITIES 73,300 59,014 46,819
Stockholders' equity:
Common stock, $1 par value; 200,000 shares authorized,
issued and outstanding 200 200 200
Surplus 3,800 3,800 3,800
Retained earnings 1,194 856 276
Unrealized holding gain (loss) on securities
available-for-sale, net 79 (29) -
TOTAL STOCKHOLDERS' EQUITY 5,273 4,827 4,276
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $78,573 63,841 51,095
See accompanying notes to consolidated financial statements.
Page F-3
<TABLE>
CONFLUENCE BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Six months ended June 30, 1995 and
1994 and years ended December 31, 1994, 1993, and 1992
(dollars expressed in thousands, except share data)
<CAPTION>
June 30 December 31
1995 1994 1994 1993 1992
(Unaudited)
<S>
Interest income: <C> <C> <C> <C> <C>
Interest and fees on loans $ 2,415 1,599 3,696 2,413 1,761
Interest on investment securities:
Taxable 371 167 376 341 307
Exempt from federal income tax 32 10 23 7 -
Interest on federal funds sold 111 52 119 133 140
Interest on interest-bearing deposits with
other financial institutions 5 5 11 2 -
TOTAL INTEREST INCOME 2,934 1,833 4,225 2,896 2,208
Interest expense:
Interest on deposits 1,397 709 1,677 1,238 1,152
Interest on note payable 7 - - - -
TOTAL INTEREST EXPENSE 1,404 709 1,677 1,238 1,152
NET INTEREST INCOME 1,530 1,124 2,548 1,658 1,056
Provision for possible loan losses 103 120 242 140 73
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 1,427 1,004 2,306 1,518 983
Noninterest income:
Service charges on deposit accounts 41 38 76 54 22
Loss on sale of investment securities, net - - - - (1)
Other service charges and fee income 29 20 42 44 15
TOTAL NONINTEREST INCOME 70 58 118 98 36
Noninterest expense:
Salaries 400 287 637 496 358
Employee benefits 73 51 110 81 50
Occupancy 63 54 112 109 63
Furniture and equipment 64 48 101 79 51
Data processing fees 34 60 97 89 77
Federal Deposit Insurance Corporation assessment 64 50 107 76 54
Stationery, supplies, and postage 30 21 42 45 24
Directors' fees 23 21 42 34 45
Advertising and public relations 25 8 21 14 28
Other expenses 175 135 251 222 165
TOTAL NONINTEREST
EXPENSE 951 735 1,520 1,245 915
INCOME BEFORE INCOME
TAX EXPENSE AND
EXTRAORDINARY ITEM 546 327 904 371 104
Income tax expense 208 124 324 135 25
INCOME BEFORE
EXTRAORDINARY ITEM 338 203 580 236 79
Extraordinary item - utilization of net operating loss
carryforwards - - - - 22
NET INCOME $ 338 203 580 236 101
Share data:
Average common shares outstanding 200,000 200,000 200,000 200,000 200,000
Earnings per common share:
Income before extraordinary item $ 1.69 1.02 2.90 1.18 .40
Extraordinary item - - - - .11
Net income $ 1.69 1.02 2.90 1.18 .51
</TABLE>
See accompanying notes to consolidated financial statements.
Page F-4
<TABLE>
CONFLUENCE BANCSHARES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six months ended June 30, 1995
and years ended December 31, 1994, 1993, and 1992
(dollars expressed in thousands, except share data)
<CAPTION>
Unrealized
Re- holding
tained gain (loss) on Total
earn- securities stock-
Common ings available- holders'
stock Surplus (deficit) for-sale,net equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $200 3,800 (61) - 3,939
Net income - - 101 - 101
Balance at December 31, 1992 200 3,800 40 - 4,040
Net income - - 236 - 236
Balance at December 31, 1993 200 3,800 276 - 4,276
Cumulative effect of implementation of
change in accounting for investment
securities, net of tax - - - 1 1
Net income - - 580 - 580
Net change in unrealized holding gain (loss)
on securities available-for-sale,
net of tax - - - (30) (30)
Balance at December 31, 1994 200 3,800 856 (29) 4,827
Net income (unaudited) - - 338 - 338
Net change in unrealized holding gain (loss)
on securities available-for-sale,
net of tax (unaudited) - - - 108 108
Balance at June 30, 1995 (unaudited) $200 3,800 1,194 79 5,273
</TABLE>
See accompanying notes to consolidated financial statements.
Page F-5
<TABLE>
CONFLUENCE BANCSHARES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1995 and 1994 and
years ended December 31, 1994, 1993, and 1992
(dollars expressed in thousands)
<CAPTION>
June 30 December 31
1995 1994 1994 1993 1992
(Unaudited)
<S>
Cash flows from operating activities: <C> <C> <C> <C> <C>
Net income $ 338 203 580 236 101
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, net of accretion 54 65 123 177 136
Provision for possible loan losses 103 120 242 140 73
Decrease (increase) in accrued interest receivable (162) 7 (85) (91) (35)
Increase (decrease) in accrued interest payable 87 22 97 18 (18)
Net change in other assets and liabilities (216) (17) 89 56 20
Loss on sale of investment securities, net - - - - 1
Other operating activities, net (1) (16) (7) 12 (6)
Originations of loans for sale (1,508) (887) (1,496) (353) -
Proceeds from sale of loans 1,508 887 1,496 353 -
NET CASH PROVIDED BY
OPERATING ACTIVITIES 203 384 1,039 548 272
Cash flows from investing activities:
Purchase of interest-bearing deposits - - - (205) -
Purchase of investment securities, available-for-sale (6,469) - (5,389) - -
Purchase of investment securities, held-to-maturity (2,294) - (99) (9,796) (6,139)
Proceeds from maturities and principal payments of
investment securities, available-for-sale 3,299 33 855 - -
Proceeds from maturities and principal payments of
investment securities, held-to-maturity 670 2,949 3,798 4,443 1,950
Proceeds from sales of investment securities,
available-for-sale. - - 996 - -
Proceeds from sales of investment securities,
held-to-maturity - - - - 2,025
Net increase in loans (6,631) (9,137) (14,084) (8,362) (7,964)
Recoveries of loans previously charged off 5 - 8 1 15
Purchases of office properties, furniture, and equipment (58) (103) (129) (373) (636)
NET CASH USED IN
INVESTING ACTIVITIES (11,478) (6,258) (14,044) (14,292) (10,749)
Cash flows from financing activities:
Net increase in deposits 14,087 6,950 11,956 14,955 8,594
Borrowings on note payable 250 - - - -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 14,337 6,950 11,956 14,955 8,594
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 3,062 1,076 (1,049) 1,211 (1,883)
Cash and cash equivalents, beginning of period 5,185 6,234 6,234 5,023 6,906
Cash and cash equivalents, end of period $ 8,247 7,310 5,185 6,234 5,023
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Income taxes $ 389 187 305 60 (6)
Interest on deposits and note payable 1,317 687 1,580 1,220 1,170
Noncash:
Transfer of debt securities to available-for-sale - 1,708 1,708 - -
Loans charged-off 9 77 82 - -
</TABLE>
See accompanying notes to consolidated financial statements.
Page F-6
1. Summary of Significant Accounting Policies
Organization
Confluence Bancshares Corporation (Bancshares) was formed for
the purpose of acquiring control of the Duchesne Bank (the
Bank), a Missouri chartered bank, which commenced operations
on March 30, 1989. On February 15, 1995, the
shareholders of the Bank received one share of Bancshares
stock in exchange for each share of Bank stock. The merger
represented a combination of entities under common control
and, accordingly, was accounted for in a manner similar to a
pooling of interest. Therefore, results of operations for
periods prior to February 1995, reflect the results of
operations for only the Bank.
Business
Confluence Bancshares Corporation and subsidiary (the
Company) provides a full range of banking services to
individual and corporate customers through its wholly owned
subsidiary bank located in St. Peters, Missouri. The Company
is subject to competition from other financial and
nonfinancial institutions providing financial products
throughout the local area. Additionally, the Company and the
Bank are subject to the regulations of certain federal and
state agencies which perform periodic examinations.
Basis of Financial Statement Presentation
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. In preparing the consolidated
financial statements, management is required to make
estimates and assumptions which significantly affect the
reported amounts in the consolidated financial statements.
The most significant estimate, which is particularly
susceptible to significant change in the near term, relates
to the determination of the allowance for possible loan
losses. The more significant accounting policies used by the
Company in the accompanying consolidated financial statements
are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and the Bank. All significant intercompany
balances and transactions have been eliminated.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows,
cash and cash equivalents is defined as cash and due from
banks and federal funds sold.
Investment Securities
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115), on
January 1, 1994. Under SFAS 115, debt securities are
classified in one of three categories: trading, available
for-sale, or 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
which the Company has the ability and intent to hold until
maturity. Securities not classified as trading or held-to-
maturity are classified as available-for-sale.
Page F-7
Available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or
discounts. 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. Transfers of securities
between categories are recorded at fair value at the date of
transfer. Unrealized gains and losses associated with
transfers of securities from the held-to-maturity category to
the available-for-sale category are recorded as a separate
component of stockholders' equity. The unrealized gains and
losses included in the separate component of stockholders'
equity for securities transferred from the available-for-sale
category to the held-to-maturity category are maintained and
amortized into earnings over the remaining life of the
security as an adjustment to yield using the interest method.
A decline in the market value of any available-for-sale or
held-to-maturity 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.
For securities in the available-for-sale and held-to-maturity
categories, premiums and discounts are amortized and accreted
over the lives of the respective securities, with
consideration of historical and estimated prepayment rates,
as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned.
Realized gains and losses for securities classified as
available-for-sale are included in earnings and are derived
using the specific identification method for determining the
cost of securities sold.
Prior to adoption of SFAS 115 on January 1, 1994, investments
in debt securities were stated at cost, adjusted for
amortization of premiums and accretion of discounts over the
period to maturity of the respective security. Amortization
of premiums and accretion of discounts on mortgage-backed
securities were amortized in relation to the corresponding
prepayment rates, both historical and estimated, using a
method which approximates the interest method. Gains or
losses were recognized upon realization and were shown
separately in the consolidated statements of income and the
cost of the securities sold was based on a specific
identification method.
Loans
The Company grants commercial, real estate mortgage, and
consumer loans primarily to customers in the Company's
immediate geographic lending area. A substantial portion of
the loan portfolio is secured by real estate in the local
area. In addition, the Company has a concentration of credit
in the residential construction economic sector.
Page F-8
Loans receivable are carried at cost, adjusted for
amortization of premiums and accretion of discounts using a
method which approximates the level yield method. Interest
and fees on loans are recorded in income using the interest
method. Loans receivable are stated at cost as the Company
has the ability and it is management's intent to hold them to
maturity. The accrual of interest is discontinued when
management believes interest or principal may not be paid in
a timely manner in the normal course of business. A loan
remains on nonaccrual status until the loan is current as to
payment of both principal and interest and/or the borrower
demonstrates the ability to pay and remain current.
Generally, payments received on nonaccrual loans are recorded
as principal reductions. Interest income is recognized after
all principal has been repaid or an improvement in the
condition of the loan has occurred which would warrant
resumption of interest accruals.
The Bank originates certain loans which are sold in the
secondary mortgage market with servicing released to various
private investors. These fixed and adjustable rate loans are
sold on a note-by-note basis. Upon committing to a loan
applicant to originate a mortgage loan, the Company enters
into an agreement to sell the mortgage loan to the investor
without recourse. At December 31, 1994 and 1993, no mortgage
loans were held for sale. The gains and losses on the sale
of mortgage loans are included in other service charges and
fee income in the consolidated statements of income.
The allowance for possible loan losses is maintained at a
level considered adequate to provide for potential losses.
The provision for possible 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
estimated 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 possible 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
possible loan losses of the Company. Such agencies may
require the Company to increase its allowance for possible
loan losses based on their judgments and interpretations
about information available to them at the time of their
examinations.
Office Properties, Furniture, and Equipment
Office properties, furniture, and equipment are stated at
cost less accumulated depreciation. Depreciation is computed
primarily using the straight-line method over the estimated
useful lives of the related assets. Office properties and
improvements are depreciated over five to 40 years and
furniture and equipment over three to seven years.
Expenditures for major renewals and betterments of office
properties, furniture, and equipment are capitalized, and
those for maintenance and repairs are expensed as incurred.
Page F-9
Income Taxes
The Company and the Bank file consolidated federal income tax
returns.
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
requires a change from the deferred method of accounting for
income taxes pursuant to Accounting Principle Board (APB)
Opinion 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of
SFAS 109, deferred tax assets and liabilities are recognized
for the 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 expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the
enactment date.
Effective January 1, 1993, the Company adopted SFAS 109;
however, no adjustment was necessary to reflect the
cumulative effect of adoption in the Company's 1993
consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which
was applied in 1992 and prior years, deferred income taxes
were recognized for income and expense items that were
reported in different years for financial reporting purposes
and income tax purposes using the tax rate applicable for the
year of the calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
Earnings Per Common Share
Earnings per common share data is calculated using the
weighted average number of shares of common stock outstanding
during each period.
2. Investments in Debt Securities
Effective January 1, 1994, the Company adopted SFAS 115, for
which the cumulative effect was recorded on the consolidated
balance sheet on that date. On January 1, 1994, debt
securities with an amortized cost of $1,707,000 were
classified as available-for-sale securities; a market
valuation account was established for the available-for-sale
securities of approximately $1,000 to increase the recorded
balance of such securities at January 1, 1994 to their fair
value on that date; a deferred tax liability was also
recorded to reflect the tax effect of the market valuation
account; and the net increase resulting from the market
valuation adjustment at January 1, 1994 was recorded as a
separate component of stockholders' equity. The Company did
not classify any securities as trading securities at January
1, 1994.
Page F-10
<TABLE>
The amortized cost, gross unrealized gains and losses, and
estimated market values of debt securities classified as
available-for-sale at December 31, 1994 are as follows:
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities $4,152 - (21) 4,131
Securities of U.S. government corporations
and agencies 495 1 - 496
Mortgage-backed securities 599 - (25) 574
$5,246 1 (46) 5,201
</TABLE>
<TABLE>
The amortized cost, gross unrealized gains and losses, and
estimated market values of debt securities classified as held
to-maturity at December 31, 1994 are as follows:
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 550 - (6) 544
Securities of U.S. government corporations
and agencies 1,700 - (104) 1,596
Obligations of states and political
subdivisions 1,738 - (71) 1,667
Other debt securities 775 - (23) 752
$4,763 - (204) 4,559
</TABLE>
<TABLE>
The amortized cost and estimated market value of investment
securities classified as available-for-sale and held-to
maturity at December 31, 1994, by contractual maturity, are
shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
<CAPTION>
Available-for-sale Held-to-maturity
Estimated Estimated
Amortized market Amortized market
cost value cost value
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $2,969 2,959 1,520 1,506
Due after one year through five years 982 972 3,144 2,959
Due after five years through ten years 696 696 - -
Due after ten years - - 99 94
4,647 4,627 4,763 4,559
Mortgage-backed securities 599 574 - -
$5,246 5,201 4,763 4,559
</TABLE>
Page F-11
<TABLE>
The amortized cost, gross unrealized gains and losses, and
estimated market values of investment securities at
December 31, 1993 were as follows:
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains Losses value
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 4,466 8 - 4,474
Securities of U.S. government corporations
and agencies 2,201 1 (2) 2,200
Obligations of states and political
subdivisions 1,747 21 - 1,768
Other debt securities 1,786 2 (5) 1,783
$10,200 32 (7) 10,225
</TABLE>
Proceeds from the sale of investment securities classified as
available-for-sale during 1994 were approximately $996,000.
The sales produced no gains or losses.
Proceeds from the sale of investment securities during 1992
were approximately $2,025,000. Gross gains and losses of $0
and approximately $1,000, respectively, were realized on
those sales. There were no sales of investment securities in
1993.
Investment securities with a carrying value of approximately
$5.9 million and $4.5 million at December 31, 1994 and 1993,
respectively, were pledged to secure public funds and for
other purposes as required or permitted by law.
3. Loans
The composition of the loan portfolio at December 31, 1994
and 1993 is as follows:
1994 1993
(dollars expressed in thousands)
Commercial, financial, and agricultural $ 8,275 6,453
Real estate:
Commercial 19,541 13,607
Construction 9,045 7,014
Residential 7,464 4,317
Consumer 1,911 1,111
Other 298 30
$46,534 32,532
The Company grants commercial, residential, and consumer
loans to customers throughout their service area, which is
primarily in St. Louis and St. Charles County, Missouri. A
substantial portion of the loan portfolio is secured by real
estate in the local area. In addition, the Company has a
concentration of credit in the residential construction
economic sector. The majority of the construction loans are
made to local home builders to fund residential construction,
on both pre-sold and speculative residential homes, in
subdivisions located throughout the Company's service area.
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.
Page F-12
Transactions in the allowance for possible loan losses for
the years ended December 31, 1994, 1993, and 1992 are
summarized as follows:
1994 1993 1992
(dollars expressed in thousands)
Balance at beginning of year $391 250 162
Provision charged to operations 242 140 73
Loans charged off (82) - -
Recoveries of loans previously charged off 8 1 15
Balance at end of year $559 391 250
Nonaccrual loans totaled approximately $118,000 at December
31, 1994. Interest on nonaccrual loans, which would have
been recorded under the original terms of the loans, and
interest on nonaccrual loans, which was actually recorded,
were approximately $13,000 and $10,000, respectively, for the
year ended December 31, 1994. There were no nonaccrual loans
at December 31, 1993.
Aggregate loan transactions involving executive officers and
directors of the Company for the year ended December 31, 1994
are summarized as follows (dollars expressed in thousands):
Aggregate balance, December 31, 1993 $2,291
New loans and advances 2,024
Repayments (1,014)
Aggregate balance, December 31, 1994 $3,301
Such loans were made in the ordinary course of business at
normal credit terms, including interest rates and collateral,
prevailing at the time for comparable transactions with
unrelated parties, and do not involve more than the normal
risk of collection.
4. Office Properties, Furniture, and Equipment
Office properties, furniture, and equipment at December 31,
1994 and 1993 are summarized as follows:
1994 1993
(dollars expressed in thousands)
Land and land improvements $ 492 489
Buildings and improvements 1,242 1,233
Furniture, fixtures, and equipment 530 413
2,264 2,135
Less accumulated depreciation 280 189
$1,984 1,946
Depreciation expense for the years ended December 31, 1994,
1993, and 1992 was approximately $91,000, $85,000, and
$56,000, respectively.
Page F-13
The Company leases three automobiles under operating leases.
Future minimum rentals under the lease agreements as of
December 31, 1994 are as follows (dollars expressed in
thousands):
1995 $17
1996 11
$28
5. Interest-Bearing Deposits
Interest-bearing deposits at December 31, 1994 and 1993 are
summarized as follows:
1994 1993
(dollars expressed in thousands)
Interest-bearing demand deposits $14,169 15,359
Savings deposits 1,476 1,384
Time and certificates of deposit:
Less than $100,000 21,509 12,152
$100,000 and over 11,855 8,453
$49,009 37,348
A local hospital, at which a director of the Company and the
Bank is an officer, maintained deposits of approximately $7.5
million and $6.3 million at the Bank at December 31, 1994 and
1993, respectively. The related interest paid on those
deposits totaled approximately $251,000 and $227,000 for the
years ended December 31, 1994 and 1993, respectively.
Interest on deposits for the years ended December 31, 1994,
1993, and 1992 consists of the following:
1994 1993 1992
(dollars expressed in thousands)
Interest-bearing demand deposits $ 467 412 349
Savings deposits 38 26 9
Time and certificates of deposit:
Less than $100,000 757 462 362
$100,000 and over 415 338 432
$1,677 1,238 1,152
6. Income Taxes
As discussed in note 1, the Company adopted SFAS 109 as of
January 1, 1993; however, no adjustment to the consolidated
statement of income was necessary to reflect the cumulative
effect of this adoption in the Company's consolidated
financial statements.
The components of income tax expense for the years ended
December 31, 1994, 1993, and 1992 are as follows:
1994 1993 1992
(dollars expressed in
thousands)
Current:
Federal $344 147 37
State and local 36 13 2
380 160 39
Deferred income taxes (56) (25) (14)
$324 135 25
A reconciliation of expected income tax expense to income tax
expense computed by applying the federal statutory rate of
34% to income before income tax expense and extraordinary
item for the years ended December 31, 1994, 1993, and 1992 to
reported income tax expense is as follows:
1994 1993 1992
(dollars expressed in
thousands)
Expected statutory federal income tax $307 127 35
Increase (decrease) in income taxes
resulting from:
State and local income tax,
net of federal income tax effect 24 9 2
Tax-exempt income (8) (3) -
Graduated income tax rates - - (13)
Other, net 1 2 1
Income tax expense $324 135 25
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 1994 and 1993 are presented
below:
1994 1993
(dollars exressed in thousands)
Deferred tax assets:
Allowance for possible loan losses $179 96
Unrealized holding loss on securities
available-for-sale 16 -
All other deferred tax assets - 5
Total deferred tax assets 195 101
Deferred tax liabilities:
Office properties, furniture, and equipment (49) (29)
All other deferred tax liabilities (5) (3)
Total deferred tax liabilities (54) (32)
Net deferred tax asset $141 69
Page F-15
Pursuant to SFAS 109, a valuation allowance would be provided
on deferred tax assets when it is more likely than not some
portion of the assets will not be realized. The Company has
not established a valuation allowance as of December 31, 1994
and 1993, due to management's belief that it is more likely
than not that the results of future operations will generate
sufficient taxable income to realize the deferred tax assets.
The significant components of deferred income tax expense for
the year ended December 31, 1992 is as follows (dollars
expressed in thousands):
Provision for possible loan losses for financial
reporting purposes greater than for tax reporting
purposes $(24)
Depreciation 6
Other, net 4
$(14)
For consolidated financial statement purposes, the Company
had approximately $56,000 of net operating loss carryforwards
which were fully utilized in 1992. The utilization of the
net operating loss carryforwards is reflected as an
extraordinary item in the consolidated statements of income.
7. Commitments and Contingent Liabilities
The Company is party to financial instruments with off-
balance-sheet risk in the normal course of business to meet
the financing needs of its customers and to reduce its own
exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets.
The contractual amounts of those instruments reflect the
extent of involvement the Company has in particular classes
of financial instruments.
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 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
on-balance-sheet instruments.
Contractual amount
1994 1993
(dollars expressed in thousands)
Financial instruments whose contractual amounts
represent:
Commitments to extend credit $7,616 6,372
Standby letters of credit 589 554
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any conditions
established in the contract. Standby letters of credit are
conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party.
Page F-16
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 are expected to expire without being drawn
upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates
each customer's creditworthiness 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 counterparty. Collateral held
varies, but may include commercial and residential real
estate, accounts receivable, inventory and equipment, and
securities.
At December 31, 1994 and 1993, approximately $186,000 and
$84,000, respectively, of cash and due from banks represented
cash reserves on deposits maintained by the Company in
accordance with Federal Reserve Bank requirements.
8. Capital Requirements and Dividend Limitations
The Bank is restricted by state and federal regulations in
the amount of dividends which is available for payment to the
Company. The Bank is state-chartered and subject to
supervision by the Federal Deposit Insurance Corporation and
Missouri Division of Finance, and is only limited in the
amount of dividends paid, without prior regulatory approval,
to the maintenance of minimum capital requirements and to
what sound and prudent banking practices would permit.
Subsequent to December 31, 1994, as described in note 11, the
Company entered into a line of credit note with an
unaffiliated bank, which requires maintenance of certain
financial ratios. Additionally, in accordance with the
provisions of the Company's Agreement and Plan of Merger with
Firstbank of Illinois Co. described in note 12, the Company
is prohibited from making any dividend distributions to the
shareholders from June 15, 1995 through the transaction
closing date, which is expected to occur in the third quarter
of 1995.
9. Federal Funds Purchased
At December 31, 1994, the Company has the ability to borrow a
total of approximately $3.7 million from three unaffiliated
financial institutions under federal fund lines of credit.
There were no outstanding borrowings at December 31, 1994 or
at December 31, 1993.
10.Employee Benefits
Effective July 1, 1994, the Company established a defined
contribution 401(k) plan to provide retirement benefits to
eligible employees. Contributions made by the Company under
the plan were approximately $7,000 for the year ended
December 31, 1994. Postretirement benefits are generally not
provided for the Company's employees.
11.Interim Consolidated Financial Information - (Unaudited)
Basis of Presentation
The unaudited interim consolidated financial statements
include the accounts of the Company and the Bank after
elimination of material intercompany transactions. This
unaudited data, in the opinion of the Company, includes all
adjustments necessary for the fair presentation thereof. All
adjustments made were of a normal and recurring nature.
Page F-17
Note Payable
On February 27, 1995, the Company obtained a line of credit
demand note with an original face value of $2,000,000 from an
unaffiliated bank. On that same date, the Company borrowed
$250,000 on the line of credit which was used to pay
approximately $30,000 in organizational expenses related to
the formation of Confluence Bancshares Corporation. The
remaining $220,000 was used to make a capital contribution to
the Bank.
The demand note provides for interest payments quarterly.
The demand note bears interest at the lending bank's prime
rate on commercial loans (9.0% at June 30, 1995). Principal
payments are not required, and the Company has the right to
prepay the demand note in whole or in part at any time
without penalty or premium provided certain conditions are
met. All of the common stock of the Bank is pledged to
secure the demand note. The loan contains various
restrictions with respect to the Company, including
maintenance of certain financial ratios. As of June 30,
1995, the Company has complied with all restrictions and
limitations in the line of credit loan agreement.
Implementation of New Accounting Principle
Effective January 1, 1995, the Company adopted Statement of
Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" (SFAS 114) and Statement
of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures" (SFAS 118), which amends SFAS 114.
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 are required to be discounted at the loan's effective
interest rate. Alternatively, impairment can 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 a creditor to use existing
methods for recognizing interest income on an impaired loan.
The Company has elected to continue to use its existing
nonaccrual methods for recognizing interest on impaired
loans. The Company continues to apply all payments received
on impaired loans to the outstanding balance of the loan
until such a time as the loan balance is reduced to zero,
after which payments are applied to interest income until
such time as the forgone interest is recovered, or until such
a time as an improvement in the condition of the loan has
occurred which would warrant resumption of interest accruals.
As of the adoption date of January 1, 1995 and at June 30,
1995, the Company had one impaired loan in the amount of
approximately $118,000 which is represented by the loan on
nonaccrual status December 31, 1994 . No specific reserve
has been allocated to this impaired loan at January 1, 1995
and June 30, 1995. The adoption of SFAS 114 and SFAS 118
resulted in no prospective adjustment to the provision for
possible loan losses.
Page F-18
12.Subsequent Event - Merger Agreement with Firstbank of
Illinois Co.
On June 15, 1995, the Company entered into an Agreement and
Plan of Merger with Firstbank of Illinois Co. (Firstbank) and
Firstbank's wholly owned subsidiary, Colonial Bancshares,
Inc. (Colonial) to merge Confluence Bancshares Corporation
into Colonial. At December 31, 1994, Firstbank, which is
headquartered in Springfield, Illinois, had total assets of
approximately $1.75 billion. The merger agreement with
Firstbank will be effected through a stock for stock
exchange. The merger is contingent upon approval of various
regulatory agencies and the stockholders of Confluence
Bancshares Corporation and the Federal Reserve Bank under the
Agreement. If approved, the merger is expected to close by
the third quarter of 1995.
Page F-19
EXHIBIT A
Section 351.455 of the Missouri Act provides:
351.455 Shareholder who objects to merger may demand value
of shares when:
1. If a shareholder of a corporation which is a party to a
merger or consolidation shall file with such corporation, prior
to or at the meeting of shareholders at which the plan of merger
or consolidation is submitted to a vote, a written objection to
such plan of merger or consolidation, and shall not vote in favor
thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on
the surviving or new corporation for payment of the fair value of
his shares as of the day prior to the date on which the vote was
taken approving the merger or consolidation, the surviving or new
corporation shall pay to such shareholder, upon surrender of his
certificate or certificates representing said shares, the fair
value thereof. Such demand shall state the number of class of
the shares owned by such dissenting shareholder. Any shareholder
failing to make demand within the twenty day period shall be
conclusively presumed to have consented to the merger or
consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such
merger or consolidation was effected the value of such shares is
agreed upon between the dissenting shareholder and the surviving
or new corporation, payment therefor shall be made within ninety
days after the date on which such merger or consolidation was
effected, upon the surrender of his certificate or certificates
representing said shares. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such
shares or in the corporation.
3. If within such period of thirty days the shareholder
and the surviving or new corporation do not so agree, then the
dissenting shareholder may, within sixty days after the
expiration of the thirty day period, file a petition in any court
of competent jurisdiction within the country in which the
registered office of the surviving or new corporation is
situated, asking for a finding and determination of the fair
value of such shares, and shall be entitled to judgment against
the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was
taken approving such merger or consolidation, together with
interest thereon to the date of such judgment. The judgment
shall be payable only upon and simultaneously with the surrender
of the surviving or new corporation of the certificate or
certificates representing said shares. Upon payment of the
judgment, the dissenting shareholder shall cease to have any
interest in such shares of in the surviving or new corporation.
Such shares may be held and disposed of by the surviving or new
corporation as it may see fit. Unless the dissenting shareholder
shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the merger or
consolidation, and shall be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the
fair value of his shares as herein provided shall cease if and
when the corporation shall abandon the merger or consolidation.
Page A-1
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Under its Certificate of Incorporation, Firstbank
shall, to the full extent permitted by the Delaware General
Corporation Law, as it may be in effect from time to time,
indemnify each person who is or was a director or officer of
Firstbank against any liability, cost, or expense incurred
by him or her in his or her capacity as a director or
officer or arising out of his status as a director or
officer.
Page II-1
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
2.1 Agreement and Plan of Merger, dated as of June 15, 1995,
by and among Firstbank of Illinois Co., Colonial Bancshares,
Inc. and Confluence Bancshares Corporation
2.2 First Amendment to Agreement and Plan of Merger, dated
as of July 15, 1995, by and among Firstbank of Illinois
Co., Colonial Bancshares, Inc. and Confluence Bancshares
Corporation
5.1 Opinion of Brown, Hay & Stephens
8.1 Opinion of Thompson & Mitchell
13.1 Form 10-K for the fiscal year ended December 31, 1994
of Registrant (including the portions of the Registrant's 1994
Annual Report incorporated therein) is incorporated by reference
herein.
13.2 Quarterly reports on Form 10-Q for the quarters ended March 31,
1995, and June 30, 1995 are incorporated by reference herein.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Brown, Hay & Stephens (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
99.1 Form of Proxy for Confluence Bancshares Corporation
(b) Financial Statement Schedules
Not Required
Page II-2
Item 22. Undertakings
(a) 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 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.
The undersigned Registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the
latest annual report to security holders that is
incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange
Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference
in the prospectus to provide such interim financial
information.
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
(described in Item 20), 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 expense 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 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.
(b) 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 documents filed subsequent to the
effective date of the registration statement through
the date of responding to the request.
(c) 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.
(d) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or 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.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective 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.
(e) The undersigned Registrant hereby undertakes 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.
(f) The undersigned Registrant hereby undertakes 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.
Page II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Springfield, State of Illinois, on
_________________________, 1995.
FIRSTBANK OF ILLINOIS CO.
By: /s/ Mark H. Ferguson
Mark H. Ferguson
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints Mark H. Ferguson and Chris R. Zettek and each of
them, the true and lawful attorneys-in-fact and agents of the
undersigned, with full power of substitution and resubstitution,
for and in the name, place, and stead of the undersigned, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to the Registration Statement, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully for all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature and Capacity Date
/s/ Mark H. Ferguson July 31, 1995
Mark H. Ferguson,
Chairman, President,
Chief Executive Officer and Director
/s/ Leo J. Dondanville, Jr. July 31, 1995
Leo J. Dondanville, Jr.
Director
/s/ William T. Grant, Jr. July 31, 1995
William T. Grant, Jr.
Director
/s/ William B. Hopper July 31, 1995
William B. Hopper
Director
Page II-4
/s/ Robert W. Jackson July 31, 1995
Robert W. Jackson
Director
/s/ William R. Schnirring July 31, 1995
William R. Schnirring
Director
/s/ Robert L. Sweney July 31, 1995
Robert L. Sweney
Director
/s/ E. Jack Thornburg July 31, 1995
E. Jack Thornburg
Director
/s/ P. Richard Ware July 31, 1995
P. Richard Ware
Director
/s/ Richard E. Zemenick July 31, 1995
Richard E. Zemenick
Director
/s/ Chris R. Zettek July 31, 1995
Chris R. Zettek
Executive Vice President and
Chief Financial Officer
/s/ Daniel R. Davis July 31, 1995
Daniel R. Davis
Vice President and Controller
(Principal Accounting Officer)
Page II-5
EXHIBIT INDEX
Exhibit
2.1 Agreement and Plan of Merger, dated as of June 15, 1995,
by and among Firstbank of Illinois Co., Colonial Bancshares,
Inc. and Confluence Bancshares Corporation
2.2 First Amendment to Agreement and Plan of Merger, dated
as of July 14, 1995, by and among Firstbank of Illinois
Co., Colonial Bancshares, Inc. and Confluence Bancshares
Corporation
5.1 Opinion of Brown, Hay & Stephens
8.1 Opinion of Thompson & Mitchell
13.1 Form 10-K for the fiscal year ended December 31, 1994 of
Registrant (including the portions of the Registrant's 1994
Annual Report incorporated therein) is incorporated by
reference herein.
13.2 Quarterly reports on Form 10-Q for the quarters ended March 31,
1995, and June 30, 1995 are incorporated by reference herein.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Brown, Hay & Stephens (included in Exhibit 5.1)
23.4 Consent of Thompson & Mitchell (included in Exhibit 8.1)
24.1 Power of Attorney (included on Page II-4)
99.1 Form of Proxy for Confluence Bancshares Corporation
Page II-6
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
FIRSTBANK OF ILLINOIS CO.
a Delaware corporation
and
COLONIAL BANCSHARES, INC.
a Missouri corporation
and
CONFLUENCE BANCSHARES CORPORATION
a Missouri corporation
Dated June 15, 1995
TABLE OF CONTENTS
Agreement and Plan of Merger
I. The Merger
1.01 The Merger
1.02 Closing
1.03 Effective Time
1.04 Articles of Incorporation and By-Laws
1.05 Board of Directors and Officers
1.06 Additional Actions
1.07 Conversion of Securities
1.08 Surrender and Exchange of Shares
1.09 No Fractional Shares
1.10 Closing of Stock Transfer Books
II. Representation and Warranties of Confluence
2.01 Organization and Authority
2.02 Corporation Authorization; Records
2.03 Subsidiaries of Duchesne
2.04 Capitalization of Confluence
2.05 Capitalization of Duchesne
2.06 Financial Statements
2.07 Reports
2.08 Title to and Condition of Duchesne Assets
2.09 Real Property
2.10 Contracts, Commitments, and Certain Loans
2.11 Absence of Defaults
2.12 Absence of Undisclosed Liabilities
2.13 Taxes and Tax Returns
2.14 Material Adverse Change
2.15 Litigation and Other Proceedings
2.16 Legal Proceedings and Governmental Compliance
2.17 Labor and Employment
2.18 Material Interests of Certain Persons
2.19 Employee Benefit Plan
2.20 Conduct of Confluence and Duchesne to Date
2.21 Proxy Statement, etc.
2.22 Brokers, Investment Bankers, and Finders
2.23 Accuracy of Information
III. Representations and Warranties of Firstbank
3.01 Organization and Authority
3.02 Corporation Authorization; Records
3.03 Capitalization of Firstbank
3.04 Firstbank Financial Statements
3.05 Reports
3.06 Material Adverse Changes
3.07 Registration Statement, etc.
3.08 Brokers, Investment Bankers, and Finders
3.09 Accuracy of Information
3.10 Litigation; Governmental Compliance; Other Proceedings
3.11 Tax and Regulatory Matters
3.12 Compliance with Laws
IV. Conduct of Business Prior to the Effective Time
4.01 Conduct of Business Prior to the Effective Time
4.02 Forbearances by Confluence
4.03 Forbearance by Firstbank
V. Additional Agreements
5.01 Access and Information
5.02 Registration Statement; Regulatory Matters
5.03 Shareholder Approvals
5.04 Current Information
5.05 Agreements of Affiliates
5.06 Expenses
5.07 Miscellaneous Agreements and Consents
5.08 Press Releases
5.09 Shareholders' Undertakings
5.10 Due Diligence Review
5.11 ERISA Matters
5.12 Employee Agreements and Benefits
5.13 Directors' and Officers' Indemnification 5.14 Duchesne Board of
Directors
5.15 Tax Opinion Certificates
5.16 Firstbank Merger, Consolidation, or Acquisition
VI. Certain Conditions
6.01 Conditions to Each Party's Obligations to Effect the Merger
6.02 Conditions to Obligations of Confluence
6.03 Conditions to Obligations of the Firstbank Entities
VII. Termination, Amendment, and Waiver
7.01 Termination
7.02 Effect of Termination
7.03 Amendment
7.04 Waiver
VIII. General Provisions
8.01 Survival of Representations, Warranties, and Agreements
8.02 Indemnification
8.03 No Assignment; Successors and Assigns
8.04 Severability
8.05 No Implied Waiver
8.06 Headings
8.07 Entire Agreement
8.08 Schedules
8.09 Counterparts
8.10 Notices
8.11 Governing Law
8.12 Best Knowledge and Belief
Exhibit 2.04 First Stock Restriction Agreement
Exhibit 5.05 Affiliate Letter
Exhibit 5.09 Voting Agreement
Exhibit 5.15(a)
(b) and (c) Tax Opinion Certificates
Exhibit 6.02 Firstbank's Counsel's Legal Opinion
Exhibit 6.03 Confluence's Counsel's Legal Opinion
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the date last below written by and among FIRSTBANK OF ILLINOIS CO.,
a Delaware corporation ("Firstbank"), COLONIAL BANCSHARES, INC., a Missouri
corporation ("Colonial", and collectively with Firstbank, the "Firstbank
Entities") and CONFLUENCE BANCSHARES CORPORATION, a Missouri corporation
("Confluence"):
WHEREAS, Confluence is the beneficial and record owner of one hundred
percent (100%) of the issued and outstanding shares of the capital stock of
Duchesne Bank, a Missouri banking corporation ("Duchesne"); and
WHEREAS, Firstbank is the beneficial and record owner of one hundred
percent (100%) of the issued and outstanding shares of the capital stock of
Colonial; and
WHEREAS, the respective Boards of Directors of the Firstbank
Entities and Confluence have authorized the execution and delivery of this
Agreement; and
WHEREAS, the Firstbank Entities and Confluence desire to provide for
certain undertakings, conditions, representations, warranties, and covenants
in connection with the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, and agreements herein contained, the parties
agree as follows:
ARTICLE I
The Merger
1.01 The Merger. Subject to the terms and conditions
of this Agreement, Confluence shall be merged with and into
Colonial (the "Merger") in accordance with the Missouri
General and Business Corporation Law (the "Missouri Act") and
the separate corporate existence of Confluence shall cease.
Colonial shall be the surviving corporation in the Merger
(sometimes referred to herein as the "Surviving
Corporation").
1.02 Closing. The closing (the "Closing") of the
Merger shall take place, subject to satisfaction or waiver
of all conditions set forth in Article VI hereof, at the
offices of Brown, Hay & Stephens, 700 First National Bank
Building, Springfield, Illinois, 10:00 a.m. local time, on the
last Business Day (as hereinafter defined) of the month in
which the last of the following events occurs: (a) the
receipt of the requisite approval of this Agreement by
the shareholders of Confluence as set forth in Section
5.03 hereof and (b) the receipt of the approval of the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") and the expiration of any required waiting
period, or at such other time and place as the Firstbank
Entities and Confluence shall agree (the "Closing Date").
For purposes of this Agreement, "Business Day" shall mean any
day that the Office of the Secretary of State of the State
of Missouri is open for receipt of official corporate filings.
1.03 Effective Time. On the Closing Date, the
parties hereto will cause the Merger to be consummated by
delivering to the Missouri Secretary of State for filing
articles of merger (the "Articles of Merger") in such form
as required by, and duly executed and acknowledged in
accordance with, the relevant provisions of the Missouri
Act. The Merger shall be effective (the "Effective Time")
upon the issuance of a certificate of merger by the Missouri
Secretary of State.
1.04 Articles of Incorporation and By-Laws. The Articles
of Incorporation and By-Laws of Colonial in effect immediately
prior to the Effective Time shall be the Articles of Incorporation
and By-Laws of the Surviving Corporation and shall continue until
amended in accordance with their provisions and applicable law.
1.05 Board of Directors and Officers.
(a) At the Effective Time, the Board of Directors
of the Surviving Corporation shall consist of those persons
serving as directors of Colonial immediately prior to the
Effective Time and the terms of those directors after the
Effective Time shall be the same as their respective terms
immediately prior to the Effective Time (either by operation
of this Agreement or by action of Firstbank as the sole shareholder
of the Surviving Corporation immediately after the Effective Time).
(b) The officers of Colonial shall be the officers
of the Surviving Corporation until their respective successors
are duly elected and qualified.
1.06 Additional Actions. If, at any time after
the Effective Time, the Surviving Corporation shall consider or
be advised that any further deeds, assignments, or assurances
in law or any other acts are necessary or desirable to
(a) vest, perfect, or confirm, of record or otherwise, in
the Surviving Corporation its right, title, or interest in,
to, or under any of the rights, properties, or assets of
Confluence, or (b) otherwise carry out the purposes of this
Agreement, Confluence and its officers and directors shall
be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such
deeds, assignments, or assurances in law and to do all acts
necessary or proper to vest, perfect, or confirm title to and
possession of such rights, properties, or assets in the
Surviving Corporation and otherwise to carry out the purposes
of this Agreement, and the officers and directors of
the Surviving Corporation are authorized in the name of
Confluence or otherwise to take any and all such actions.
1.07 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of
the Firstbank Entities, Confluence, or the holder of any
of the following securities:
(a) Each share of common stock, $1.00 par value,
of Confluence (the "Confluence Common Stock") outstanding
shall be converted into the right to receive 2.5 shares of
common stock, $1.00 par value, of Firstbank (the "Firstbank
Common Stock") (such shares of Firstbank Common Stock to be
received in the Merger are collectively referred to herein
as the "Firstbank Conversion Stock"). The Firstbank Common
Stock is the only class of Firstbank stock that is currently
registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, and is traded on the
NASDAQ National Market under the symbol "FBIC." No
conversion will be made with respect to any shares of
Confluence Common Stock ("Dissenting Shares") the holder of
which has effectively demanded pursuant to the Missouri
Act the appraisal of such shares and who has timely filed
a written objection to the Merger and who neither voted in
favor of, nor consented in writing to, the Merger, and
who, as a result thereof, is entitled to receive the payment
of the fair value of such holder's shares of Confluence
Common Stock from the Surviving Corporation in accordance
with the Missouri Act (the "Dissenting Shareholder"). The exchange
ratio of 2.5 shares of Firstbank Common Stock for every 1 share of
Confluence Common Stock shall be equitably adjusted to
take into account any Capital Change respecting Firstbank in
accordance with Subsection (f) of this Section.
(b) Each share of common stock of Colonial issued
and outstanding immediately prior to the Effective Time
shall continue to be issued and outstanding from and
after the Effective Time, and shall for all purposes be
deemed to be validly issued and outstanding shares of
the Surviving Corporation.
(c) The holders of the Dissenting Shares, if
any, shall be entitled to payment for such shares only to the
extent permitted by and in accordance with the provisions
of the Missouri Act. The Surviving Corporation shall make any
payment to the holders of Dissenting Shares pursuant to the Missouri
Act.
(d) If, in accordance with the Missouri Act any
holder of Dissenting Shares shall forfeit such right to
payment of the fair value of such shares, such shares shall
thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right
to receive the applicable share of the consideration provided
in subsection (a) of this Section.
(e) Confluence shall give the Firstbank Entities
(i) prompt notice of any written objections to the Merger
and any written demands for the payment of the fair value of
any shares, withdrawals of such demands, and any other
instruments served pursuant to the Missouri Act and received
by Confluence, and (ii) the opportunity to direct all
negotiations and proceedings with respect to such demands
under the Missouri Act. Confluence shall not voluntarily make
any payment with respect to any demands for payment of fair
value and shall not, except with the prior written consent
of the Firstbank Entities, settle or offer to settle any
such demands.
(f) As used herein, the term "Capital Change"
includes stock splits, stock dividends, combinations of shares,
distributions of warrants or other rights, and/or any
other capital rearrangements by Firstbank. In the event
that any Capital Change occurs between the date of this
Agreement and the Closing Date respecting the shares of $1.00
par value Firstbank common stock comprising the Firstbank
Conversion Stock, the consideration comprising the Conversion
Stock shall be equitably adjusted so that the holders of
Confluence Common Stock who are entitled to receive Firstbank
Conversion Stock pursuant to the Merger will receive (in lieu
of each share of $1.00 par value Firstbank common stock to which
such holder would have been entitled if no Capital Change had
occurred) the same shares and/or other rights or property that
a holder of one share of $1.00 par value Firstbank common stock
immediately prior to such Capital Change was entitled to continue
to own and/or receive immediately after such Capital Change. This
provision shall apply severally in the event of successive Capital
Changes.
1.08 Surrender and Exchange of Shares.
(a) After the Effective Time, each holder of
a certificate or certificates theretofore evidencing outstanding
shares of Confluence Common Stock shall, upon surrender of the
same to: Colonial Bank, Des Peres, Missouri, (the "Exchange
Agent"), be entitled to receive in exchange therefor such
portion of the Firstbank Conversion Stock as shall be
attributable to the shares of Confluence Common Stock
theretofore represented by the certificate or certificates
so surrendered, all as determined pursuant to Section 1.07.
Immediately prior to the Effective Time, Firstbank shall deliver
the Firstbank Conversion Stock to the Exchange Agent for subsequent
delivery to the former holders of Confluence Common Stock, as hereinafter
provided. Within five (5) Business Days following the Closing Date,
the Exchange Agent shall mail to each holder of record of an outstanding
certificate which immediately prior to the Effective Time evidenced
shares of Confluence Common Stock, and which is to be exchanged
for Firstbank Conversion Stock, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to such certificate shall pass, only upon
delivery of such certificate to the Exchange Agent) advising
such holder of the terms and the exchange effected by the
Merger and the procedure for surrendering to the Exchange
Agent such certificate in exchange for certificates evidencing Firstbank
Conversion Stock attributable to the Confluence Common Stock being
surrendered. Upon receipt by the Exchange Agent of a properly completed
and executed letter of transmittal and applicable certificate
for shares of Confluence Common Stock, the Exchange Agent shall promptly
forward to the person(s) properly designated in the letter of transmittal
the Firstbank Conversion Stock and any other consideration or amounts
that may be due. Unless and until any such outstanding certificates
for shares of Confluence Common Stock shall be so surrendered, no dividend
(cash or stock) payable to holders of record of shares of Firstbank
Conversion Stock as of any time subsequent to the Effective
Time shall be paid to any holder thereof who otherwise would
have been entitled to receive the same, but upon such
surrender of such outstanding certificate there shall be paid
to such holder the amount of dividends, if any, without
interest and less any taxes which may have been imposed
thereon, that have therefore become payable with respect to the number
of whole shares of Firstbank Conversion Stock represented by the
Firstbank Conversion Stock issued upon such surrender and exchange of
such certificate. The Exchange Agent shall receive and hold all
dividends or other distributions paid or distributed with
respect to shares of Firstbank Conversion Stock held by it
for the account of the persons entitled thereto. After
one hundred eighty (180) days following the Effective Time,
the Exchange Agent shall deliver to Firstbank all shares of
Firstbank Conversion Stock and all undistributed cash and
other funds (including any interest received with respect
thereto) which Firstbank, or any of the Firstbank Entities
have transferred to the Exchange Agent, and which have not
been disbursed to holders of certificates formerly representing
shares of Confluence Common Stock, and thereafter such
holder shall be entitled to look to the Firstbank Entities,
jointly and/or severally (subject to abandoned property,
escheat, and other similar laws) with respect to such of the
foregoing as would otherwise be deliverable or payable upon
due surrender of their certificates. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto
shall be liable to any holder of shares of Confluence Common
Stock for any consideration paid to a public official
pursuant to any applicable abandoned property, escheat, or
similar laws.
(b) If any certificate evidencing shares of
Firstbank Conversion Stock is to be issued in a name other
than that in which the certificate so surrendered in
exchange therefor is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form
for transfer and that the person requesting such exchange
pay to Firstbank any transfer or other taxes required by
reason of the issuance of a certificate for shares of
Firstbank Conversion Stock in any name other than that of the
registered holder of the certificate surrendered or
otherwise establish to the satisfaction of Firstbank that
such tax has been paid or is not payable.
1.09 No Fractional Shares. Notwithstanding any
other provision of this Agreement, neither certificates nor scrip
for fractional shares of Firstbank Conversion Stock shall be
issued in the Merger. Each holder of shares of Confluence
Common Stock who otherwise would have been entitled to a
fraction of a share of Firstbank Conversion Stock shall
receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to
which such holder would otherwise be entitled by $27.50. No
such holder shall be entitled to dividends, voting rights,
or any other rights in respect of any fractional share.
1.10 Closing of Stock Transfer Books. The stock transfer
books of Confluence shall be closed at the close of business
5 business days preceding the date of the Effective Time. In
the event of a transfer of ownership of Confluence Common Stock
which is not registered in the transfer records of Confluence,
the consideration to be distributed pursuant to this Agreement
may be delivered to a transferee if the certificate representing
such shares is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and
by payment of any applicable stock transfer taxes. The Firstbank
Entities and the Exchange Agent shall be entitled to rely upon the
stock transfer books of Confluence to establish the identity of those
persons entitled to receive the consideration specified in this Agreement
for their shares of Confluence Common Stock, which books shall be conclusive
with respect to the ownership of such shares. In the event of a
dispute with respect to the ownership of any such shares, the Firstbank
Entities and the Exchange Agent shall be entitled to deposit any
consideration represented thereby in escrow with an independent
party and thereafter be relieved with respect to any claims to
such consideration.
ARTICLE II
Representations and Warranties of Confluence
As a material inducement to the Firstbank Entities to
enter into and perform their respective obligations under
this Agreement, and notwithstanding any examinations,
inspections, audits, and other investigations heretofore or hereafter
made by the Firstbank Entities, Confluence hereby represents and
warrants to the Firstbank Entities as follows:
2.01 Organization and Authority. Confluence is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Missouri, and all other
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified, and has
corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted.
Confluence is registered as a bank holding company with the
Federal Reserve Board under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). Except for Duchesne,
Confluence has no subsidiaries.
Duchesne is chartered as a Missouri Banking corporation by
the Missouri Division of Finance (the "Division of Finance"), is
duly authorized, validly existing, and in good standing under
the laws of the State of Missouri, and is a bank insured
by the Federal Deposit Insurance Corporation (the "FDIC")
under the Federal Deposit Insurance Act of 1950, as amended
(the "FDIC Act"). Each of Confluence and Duchesne possess
all corporate power and authority to own and operate its
respective properties and to carry out its respective
businesses as and where the same are now being conducted. The
character of the properties owned or leased by each of
Confluence and Duchesne and the nature of the business transacted
by each do not require that any of them be qualified to do business
in any other jurisdiction.
2.02 Corporation Authorization; Records. Confluence has the
corporate power and authority to enter into this Agreement and,
subject to the approval of the Merger by the shareholders of
Confluence and such approvals of government agencies and other
governing boards having regulatory authority over Confluence,
Duchesne, or the Firstbank Entities as may be required by
applicable law, rule, or regulation, to carry out its obligations
hereunder. The only shareholder vote of Confluence required
to approve the Merger is the affirmative vote of the holders of
twothirds (2/3) of the outstanding shares of Confluence
Common Stock, entitled to vote at any meeting of
shareholders of Confluence held for such purpose. The
execution, delivery, and performance of this Agreement by
Confluence and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of
Directors of Confluence. Subject to the approvals as
aforesaid, this Agreement is the valid and binding obligation
of Confluence, enforceable against Confluence in accordance
with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization,
moratorium, and other laws now or hereafter in effect
relating to the enforcement of creditors' rights generally
and except that equitable principles may limit the right to
obtain specific performance or other equitable remedies.
Neither the execution, delivery and performance by
Confluence of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by
Confluence with any of the provisions hereof, will (a) except
as set forth in Schedule 2.02 attached hereto, violate,
conflict with, or result in a breach of any provisions of,
or constitute a default for an event which, with notice or
lapse of time or both, would constitute a default under, or
result in the termination of, or accelerate the performance
required by, or result in a right of termination or
acceleration of, or result in the creation of any lien,
security interest, charge, or encumbrance upon any of the
properties or assets of Confluence or Duchesne under any of
the terms, conditions, or provisions of (i) the articles of
incorporation, articles of association, or by-laws of each,
or (ii) except as set forth in Schedule 2.02 attached hereto,
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, or other instrument or obligation to which
Confluence or Duchesne is a party or by which it may be bound,
or to which Confluence or Duchesne or any of the properties
or assets of Confluence or Duchesne may be subject, or
(b) subject to compliance with the statutes and regulations
referred to in this Section, violate any judgment, ruling,
order, writ, injunction, decree, or to the best of
Confluence's knowledge, any statute, rule, or regulation
applicable to Confluence or Duchesne or any of their
respective properties or assets.
Other than in connection or compliance with the
provisions of the Missouri Act, the Securities Act of 1933 and
the rules and regulations thereunder (the "Securities Act"),
the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Exchange Act"), the securities
or blue sky laws of the various states, or filings,
consents, reviews, authorizations, approvals, or exemptions
required under the BHC Act, or any required approvals of
the Division of Finance, or the FDIC, no notice to, filing
with, exemption or review by, or authorization, consent, or
approval of, any public body or authority is necessary
for the consummation by Confluence of the transactions
contemplated by this Agreement.
The minute books and stock records of Confluence
and Duchesne are complete and correct in all material
respects and accurately reflect in all material respects
all meetings, consents and other actions of the
organizers, incorporators, shareholders, boards of directors,
and committees of the boards of directors occurring since the
organization of each.
2.03 Subsidiaries of Duchesne. Duchesne has no subsidiaries
and does not control, or have any interest in any other
corporation, partnership, joint venture, or other business
association (other than any interest pledged to Duchesne in
the ordinary course of its business as security for the
obligations of third parties to Duchesne or held by Duchesne as
a consequence of its exercise of rights and remedies in respect
of any interest pledged as security in respect of such obligations).
2.04 Capitalization of Confluence. The authorized stock
of Confluence consists of 200,000 shares of common stock, par
value $1.00 per share, of which, as of the date hereof,
200,000 shares are issued and outstanding, and no shares are
issued but not outstanding and held in treasury. Except as
provided in that certain First Stock Restriction Agreement
(a copy of which is attached hereto as Exhibit 2.04), there
are no other shares of capital stock or other equity
securities of Confluence outstanding and no other options,
warrants, scrip, rights to subscribe to, calls, or commitments
of any character whatsoever relating to, or securities or rights
convertible into, shares of any capital stock of Confluence, or
contracts, commitments, understandings, or arrangements by
which Confluence is or may become bound to issue additional
shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital
stock. All of the issued and outstanding shares of Confluence
Common Stock are validly issued, fully paid, and nonassessable,
and have not been issued in violation of any preemptive right
to any shareholder of Confluence.
2.05 Capitalization of Duchesne. The authorized
capital stock of Duchesne consists of 200,000 shares of common
stock, par value $10.00 per share, of which 200,000 shares are
issued and outstanding. Confluence has and will have as of
the Closing Date good and marketable title to all then
issued and outstanding shares of the common stock of
Duchesne, free and clear of any liens, claims, charges,
encumbrances, and assessments of any kind or nature
whatsoever. Except as provided in the Collateral Pledge
Agreement which is attached hereto as Exhibit 2.05, there are
no other shares of capital stock or other equity securities of
Duchesne outstanding and no other outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments
of any character whatsoever relating to, or securities or
rights convertible into shares of any capital stock of
Duchesne, or contracts, commitments, understandings, or
arrangements by which Duchesne is or may become bound to
issue additional shares of capital stock or options,
warrants, or rights to purchase or acquire any additional
shares of capital stock. All of the issued and
outstanding shares of Duchesne's common stock are validly
issued, fully paid, and nonassessable.
2.06 Financial Statements.
(a) Not later than fifteen (15) days
following execution of this Agreement, Confluence shall
furnish Firstbank with copies of the following financial
statements:
(i) Balance sheets, statements of income or
loss, statements of cash flows and statements of shareholders'
equity together with notes thereto of Duchesne for the
period ending December 31, 1992, and balance sheets of
Duchesne, as audited by KPMG Peat Marwick LLP, for the years
ending June 30, 1993 and June 30, 1994, and the unaudited
consolidated balance sheets and statements of income or
loss and statements of shareholders' equity of Duchesne at
and for each of the periods ending September 30, 1994;
December 31, 1994; and March 31, 1995;
(ii) Any and all reports of Confluence which
have been filed with the Federal Reserve Board prior to the
execution of this Agreement, or if none have yet been filed,
then such reports shall be provided to Firstbank within five (5)
Business Days following the date such report is filed or on
the date such report is due, whichever is earlier;
(iii) The Reports of Condition and Income
of Duchesne as of December 31, 1992, 1993, and 1994, and as of
March 31, 1995, as furnished by Duchesne to each federal and
state Bank regulatory agency having jurisdiction over its
affairs; and
(iv) The Confluence consolidated balance sheet
and statement of income or loss, statement of cash
flows, and statement of shareholders' equity at and for the
month ended April 30, 1995.
(b) The financial statements referenced above in
subsection (a) of this Section are referred to collectively as
the "Financial Statements". The Financial Statements have
been prepared in accordance with the books and records of
Confluence and Duchesne and in accordance with generally
accepted accounting principles and/or regulatory accounting
principles in the case of Duchesne, and present fairly the
consolidated financial position of Confluence and the
financial position of Duchesne at the dates thereof and the
results of their operations and cash flows for the periods
stated.
(c) Confluence and Duchesne have each prepared,
kept, and maintained through the date hereof true, correct,
and complete financial and other books and records of their
affairs which fairly reflect their respective assets,
properties, liabilities, and operations.
(d) All of the accounts, notes, other receivables,
and investment securities which are reflected in the
Financial Statements were acquired in the ordinary course of
business.
2.07 Reports. Confluence and Duchesne have filed
all reports, registrations, and statements, together
with any required amendments thereto, that they were required to file
with (i) the Federal Reserve Board, (ii) the FDIC, (iii) the
Division of Finance, and (iv) any applicable state securities
authorities. All such reports and statements filed with any
such regulatory body or authority are collectively referred
to herein as the "Confluence Reports." As of their
respective dates and to the extent applicable, the
Confluence Reports complied in all material respects with all
rules and regulations promulgated by the Securities and Exchange
Commission ("SEC"), the Federal Reserve Board, the FDIC, the
Division of Finance, and any applicable state securities authorities,
as the case may be, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
2.08 Title to and Condition of Duchesne Assets.
(a) Except as may be reflected in the
Financial Statements, Confluence and Duchesne have, and at the Closing
Date will have, good and marketable title to all of their respective
properties and assets, including, without limitation, those
reflected on the Financial Statements, free and clear of
any liens, charges, pledges, encumbrances, defects, claims, or
rights of third parties, except:
(i) as set forth in Schedule 2.08 attached
hereto under the heading "Encumbrances; " or
(ii) for liens for taxes, assessments, or
other governmental charges not yet delinquent; or
(iii) with respect to real property only,
for such easements and other encumbrances as do not individually
or in the aggregate materially and adversely affect the use or
value of such real estate.
(b) No material assets reflected on the
Financial Statements in respect of Confluence or Duchesne have
been sold, leased, transferred, assigned, or otherwise
disposed of since December 31, 1994, except in the ordinary
course of business or as set forth in Schedule 2.08 under the heading
"Dispositions."
(c) All furniture, fixtures, vehicles,
machinery, equipment, and computer software owned or used by
Confluence and Duchesne including any of such items leased as
a lessee and all facilities and improvements comprising
part of any owned or leased real property, taken as a whole
as to each of the foregoing, and with no single such item being
deemed of material importance, is fit for the purposes for which
they are currently used, will remain, in the same level of order
and repair as currently exists through the Effective Time and free of
defects not currently existing and in the same operating condition as is
currently existing, subject only to normal wear and tear. The
operation by Confluence and Duchesne of such properties is in
compliance in all material respects with all applicable laws,
ordinances, and rules and regulations of any governmental
authorities having jurisdiction.
2.09 Real Property.
(a) The legal description of each parcel of
real property owned by Confluence and Duchesne (other
than real property (i) held by Duchesne as a trustee in the
ordinary course of its business, or (ii) acquired in
foreclosures or in lieu of foreclosures and being held by Duchesne
for disposition as required by law ("OREO")) is set forth in Schedule
2.09 attached hereto under the heading "Owned Real Property"
(such real property and other similar real property
previously owned by Confluence or Duchesne being herein referred to
as the "Owned Real Property"). The legal description of each parcel
of real property leased by Confluence and Duchesne as lessee
is also set forth in Schedule 2.09 under the heading "Leased
Real Property" (such real property being herein referred to
as "Leased Real Property"). Collectively, the Owned Real
Property and the Leased Real Property is herein referred to as
the"Real Property."
(b) Confluence and Duchesne enjoy peaceful
possession of all of the Real Property currently owned or
leased by them.
(c) Neither Confluence nor Duchesne has any
interest in any other real property except interests as a
mortgagee, and except for OREO.
(d) To the best of Confluence's knowledge, none of
the buildings, structures, or other improvements located on the
Real Property encroaches upon or over any adjoining parcel
of real estate or any easement or right-of-way or "setback"
line in any material respect, and all such buildings,
structures, and improvements are located and constructed in material
conformity with all applicable zoning ordinances and building
codes.
(e) None of the buildings, structures, or
improvements located on the Real Property are the subject of
any official complaint or notice of violation of any
applicable zoning ordinance or building code, and there is no
zoning ordinance, building code, use or occupancy restriction,
or condemnation action or proceeding pending or threatened with
respect to any such building, structure or improvement.
(f) Except as set forth in Schedule 2.09 under the
heading of "Property Especially Mentioned," neither any
Owned Real Property nor any real property now or, to the
best of Confluence's knowledge, previously held by Confluence
or Duchesne as a result of any foreclosures is or was in
violation of any federal, state, or municipal environmental
laws, regulations, or ordinances and there are not nor have
there been conditions existing on any of the Owned Real
Property or on any real property held by Duchesne as a
result of foreclosure, or otherwise existing with respect to
Confluence and Duchesne which give rise to, or may give rise to,
any such violation, or which require or may in the future
require remedial action under or with respect to such laws,
regulations, and ordinances.
2.10 Contracts, Commitments, and Certain Loans.
(a) Schedule 2.10 attached hereto contains a
complete and accurate listing of all agreements (written or
oral) and other contracts (including any leases, whether as
lessor or as lessee) to which Confluence or Duchesne is a
party which involve commitment of funds by either of more than
$10,000.00 or which cannot be terminated by Confluence or
Duchesne on thirty (30) days' notice or less without
liability, other than contracts entered into in respect
of deposits, loan agreements and commitments, notes, security
agreements, repurchase agreements, Bankers' acceptances,
outstanding letters of credit and commitments to issue letters
of credit, participation agreements, and other documents relating
to loan or deposit transactions entered into by Duchesne in the ordinary
course of business. In addition, Schedule 2.10 also contains a
complete and accurate listing of all loan commitments, outstanding
letters of credit and commitments to issue letters of credit, and
other documents relating to or involving commitments to extend
credit by Confluence or Duchesne.
(b) Except for the contracts and agreements
required to be listed on Schedule 2.10, neither Confluence nor
Duchesne is a party to or bound by any written or oral:
(i) agreement, contract, arrangement,
understanding, or commitment with any labor union or similar
organization:
(ii) bonus, incentive compensation, deferred
compensation, retirement, savings, stock purchase, stock option,
or other similar plan;
(iii) franchise or license agreement:
(iv) employment, severance or termination pay,
agency, consulting, or similar agreement, contract, arrangement,
understanding or commitment;
(v) loans or other obligations payable or owing to
any officer, director, or employee, except (i) salaries and wages
incurred and accrued in the ordinary course of business and/or
(ii) obligations due in respect of any depository accounts maintained
by any of the foregoing at Duchesne in the ordinary course of business;
(vi) loans or debts payable or owing by
any executive officer or director of Confluence or Duchesne
or any other person or entity deemed an "executive
officer" or a "related interest" of any of the foregoing, as
such terms are defined in Regulation O of the Federal Reserve
Board; or
(vii) other agreement, contract, arrangement,
understanding or commitment extending beyond six (6) months from
the date hereof that cannot be cancelled without cost or penalty
upon notice of thirty (30) days orless.
(c) Confluence and Duchesne each carry property
casualty, liability, fidelity, and other insurance coverages
as set forth in Schedule 2.10 under the heading "Insurance."
(d) True, correct, and complete copies of
the agreements, contracts, leases, insurance policies, and
other documents referred to in Schedule 2.10 shall be furnished
or made available to the Firstbank Entities.
(e) To the best of Confluence's knowledge, each of
the agreements, contracts, leases, insurance policies, and
other documents referred to in Schedule 2.10 is a valid,
binding, and enforceable obligation of the parties sought to
be bound thereby, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium, and
other laws now or hereafter in effect relating to the enforcement
of creditors' rights generally, and except that equitable principles
may limit the right to obtain specific performance or other
equitable remedies.
(f) There is set forth in Schedule 2.10 under the
heading "Loans" a true, correct, and complete listing,
by account or other identifying number, of (i) all
loans of Duchesne which have been accelerated during the past 24
months and which as of the time of acceleration, had in excess of
$25,000.00 of principal and interest due; (ii) all loan
commitments or lines of credit of Duchesne which have
been terminated during the past 24 months by reason of default or
material adverse developments in the condition of the borrower
or other events or circumstances affecting the credit of
the borrower and which, as of the time of termination,
pertained to more than $25,000.00 of principal and interest;
(iii) all loans, lines of credit, and loan commitments as to
which Duchesne has given notice to the borrower or customer of
Duchesne's intent to terminate during the past 24 months and
which, as of the time of such notice pertained to more than
$25,000.00 of principal and interest; (iv) all loans, all
notification letters, and other written communications
between Duchesne and any of its borrowers, customers, or other
parties during the past 24 months under which, or pursuant to
which, Duchesne has requested or demanded that actions be taken
to correct existing defaults or facts or circumstances which may
become defaults, which, as of the time of such request or demand,
had more than $25,000.00 of principal and interest due; and
(v) each borrower, customer, or other party which has
notified Duchesne during the past 24 months of, or asserted
against Duchesne, in writing, any "lender liability" or similar
claim, and, to the best of Confluence's knowledge, each borrower,
customer, or other party which has given Confluence or Duchesne
any oral notification of, or asserted against Confluence
or Duchesne, any such claim.
2.11 Absence of Defaults. Except as set forth in Schedule
2.11 attached hereto under the heading "Defaults," there are
no pending material disputes between Confluence or Duchesne and
the other parties to the agreements, contracts, leases, insurance
policies, and other documents referred to in Schedule 2.10,
and all such agreements, contracts, leases, insurance
policies, and other documents are in full force and effect
and not in default in any material respect with respect to
Confluence or Duchesne, or, to the best of Confluence's
knowledge, any other party thereto, and will continue in
full force and effect immediately after the Closing Date.
2.12 Absence of Undisclosed Liabilities. Except as
disclosed in Schedule 2.12 attached hereto:
(a) Neither Confluence nor Duchesne, as of the date
hereof, has any debts, liabilities, or obligations, whether
accrued, absolute, contingent, or otherwise and whether due or to
become due, except:
(i) liabilities reflected in the Financial
Statements; or
(ii) debts, liabilities or obligations incurred
since June 30, 1994, in the ordinary and usual course
of their respective businesses, none of which are for breach
of contract, breach of warranty, tort, infringement, or
lawsuits, and none of which materially and adversely affect
their respective financial positions or results of
operations, or businesses, assets, or operations; and
(b) Confluence and Duchesne were not, as of June
30, 1994, and since such date have not become, a party
to any contract or agreement which affected, affects, or may
reasonably be expected to affect, materially and adversely,
their respective financial positions, results of operations,
businesses, assets, or operations.
2.13 Taxes and Tax Returns. Confluence and Duchesne
have timely filed or will timely file all tax returns required
to be filed at or prior to the Closing Date. Confluence and
Duchesne have paid, or have set up adequate reserves on the
Financial Statements for the payment of, all taxes required to
be paid in respect of the periods covered by such returns
and have set up adequate reserves on the Financial Statements
for the payment of all taxes anticipated to be payable in
respect of the periods subsequent to the last of said
periods for which returns have been filed (treating for
this purpose the Closing Date as the last day of an
applicable period, whether or not it is in fact the last
day of a taxable period). Neither Confluence nor Duchesne
will have any material liability for any such taxes in excess
of the amounts so paid or reserves so established and no
material deficiencies for any tax, assessment, or
governmental charge have been proposed, asserted, or assessed
(tentatively or definitely) against Confluence or Duchesne
which would not be covered by existing reserves. Neither
Confluence nor Duchesne is delinquent in the payment of any
material tax, assessment, or governmental charge, nor has it
requested any extension of time within which to file any tax
return in respect of any fiscal year which has not since been
filed and no requests for waivers of the time to assess any
taxes are pending. There are no pending or unresolved audits
of any tax returns filed by Confluence or Duchesne.
2.14 Material Adverse Change. Except as otherwise
disclosed in any of the Schedules of Confluence referenced
herein, since June 30, 1994, there has been no material
adverse change in the business, financial condition, results
of operations, or prospects of Confluence and Duchesne taken
as a whole (other than changes in banking laws or regulations,
or interpretations thereof, that affect the banking industry
generally, or changes in the general level of interest rates).
2.15 Litigation and Other Proceedings. Except as set
forth in Schedule 2.15, neither Confluence nor Duchesne is a
party to any pending or threatened claim, action, suit,
investigation, or proceeding, or is subject to any order,
judgment or decree. Without limiting the generality of the
foregoing, except as set forth in Schedule 2.15, as of the
date of this Agreement, there are no actions, suits, or
proceedings pending or threatened against Confluence or
Duchesne or any of their respective officers, employees,
or directors by any shareholder of Confluence or any former
shareholder or involving claims under the Community Reinvestment
Act of 1977, the Bank Secrecy Act, the Right to Financial Privacy
Act, or any other laws applicable to Confluence or Duchesne.
2.16 Legal Proceedings and Governmental Compliance.
Except as set forth in Schedule 2.16, (i) there is no claim,
action, suit,or proceeding, or governmental proceeding or, to the best
knowledge of Confluence, investigation, pending or threatened
against Confluence or Duchesne or their business, properties,
or assets; and (ii) no such claim, action, suit, or proceeding,
or governmental proceeding or investigation, if adversely
determined, will affect materially and adversely the financial
conditions, results of operations, business, assets, or
operations of Confluence or Duchesne.
Confluence and Duchesne are in compliance in all
material respects with all laws, ordinances, rules,
regulations, and orders, licenses and permits that are
applicable to each.
Confluence and Duchesne hold all permits, business licenses,
certificates, franchises, and other similar items, which, if not
held, would materially adversely affect the financial condition,
operations, prospects, and/or ownership rights as to the assets
and properties of any of the foregoing. A true, correct and
complete list of all such items is set forth in Schedule
2.16 attached hereto.
There is no legal action or governmental proceeding or,
to the best knowledge of Confluence, investigation
pending or threatened against Confluence or Duchesne that
could prevent or adversely affect or seeks to prohibit the
consummation of the transactions contemplated hereby, nor is
Confluence or Duchesne subject to any order of court or
governmental authority having any such effect.
Except as set forth in Schedule 2.16, neither Confluence
nor Duchesne is subject to a material liability as a result
of its ownership, operation, or use of any property (whether
directly or as a consequence of such property being part of
its investment portfolio, including, without limitation,
properties under foreclosure, property held by such in its capacity
as a trustee, and property in which Confluence or Duchesne has an
interest, but excluding property held as collateral for the
security of any loan due it) (the "Property") (a) that is
contaminated by or contains any hazardous waste, toxic
substance, or related materials, including without limitation,
asbestos, PCBs, pesticides, herbicides, or any other substance or waste
that is hazardous to human health or the environment (collectively,
a "Toxic Substance"), or (b) on which any Toxic Substance has been
stored, disposed of, placed, or used in the construction thereof. No
claim, action, suit, proceeding, or investigation is pending or has
been initiated against Confluence or Duchesne relating to the Property
before any court or other governmental authority or arbitration tribunal
relating to hazardous substances, pollution, or the environment, and
there is no outstanding judgment, order, writ, injunction, decree,
or award against or affecting Confluence or Duchesne with respect
to the same. Except for statutory or regulatory restrictions of
general application, no federal, state, municipal or other
governmental authority has placed any restriction on the business
of Confluence or Duchesne which reasonably could be expected to have
a material adverse effect on the business, financial condition,
results of operations, or prospects of Confluence or Duchesne.
2.17 Labor and Employment. No work stoppage
involving Confluence or Duchesne is pending or, to the best
knowledge of Confluence, threatened. Confluence and Duchesne
are not involved in, threatened with, or affected by,
any labor dispute, arbitration, lawsuit, or administrative
proceeding which could materially and adversely affect the
business of Confluence and Duchesne. Employees of Confluence
and Duchesne are not represented by any labor union nor are
any collective bargaining agreements otherwise in effect with
respect to such employees.
2.18 Material Interests of Certain Persons. Except as
set forth on Schedule 2.18, to the best knowledge of
Confluence, no officer or director of Confluence or Duchesne
has any material interest in any material contract or
property (real or personal, tangible or intangible), used in or
pertaining to the business of Confluence or Duchesne.
2.19 Employee Benefit Plan. There are set forth in
Schedule 2.19 all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right,
profit sharing, deferred compensation, consulting, bonus,
group insurance, Section 125, severance, and other employee benefit,
incentive, and welfare policies, contracts, plans, and arrangements,
and all trust agreements related thereto, in respect of any
of the present or former directors, officers, or other employees
of Confluence and Duchesne collectively ("Employee Plans or
Policies"). Except as set forth in Schedule 2.19, all Employee
Plans or Policies currently comply and have at all relevant times
complied in all material respects with all applicable laws,
requirements, and orders under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Internal Revenue
Code of 1986, as amended (the "Code"), and state law. With
respect to each Employee Plan or Policy which is a pension plan
(as defined in Section 3(2) of ERISA) (the "Pension Plans"),
except as set forth in Schedule 2.19, (a) no Pension Plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA;
(b) each Pension Plan, to the extent necessary and applicable,
is "qualified" within the meaning of Section 401(a) of the Code,
and each related trust, if any is exempt from taxation under
Section 501(a) of the Code; (c) the present value of all benefits
vested and all benefits accrued under each Pension Plan which
is subject to Title IV of ERISA did not, in each case, as of the
last applicable annual valuation date (as indicated on Schedule
2.19) exceed the value of the assets of the Pension Plans
allocable to such vested or accrued benefits; (d) no Pension Plan
or any trust created thereunder, nor any trustee, fiduciary, or
administrator thereof, has engaged in a "prohibited transaction"
within, the meaning of Section 4975 of the Code or Section 406
of ERISA, which could subject such plan or trust, or any trustee,
fiduciary, or administrator thereof, or any party dealing with
any such plan or trust, to the tax or penalty on prohibited
transactions imposed by said Section 4975 or by Section
502(1) of ERISA; (e) no Pension Plan or any trust created thereunder
has been terminated, nor have there been any "reportable
events" with respect to any Pension Plan, as that term is defined
in Section 4043 of ERISA; and (f) no Pension Plan or any trust
created thereunder has incurred any "accumulated funding deficiency,"
as such term is defined in Section 302 of ERISA(whether or not
waived), since the effective date of ERISA.
2.20 Conduct of Confluence and Duchesne to Date. Except
as disclosed in Schedule 2.20, from and after June 30, 1994:
(a) Confluence and Duchesne have carried on
their respective businesses in the ordinary and usual course
consistent with their past practices;
(b) Neither Confluence nor Duchesne has issued or
sold any of its capital stock or any corporate debt securities
which should, under generally accepted accounting principles, be
classified as long-term debt on its balance sheet;
(c) Confluence has not granted any option for
the purchase of its capital stock, effected any stock
split, or otherwise changed its capitalization:
(d) Confluence has not declared, set aside, or
paid any dividend or other distribution in respect of its
capital stock, or, directly or indirectly, redeemed or
otherwise acquired any of its capital stock;
(e) Neither Confluence nor Duchesne has incurred
any material obligation or liability (absolute or contingent),
except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or
mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance, or restriction on any of its
assets or properties;
(f) Neither Confluence nor Duchesne has discharged
or satisfied any material lien, mortgage, pledge, claim,
security interest, charge, encumbrance, or restriction or
paid any material obligation or liability (absolute or
contingent), other than in the ordinary course of business;
(g) Neither Confluence nor Duchesne has
sold, assigned, transferred, leased, exchanged, or otherwise
disposed of any of its properties or assets other than
for a fair consideration in the ordinary course of business;
(h) Neither Confluence nor Duchesne has (i)
increased the rate of compensation of, or paid any bonus to,
any of its directors, officers, or other employees, except
merit or promotion increases in accordance with existing policy;
(ii) entered into any new, or amended or supplemented any
existing employment, management, consulting, deferred
compensation, severance, or other similar contract; (iii)
entered into, terminated, or substantially modified any Employee
Plan or Policy in respect of any of its present or former directors,
officers, or other employees; or (iv) agreed to do any of the
foregoing;
(i) Neither Confluence nor Duchesne has suffered
any material damage, destruction, or loss, whether as the
result of fire, explosion, earthquake, accident, casualty,
labor trouble, requisition, or taking of property by any
government or any agency of any government, flood, windstorm,
embargo, riot, act of God or the enemy, or other similar or
dissimilar casualty or event or otherwise, and whether or not
covered by insurance; and
(j) Except for this Agreement and the transaction
contemplated hereby, neither Confluence nor Duchesne has
entered into any material transaction, contract, or
commitment outside the ordinary course of its business.
2.21 Proxy Statement, etc. None of the
information regarding Confluence and/or Duchesne supplied or
to be supplied by Confluence for inclusion or included in
(i) a Registration Statement on Form S-4 to be filed with
the SEC by Firstbank for the purpose of registering the
shares of Firstbank Conversion Stock to be exchanged for
Confluence Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the Proxy
Statement to be mailed to shareholders of Confluence in
connection with the meeting to be called to consider the
Merger (the "Proxy Statement"), and (iii) any other
documents to be filed with the SEC or any regulatory
authority in connection with the transactions contemplated
hereby will, at the respective times such documents are
filed with the SEC or other applicable regulatory authority
and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement,
when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact
necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the
meeting of shareholders referred to in Section 5.03, be false
or misleading with respect to any material fact, or omit
to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for such meeting. All documents
which Confluence is responsible for filing with any regulatory
authority in connection with the Merger will comply as to
form in all material respects with the provisions of
applicable law.
2.22 Brokers, Investment Bankers, and Finders. Except
as authorized in Section 4.02(b) hereof, neither Confluence,
Duchesne, nor any of their respective officers, directors,
or employees has employed any broker, investment banker, or
finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, investment
banker fees or commissions, or finder's fees, and no broker, investment
banker, or finder has acted directly or indirectly for
Confluence and/or Duchesne in connection with this Agreement
or the transactions contemplated hereby.
2.23 Accuracy of Information. The statements contained
in this Agreement, the Schedules, and in any other written
document executed and delivered by or on behalf of Confluence
pursuant to the terms of this Agreement are true and correct
in all material respects, and such statements and documents
include all material facts necessary to make the statements
contained therein not misleading.
ARTICLE III
Representations and Warranties of Firstbank
As a material inducement to Confluence to enter into
and perform its obligations under this Agreement, and
notwithstanding any examinations, inspections, audits, or
other investigations made by Confluence, Firstbank hereby
represents and warrants to Confluence as follows:
3.01 Organization and Authority. Firstbank is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, is duly
qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified, and
has corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted.
Firstbank is registered as a bank holding company with the Federal
Reserve Board under the BHC Act.
Colonial is a corporation duly organized, validlyexisting,
and in good standing under the laws of the State of Missouri,
is duly qualified to do business and is in good standing in
all jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so
qualified, is registered as a bank holding company with the
Federal Reserve Board under the Bank Holding Company Act, and
has corporate power and authority to own its properties and
assets and to carry on its business as it is now being
conducted.
3.02 Corporation Authorization; Records. Firstbank
and Colonial each have the corporate power and authority to
enter into this Agreement and to carry out their respective
obligations hereunder. The execution, delivery, and
performance of this Agreement by Firstbank and Colonial and
the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of each of
Firstbank and Colonial. Subject to such approvals of
government agencies and other governing boards having
regulatory authority over Firstbank and Colonial as may be
required by statute or regulation, this Agreement is a valid
and binding obligation of Firstbank and Colonial, enforceable
against each in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy
insolvency, reorganization, moratorium, and other laws now or
hereafter in effect relating to the enforcement of creditors'
rights generally, and except that equitable principles may
limit the right to obtain specific performance or other
equitable remedies.
Neither the execution, delivery and performance by
Firstbank or Colonial of this Agreement, nor the
consummation of the transactions contemplated hereby, nor
compliance by Firstbank or Colonial with any of the
provisions hereof will (i) violate, conflict with, or
result in a breach of any provisions of, or constitute a
default for an event which, with notice or lapse of time or
both, would constitute a default under, or result in the
termination of, or accelerate the performance required by,
or result in a right of termination or acceleration of, or
result in the creation of, any lien, security interest,
charge, or encumbrance upon any of the properties or assets of Firstbank
or Colonial under any of the terms, conditions, or provisions
of (x) their respective certificates or articles of
incorporation or bylaws, or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which Firstbank or Colonial is a
party or by which it may be bound, or to which Firstbank or
Colonial or any of its properties or assets may be subject, or
(ii) subject to compliance with the statutes and regulations
referred to in the next paragraph, to the best knowledge of
Firstbank, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule, or regulation applicable
to Firstbank or Colonial or any of their respective
properties or assets.
Other than in connection or compliance with the
provisions of the Missouri Act, the Securities Act, the
Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations,
approvals, or exemptions required under the BHC Act, or any
required approvals of the Division of Finance, or the
FDIC, no notice to, filing with, exemption or review by, or
authorization, consent, or approval of,
any public body or authority is necessary for the
consummation by Firstbank and Colonial of the
transactions contemplated by this Agreement.
The minute books and stock records of Firstbank and
Colonial are complete and correct in all material respects and
accurately reflect in all material respects all meetings,
consents, and other actions of the organizers, incorporators,
shareholders or stockholders as the case may be, boards
of directors, and committees of the boards of directors
occurring since the organization of each.
3.03 Capitalization of Firstbank. The authorized
capital stock of Firstbank consists of (i) 20,000,000 shares of
Firstbank common stock, $1.00 par value of which, as of March
31, 1995, 9,838,666 shares were issued and outstanding and
(ii) 1,000,000 shares of preferred stock, no par value, of
which, as of March 31, 1995, none were issued and
outstanding. As of March 31, 1995, 609,447 shares of
Firstbank common stock were reserved for issuance under the
Firstbank Incentive Stock Option Plan, 650,939 shares of
Firstbank common stock were reserved for issuance under the
Firstbank Dividend Reinvestment and Stock Purchase Plan,
88,500 shares of Firstbank common stock were reserved
for issuance under the Firstbank Directors Stock Option
Plan, and 4,868 shares of Firstbank common stock were
issued but not outstanding and were held in treasury.
Except as set forth above, there are no other shares of
capital stock or other equity securities of Firstbank
outstanding and no other outstanding options, warrants,
scrip, rights to subscribe to, calls, or commitments of
any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock of Firstbank,
or contracts, commitments, understandings, or arrangements by which
Firstbank is or may become bound to issue additional shares of its
capital stock or options, warrants, or rights to purchase or
acquire any additional shares of its capital stock. All of the
issued and outstanding shares of Firstbank common stock
are validly issued, fully paid, and nonassessable, and
have not been issued in violation of any preemptive right
of any shareholder of Firstbank. At the Effective Time,
the Firstbank Conversion Stock issued pursuant to this
Agreement will be duly authorized, validly issued in
compliance with all applicable federal and state securities
laws, fully paid, nonassessable, and not subject to preemptive
rights.
3.04 Firstbank Financial Statements. The
consolidated balance sheets of Firstbank and its
subsidiaries (hereinafter sometimes referred to collectively
as the "Firstbank Subsidiaries") as of December 31, 1994 and
1993 and related consolidated statements of income, shareholders'
equity, and cash flows for the three years ended December 31, 1994,
together with the notes thereto, certified by KPMG
Peat Marwick LLP and included in Firstbank's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994
(the "Firstbank 10-K") as filed with the SEC, and the
unaudited consolidated balance sheet of Firstbank as of
March 31, 1995, and the related unaudited consolidated
statements of income and cash flows for the period then
ended included in Firstbank's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1995, as filed with the
SEC (collectively, with the Firstbank 10-K, the
"Firstbank Financial Statements"), have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis, and present fairly the
consolidated financial position of Firstbank at the dates and
the consolidated results of operations and cash flows of
Firstbank for the periods stated therein.
3.05 Reports. Firstbank and each of the
Firstbank Subsidiaries (with "Subsidiaries" being defined as in
Rule 1-02 of Regulation S-X promulgated by the SEC) have filed
all reports, registrations, and statements, together with
any required amendments thereto, that they were required to
file with (i) the SEC, including, but not limited to, Forms 10-K,
Forms 10-Q, Forms 8-K, and proxy statements, (ii) the Federal Reserve
Board, (iii) the FDIC, (iv) the OCC, and (v) any applicable
state securities or banking authorities. All such reports and
statements filed with any such regulatory body or
authority are collectively referred to herein as the
"Firstbank Reports". As of their respective dates, the
Firstbank Reports complied in all material respects with all
the rules and regulations promulgated by the SEC, the
Federal Reserve Board, the FDIC, the OCC, and any
applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
3.06 Material Adverse Changes. Except as set forth
in Schedule 3.06, since December 31, 1994, there has
been no material adverse change in the business, financial
condition, results of operations or prospects of Firstbank and
the Firstbank Subsidiaries taken as a whole (other than changes
in banking laws or regulations, or interpretations thereof,
that affect the banking industry generally or changes in
the general level of interest rates).
3.07 Registration Statement, etc. None of the
information regarding Firstbank and the Firstbank Subsidiaries
supplied or to be supplied by Firstbank for inclusion or
included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with
the SEC or any regulatory authority in connection with the
transactions contemplated hereby will, at the respective times
such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement,
when it becomes effective and, with respect to the Proxy
Statement, when mailed, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading
or, in the case ofthe Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of shareholders of
Confluence to approve the Merger provided for in Section
5.03 hereof, be false or misleading with respect to any
material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting. All
documents which Firstbank and the Firstbank Subsidiaries are
responsible for filing with the SEC and any regulatory
authority in connection with the Merger will comply as to
form in all material respects with the provisions of
applicable law.
3.08 Brokers, Investment Bankers, and Finders.
Neither Firstbank, Colonial, nor any of their respective
officers, directors, or employees has employed any broker,
investment banker, or finder or incurred any liability for
any financial advisory fees, brokerage fees, commissions,
investment banker fees or commissions, or finder's fees, and
no broker, investment banker, or finder has acted directly or
indirectly for Firstbank or Colonial in connection with this
Agreement or the transactions contemplated hereby.
3.09 Accuracy of Information. The statements contained
in this Agreement, the Schedules, and in any other written
document executed and delivered by or on behalf of Firstbank
pursuant to the terms of this Agreement are true and correct
in all material respects, and such statements and documents
do not omit any material fact necessary to make the
statements contained therein not misleading.
3.10 Litigation; Governmental Compliance; Other Proceedings.
(a) Except as set forth in Schedule 3.10,
neither Firstbank nor any of the Firstbank Subsidiaries is a
party to any pending or threatened claim, action, suit,
investigation or proceeding, or is subject to any order,
judgment or decree, which would have a material adverse effect
on the financial condition, results of operations or business
(collectively, the "Condition") of Firstbank and its
Subsidiaries, taken as a whole. Without limiting the generality
of the foregoing, except as set forth in Schedule 3.10,
as of the date hereof, there are no actions,
suits, or proceedings pending or threatened against Firstbank
or any of its Subsidiaries or any of their respective
officers, employees, or directors by any stockholder or
shareholder, as the case may be, of Firstbank or any of its
Subsidiaries, or any former stockholder or shareholder, or
involving claims under the Community Reinvestment Act of
1977, the Bank Secrecy Act, the Right to Financial Privacy
Act, or any other laws applicable to Firstbank or any of its
Subsidiaries.
(b) There is no legal action or other
governmental proceeding or investigation pending or, to the
best knowledge of the Firstbank Entities, threatened against
Firstbank or any of its Subsidiaries that could prevent or
adversely affect in a material manner or seeks to
prohibit the consummation of the transactions contemplated
herein, nor is Firstbank or any of its Subsidiaries subject
to any order of a court or governmental authority having any
such effect. To the best knowledge of the Firstbank
Entities, there is no other fact that could prevent or
adversely affect the consummation of the transactions
contemplated herein.
3.11 Tax and Regulatory Matters. Neither Firstbank nor any
of the Firstbank Subsidiaries has taken or agreed to take any
action or has any knowledge of any fact or circumstance that
would (i) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368
of the Code or (ii) materially impede or delay receipt of any approval
referred to in Section 5.02(b) or the consummation of the
transactions contemplated by this Agreement.
3.12 Compliance with Laws. To the best knowledge
of Firstbank, Firstbank and each of the Firstbank Subsidiaries
have all permits, licenses, authorizations, orders and
approvals of, and have made all filings, applications and
registrations with, all regulatory authorities that are
required in order to permit them to own or lease their
respective properties and assets and to carry on their
respective businesses as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are
in full force and effect and no suspension or cancellation
of any of them is threatened; and all such filings,
applications and registrations are current; in each case
except for permits, licenses, authorizations, orders,
approvals, filings, applications and registrations the failure
to have (or have made) would not have a material adverse
effect on the Condition of Firstbank and the Firstbank
Subsidiaries, taken as a whole.
ARTICLE IV
Conduct of Business Prior to the Effective Time
4.01 Conduct of Businesses Prior to the Effective Time.
During the period from the date of this Agreement to
the Effective Time, Confluence and each of the Firstbank
Entities shall, and shall cause each of their respective
subsidiaries to, conduct its business according to the
ordinary and usual course consistent with past and current
practices and each shall use its best efforts to maintain and
preserve its business organization, employees, and advantageous
business relationships and retain the services of its
officers and key employees; provided, however, that
Confluence shall be entitled to pay any expenses or fees
incurred in connection with the transactions contemplated by
this Agreement, including, but not limited to, reasonable
accountants' and attorneys' fees.
4.02 Forbearances by Confluence. During the period from
the date of this Agreement to the Effective Time, Confluence
shall not, and shall not cause, vote in favor of, or
otherwise authorize, approve, or permit Duchesne to:
(a) Declare and/or pay any dividends on its
outstanding shares of capital stock, other than dividends
from Duchesne to Confluence;
(b) Enter into or amend any employment, severance,
or similar agreements or arrangements with any director,
officer, key employee, or consultant; provided, however, that
Confluence may engage such person or persons, who may be
directors of Confluence, to perform a due diligence
investigation of Firstbank and its Subsidiaries;
(c) Authorize, recommend, propose, or announce
an intention to authorize, recommend, or propose, or enter into
an agreement in principle with respect to, any merger,
consolidation, or acquisition of a material amount of assets
or securities, any disposition of a material amount of
assets or securities, other than as may be necessary
pursuant to the exercise of the fiduciary duties of the
Board of Directors of Confluence or Duchesne, or any release
or relinquishment of any material contract rights not in the
ordinary course of business;
(d) Propose or adopt any amendments to the articles
of incorporation of Confluence, the articles of
association of Duchesne or any of their respective by-laws;
(e) Issue any shares of capital stock or effect
any stock split or otherwise change its capitalization as it
existed as of the date hereof;
(f) Grant, confer, or award any options, warrants,
conversion rights, or other rights not existing on the date
hereof to acquire any shares of its capital stock;
(g) Purchase or redeem any shares of its
capital stock;
(h) Enter into or increase any loan or credit
commitment (including standby letters of credit), purchase
securities, or invest or agree to invest in any person or
entity in an amount in excess of $100,000 without first
consulting with the Firstbank Entities; provided, however,
that nothing in this paragraph shall prohibit Duchesne from
honoring any contractual and legally binding obligation in
existence on the date of this Agreement, it being understood
that "consulting with" in the context of this paragraph means
advising sufficiently in advance of any proposed action to
allow Firstbank a reasonable opportunity to offer a (non-binding)
responsive opinion;
(i) Agree in writing or otherwise to take any of
the foregoing actions or engage in any activity, enter
into any transaction, or take or omit to take any other act
which would make any of Confluence's representations and
warranties 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 act;
(j) Directly or indirectly (including through
its officers, directors, employees, or other
representatives) initiate, solicit, or encourage any
discussions, inquiries, or proposals with any party (other
than the Firstbank Entities) relating to the disposition of
any significant portion of the business or assets of
Confluence or Duchesne, or the acquisition of the capital
stock (or rights or options exercisable for, or securities
convertible or exchangeable into, capital stock) of
Confluence or Duchesne, or the merger of Confluence or
Duchesne, with any person, corporation, partnership, business
trust, or other entity (each such transaction being referred
to herein as an "Acquisition Transaction"), or provide any
such person with information (other than information
required to be given under applicable law rule, or
regulation) or assistance or negotiate with any such person
with respect to an Acquisition Transaction other than as may
be necessary pursuant to the exercise of the fiduciary
duties of the Board of Directors of Confluence or
Duchesne;
(k) Take back or commence foreclosure on any
property; or
(l) Take any actions, or fail to take any
actions which alone, or together with any other action or
inaction, shall create, alter, or eliminate any rights,
benefits, obligations, or liabilities of any person
(including, but not limited to the participants,
beneficiaries, Confluence, Duchesne, or, after the Merger,
Firstbank or Colonial) with respect to any Employee Plans or
Policies.
4.03 Forbearance by Firstbank. During the period from
the date of this Agreement to the Effective Time, Firstbank
shall not, without the prior written consent of Confluence,
agree in writing or otherwise to engage in any activity,
enter into any transaction, or take or omit to take any
other act which would make any of Firstbank's representations
and warranties untrue or incorrect in any respect that is
materially detrimental to the interests of the shareholders
of Confluence under this Agreement if, after engaging in
such activity, entering into such transaction, or taking
or omitting such other act, the effect would be to make any
representation or warranty of the Firstbank Entities contained
herein untrue as if made as of the date thereof.
ARTICLE V
Additional Agreements
5.01 Access and Information. The Firstbank
Entities, Confluence, and Duchesne shall each afford to the
other, and to the other's accountants, counsel, and other
representatives, full access during normal business hours,
during the period prior to the Closing Date, to all their
respective properties, books, contracts, commitments,
reports, audits, financial statements, and other such
business records and, during such period, each shall furnish
promptly to the other (i) a copy of each report, schedule,
and other document filed or received by it during such
period pursuant to the requirements of Federal and
state securities laws and (ii) all other information concerning
its business, properties, and personnel as such other party
may reasonably request. In the event of the termination of this
Agreement each party hereto shall, and shall cause its
advisors and representatives to, (x) hold confidential all
information obtained in connection with any transaction
contemplated hereby with respect to the other party which
is not otherwise public knowledge, (y) return all documents
(including copies thereof) obtained hereunder from the other
party to such other party, and (z) use its best efforts
to cause all information obtained pursuant to this Agreement
or in connection with the negotiation hereof to be treated
as confidential and not use, or knowingly permit others
to use, any such information unless such information
becomes generally available to the public.
5.02 Registration Statement; Regulatory Matters.
(a) Subject to the review and consent of
Confluence with respect to matters relating to Confluence,
Firstbank shall prepare and file with the SEC, within forty-
five (45) days of the date of execution of this Agreement, a
Registration Statement with respect to the shares of
Firstbank Conversion Stock to be issued to shareholders of
Confluence in respect of the Merger and shall use its best
efforts to cause the Registration Statement to become
effective. Firstbank shall also take any action required to
be taken under any applicable state blue sky or securities
laws in connection with the exchange of such shares,
and Confluence shall furnish Firstbank all information concerning
Confluence and Duchesne as Firstbank may reasonably request in
connection with any such action.
(b) Firstbank shall prepare and, subject to the
review and consent of Confluence with respect to matters
relating to Confluence file, within thirty (30) days of the
date of execution of this Agreement, an application for
approval of the Merger with the Federal Reserve Board. Each
of the parties hereto shall cooperate and use their
respective best efforts to prepare all documentation, to
effect all filings, and to obtain all permits, consents,
approvals, and authorizations of all third parties and
governmental bodies necessary to consummate the
transactions contemplated by this Agreement, including,
without limitation, any such approval or authorization
required by the Federal Reserve Board, the Division of
Finance, and the FDIC.
5.03 Shareholder Approvals. Confluence shall call a
meeting of its shareholders to be held as soon as practicable
following the effectiveness of the Registration Statement for
the purpose of voting upon the Merger and related matters.
In connection with such meeting, Confluence shall mail the Proxy
Statement and related documents to its shareholders. The Board of
Directors of Confluence, subject to the exercise of its
fiduciary duty, shall submit for approval of its shareholders
the matters to be voted upon at such meeting. The Board of
Directors of Confluence and each member thereof will recommend
the approval of this Agreement and the transactions
contemplated hereby and will use its and their best efforts
to obtain the votes and approvals of its shareholders
necessary for the approval of this Agreement and the Merger
transaction contemplated hereby.
As the sole shareholder of Colonial, Firstbank agrees
to vote its shares of Colonial in favor of the Merger so
long as Confluence, at the time of such vote, is not in
material breach of any of the terms of this Agreement and
upon satisfaction of all other conditions to Closing.
5.04 Current Information. During the period from the
date of this Agreement to the Closing Date, each party shall
cause one or more of its designated representatives to confer
on a regular and frequent basis with representatives of the
other party. Each party shall promptly notify the other
party of any material change in its business, operations,
or prospects and of any governmental complaints,
investigations, or hearings or communications indicating
that the same may be contemplated, or the institution or
the threat of material litigation or administrative or
other claim involving such party, and shall keep the other
party fully informed of such events.
5.05 Agreements of Affiliates. At least five (5) days
prior to the Closing Date, Confluence shall deliver to
Firstbank a letter identifying all persons whom Confluence
believes to be, at the time the Merger is submitted to a vote
of the shareholders of Confluence, "affiliates" of Confluence
for purposes of Rules 144 and 145 under the Securities Act.
Confluence shall use its best efforts to cause each person who
is identified as an "affiliate" in the letter referred to
above to deliver to Firstbank prior to the Effective Time a
written agreement substantially in the form set forth as
Exhibit 5.05 attached hereto. Prior to the Closing Date,
Confluence shall amend and supplement such letter to
include all additional persons who have become "affiliates"
of Confluence, and shall use its best efforts to cause
each additional person who is identified as an "affiliate" to
execute a written agreement substantially in the form of
Exhibit 5.05.
5.06 Expenses.
(a) In the event that:
(i) this Agreement and the Merger
transaction contemplated hereby are not approved by the
requisite vote of Confluence's Shareholders at the meeting
of shareholders called pursuant to Section 5.03, or
(ii) this Agreement is terminated by Firstbank
or Colonial pursuant to Section 7.01(d) (other than by reason
of an unintentional breach of the Agreement by Confluence
which cannot be cured by Confluence) or Section 7.01(f), or
(iii) the Merger is not effected by
the Firstbank Entities because all affiliate agreements described
in Section 5.05 are not delivered to Firstbank, but only if the
failure to deliver such agreements, in the opinion of
Firstbank's accounts, would prevent the transaction
contemplated by this Agreement from qualifying for pooling
of interests accounting treatment,
(iv) the Merger is not effected by the
Firstbank Entities because all shareholder undertakings as
described in Section 5.09 are not delivered to Firstbank, and
within nine (9) months after the occurrence of either (i),
(ii), (iii) or (iv), Confluence shall have entered into an
agreement with any person (other than the Firstbank
Entities and other than a Banking regulatory agency that
accomplishes a regulatory or similar takeover pursuant to
applicable law) to (x) merge or consolidate, or enter into
any similar transaction with Confluence or Duchesne, (y)
purchase, lease, or otherwise acquire all or any substantial
part of the assets of Confluence or Duchesne, or (z) purchase
or otherwise acquire (including by way of merger,
consolidation, share exchange, or any similar
transaction) securities representing ten percent (10%) or more
of the voting power of Confluence or Duchesne, (or
rights or options exercisable for, or securities convertible
into, securities representing ten percent (10%) or more of the
voting power of Confluence or Duchesne), Confluence will,
within ten (10) business days following written demand by
Firstbank, pay to Firstbank, as liquidated damages and in lieu
of any liabilities otherwise due Firstbank and/or Colonial, in
immediately available funds, an amount equal to $500,000 plus
an amount equal to all reasonable out-of-pocket expenses
incurred by Firstbank in connection with the transactions
contemplated by this Agreement, including but not limited
to legal and accounting fees and expenses. Upon payment
in full of the foregoing, this Agreement shall be terminated
and without further force and effect. This paragraph (a) shall
not apply in the event of a termination under Section 7.01 unless
such termination is for breach of this Agreement by Confluence
pursuant to Section 7.01(d) (other than by reason of an
unintentional breach of the Agreement by Confluence which
cannot be cured by Confluence) or such termination is pursuant
to Section 7.01(f).
(b) In the event Firstbank shall have entered
into, authorized, recommended, proposed or publicly
announced its intention to enter into, authorize, recommend
or propose, an agreement, arrangement or understanding with any
person pursuant to which such person would (A) purchase, lease or
otherwise acquire 50% or more of the assets of Firstbank or
(B) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or similar transaction)
Beneficial Ownership (as such term is defined in Rule 13d-3
under the Exchange Act) of securities representing 30% or more
of the voting power of Firstbank, in addition to (and not in
lieu of) any remedies at law which may be available to Confluence,
Confluence shall be entitled to obtain specific performance and an
injunction in the event of the breach of this Agreement by Firstbank
or Colonial, and no attempt on the part of Confluence to obtain
such equitable relief shall be deemed to constitute an election
of remedies by Confluence which would preclude Confluence from
obtaining any remedies at law to which it would otherwise be
entitled. In connection with any such proceeding resulting from such any
such transaction, each of Firstbank and Colonial covenant and
agree that it shall not contend that Confluence is not
entitled to a decree of specific performance by reason of
having an adequate remedy at law; provided, however, that
this covenant and agreement shall in no way affect any other
defense available to Firstbank.
(c) Except as provided in subsection (a) of
this Section, each party hereto shall bear its own expenses
incident to preparing, entering into, and carrying out this
Agreement and to consummating the Merger; provided, however,
(i) Firstbank shall pay all printing and mailing expenses
and filing fees associated with the Registration Statement,
the Proxy Statement and the regulatory filings and (ii)
Firstbank shall cause the Surviving Corporation to pay, with
funds provided by Firstbank, any holders of Confluence Common
Stock who have perfected their dissenters' rights under the
Missouri Act the fair value of their shares.
5.07 Miscellaneous Agreements and Consents. Subject to
the terms and conditions herein provided, each of the parties
hereto agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including,
without limitation, using its best efforts to lift or rescind
any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the
transactions contemplated hereby. Confluence and the
Firstbank Entities shall use their best efforts to obtain
consents of all third parties and governmental bodies
necessary or, in the opinion of any of the parties,
desirable for the consummation of the transactions
contemplated by this Agreement.
5.08 Press Releases. Confluence and the Firstbank
Entities shall consult with each other as to the form and
substance of any proposed press release or other proposed
public disclosure of matters related to this Agreement or
any of the transactions contemplated hereby prior to any
public or other non-private dissemination of same.
5.09 Shareholders' Undertakings. Within ten (10) days
of the execution of this Agreement, each of Confluence's
directors, executive officers, and their respective spouses,
and trusts and other entities controlled directly or
indirectly by any of the foregoing (to the extent that any of
said individuals or entities own or control, directly or
indirectly, shares of Confluence Common Stock) (collectively
the "Confluence Insiders") shall have entered into an
agreement substantially in the form of Exhibit 5.09, by which
each of them agrees that he, she, it or they shall vote his,
her, its, or their shares in favor of this Agreement and the
Merger contemplated hereby at the meeting of Confluence's
shareholders to approve such Agreement and Merger.
5.10 Due Diligence Review.
(a) Promptly following execution and delivery of
this Agreement by Confluence, the Firstbank Entities shall
undertake review of Confluence and Duchesne and their
respective operations, business affairs, prospects, and
financial condition, including, without limitation, those
matters which are the subject of Confluence's
representations and warranties. The Firstbank Entities shall
conclude such review by not later than fifteen (15) Business
Days following the execution of this Agreement (the "Firstbank
Due Diligence Review" and the time for said review is referred
to as the "Firstbank Due Diligence Review Period"). Notwithstanding
anything hereinabove contained or implied to the contrary, the
Firstbank Due Diligence Review shall not limit, restrict, or
preclude, or be construed to limit, restrict, or preclude, the
Firstbank Entities, at any time or from time to time thereafter,
from conducting further such reviews or from exercising any rights
available to them hereunder as a result of the existence or occurrence
prior to the date of the Firstbank Due Diligence Review of
any event or condition which was not detected in the
Firstbank Due Diligence Review by any of them and which
would constitute a breach of any representation, warranty,
or agreement of Confluence under this Agreement. During
the Firstbank Due Diligence Review, and thereafter until
the Closing, Firstbank shall have such reasonable
access to Confluence's and Duchesne's management and
personnel, and to Confluence's and Duchesne's loan
files, records, and loan and other committee meetings
(including, but not limited to attending any or all of such
meetings in person and reviewing the minutes of any such
meetings), and may have any Firstbank Entities' personnel
present at Confluence and Duchesne during business hours, all
as Firstbank, in its sole discretion, shall reasonably deem
appropriate or useful.
(b) Promptly following execution and delivery of
this Agreement, Confluence may undertake a review of the
Firstbank Entities and their respective operations,
business affairs, prospects, and financial condition,
including, without limitation, those matters which are the
subject of Firstbank's representations and warranties.
Confluence shall conclude such review no later than
fifteen (15) Business Days following the execution of this
Agreement (the "Confluence Due Diligence Review" and the
time for said review is referred to as the "Confluence Due
Diligence Review Period"). Notwithstanding anything hereinabove
contained or implied to the contrary, the Confluence Due
Diligence Review shall not limit, restrict, or preclude, or
be construed to limit, restrict, or preclude Confluence, at
any time or from time to time thereafter, from conducting further
such reviews or from exercising any rights available to it
hereunder as a result of the existence or occurrence, prior
to the date of the Confluence Due Diligence Review, of any event
or condition which was not detected in the Confluence Due Diligence
Review by Confluence and which would constitute a breach of any
representation, warranty or agreement of Firstbank under this Agreement.
5.11 ERISA Matters. Confluence shall take any action
reasonably requested by the Firstbank Entities with respect to
any of the Employee Plans or Policies, including, but not limited to,
correcting operational errors or deficiencies, making necessary
filings with the Internal Revenue Service, or the Department of
Labor, or the Pension Benefit Guaranty Corporation, or amending,
freezing, terminating, or merging one or more Pension Plans;
provided, however, that any such action not otherwise
required by law shall not be effective prior to the
Effective Time and, if this Agreement is terminated pursuant
to its terms, Firstbank shall pay to Confluence the cost of
taking such action.
5.12 Employee Agreements and Benefits.
(a) Following the Effective Time, the Firstbank
Entities shall cause the Surviving Corporation to honor
in accordance with their terms all employment, severance and
other compensation contracts set forth on Schedule 2.10
between Confluence, Duchesne, and any current or former
director, officer, employee or agent thereof, and all provisions for
vested benefits or other vested amounts earned or accrued
through the Effective Time under the Employee Plans or
Policies.
(b) The Employee Plans or Policies shall not be
terminated by reason of the Merger but shall continue thereafter
as plans of the Surviving Corporation until such time as
the employees of Confluence and Duchesne are offered
participation in Firstbank's employee benefit plans that are
available to other employees of Firstbank and its
Subsidiaries, subject to the terms and conditions specified
in such plans and to such changes therein as may be
necessary to reflect the consummation of the Merger.
Firstbank shall take such steps as are necessary to
allow the employees of Confluence and Duchesne to participate
in employee benefit plans available to other employees of
Colonial and its Subsidiaries as soon as practicable after
the Effective Time.
(c) With regard to Firstbank's Retirement Plan, full
time employees of Confluence and Duchesne, for vesting
purposes, shall receive credit for their period of full time
employment with Confluence and Duchesne calculated from their
date of hire; employees of Confluence and Duchesne shall be
credited with benefit accrual service from the later of the
Effective Time or the date the eligibility requirements
have been met. For purposes of determining eligibility for
participation in all other benefit plans available to Colonial
employees, including its group health plan, full time employees
of Confluence and Duchesne shall receive credit for their
period of fulltime employment with Confluence or Duchesne prior
to the Effective Time.
5.13 Directors' and Officers' Indemnification.
Following the Effective Time, Firstbank will
provide, for a period of three (3) years, directors' and
officers' liability insurance coverage for Confluence's and
Duchesne's directors and officers with respect to actions
occurring prior to the Effective Time. Firstbank represents
that the directors' and officers' liability insurance policy
maintained by it provides for coverage of "prior acts"
for directors and officers of entities acquired by Firstbank
including Confluence and Duchesne.
5.14 Duchesne Board of Directors. The Firstbank
Entities desire to encourage an ongoing relationship, in some
capacity, with those individuals who currently serve as
members of the Board of Directors of Duchesne Bank. The
parties agree that the board members, through their
continued identification with Duchesne Bank and active
support, will ensure an ongoing program of interest and
commitment in Duchesne Bank's market area.
5.15 Tax Opinion Certificates. Firstbank shall cause
such of its executive officers and Confluence shall cause such
of its executive officers, directors and/or shareholders as
may reasonably be requested by Thompson & Mitchell to timely
execute and deliver to Thompson & Mitchell certificates
substantially in the form of Exhibits 5.15(a), (b) or (c) hereto,
as the case may be.
5.16 Firstbank Merger, Consolidation, or
Acquisition. Firstbank acknowledges and agrees that if it
shall have entered into an agreement, arrangement or
understanding with any person pursuant to which such person
would (A) purchase, lease or otherwise acquire 50% or more
of the assets of Firstbank or (B) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or
similar transaction) Beneficial Ownership of securities representing
30% or more of the voting power of Firstbank, and such transaction is
consummated prior to the Effective Time, the exchange
ratio of the Firstbank Conversion Stock shall be equitably
adjusted, as described in Section 1.07(a) hereof, such that
the shareholders of Confluence are treated as if the
Merger was effective prior to the consummation of such
other transaction. Firstbank shall require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of
the business and/or assets of Firstbank to assume expressly and
agree to perform this Agreement in the same manner and to
the same extent that Firstbank would be required to perform it
if no such succession had taken place.
ARTICLE VI
Certain Conditions
6.01 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligations of each party to
effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Closing Date of all of the following
conditions:
(a) This Agreement shall have received the
requisite approval of shareholders of Confluence at the
meeting of shareholders called for purposes of approving the
Merger.
(b) This Agreement and the transactions
contemplated hereby shall have been approved by the Federal
Reserve Board, the Division of Finance, and each other
federal and/or state regulatory agencies whose approval is
required for consummation of the transactions contemplated hereby.
(c) The Registration Statement shall have
been declared effective and shall not be subject to a stop
order or any threatened stop order.
(d) Neither Confluence nor Firstbank or Colonial
shall be subject to any order, decree, or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
6.02 Conditions to Obligations of Confluence. The
obligations of Confluence to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the
Effective Time of all of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Firstbank set forth in
Article III hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing
Date (as though made on and as of the Closing Date except (i) to
the extent such representations and warranties are by their
express provisions made as of a specified date, and (ii) for the effect
of transactions contemplated by this Agreement) and Confluence shall
have received a signed certificate of the Chief Executive Officer
and the Corporate Secretary of Firstbank, signing on behalf
of the Firstbank Entities, to that effect. The condition set forth
in this paragraph requires that all said
representations and warranties made by Firstbank in
connection with this Agreement are absolutely true in all
material respects (whether or not made to the best
knowledge and belief of Firstbank).
(b) Performance of Obligations. The
Firstbank Entities shall have performed in all material
respects all obligations required to be performed by each
under this Agreement prior to the Effective Time, and
Confluence shall have received a signed certificate of the
Chief Executive Officer and the Corporate Secretary of Firstbank
and is to that effect, including, without limitation, the obligations
of the Firstbank Entities under Section 1.08 hereof in respect of the
payment and/or delivery of the Firstbank Conversion Stock to
the Exchange Agent.
(c) No Material Adverse Change. Notwithstanding
any amended or supplemental Schedules delivered to Confluence,
since the date of this Agreement, there shall have been no
material adverse change in the business, financial condition,
or results of operations of Firstbank and the Firstbank
Subsidiaries, taken as a whole (other than changes in banking
laws or regulations, or interpretations thereof, that
affect the banking industry generally or changes in the
general level of interest rates).
(d) Opinion of Counsel. Firstbank shall
have delivered to Confluence an opinion of counsel to Firstbank
dated as of the Closing Date or a mutually agreeable earlier
date in form substantially similar to that attached hereto
as Exhibit 6.02.
(e) Tax Treatment. Confluence shall have received
an opinion, which opinion shall not have been withdrawn prior
to the Effective Time, of each of (i) Thompson & Mitchell
and (ii) Firstbank's counsel or accountants, each such opinion
to the effect that (A) the transactions contemplated herein
will constitute a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each constituent party to the transaction
constitutes a "party to a reorganization" within the meaning of
Section 368(b) of the Code, (B) no gain or loss will be recognized
by the shareholders of Confluence as a result of the Merger,
(C) each shareholder of Confluence who exchanges his or her shares
of Confluence Common Stock solely for shares of Firstbank Common
Stock will recognize no gain or loss, (D) the basis of such
Firstbank Common Stock will equal the basis of the Confluence
Common Stock for which it is exchanged, and (E) the holding
period of the Firstbank Common Stock will include the holding
period of the Confluence Common Stock for which it is exchanged,
assuming that such Confluence Common Stock is a capital asset in
the hands of the holder thereof at the Effective Time.
(f) Average Firstbank Price. The Average
Firstbank Price as defined herein shall not be less than
$24.75 per share. The "Average Firstbank Price" shall be
defined as the average of the high and low prices of Firstbank
Common Stock as reported in the Wall Street Journal, Midwest
Edition, for the twenty (20) consecutive trading days prior
to the Closing (for purposes hereof, a date on which no trade
occurred will not be deemedto be a trading day).
(g) Permits, Authorizations, etc. Firstbank
Entities shall have obtained any and all material permits,
authorizations, consents, waivers, and aprovals required
for the lawful consummation of the Merger.
6.03 Conditions to Obligations of the Firstbank Entities.
The obligations of the Firstbank Entities to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Time of all of the following additional conditions:
(a) Representations and Warranties.
The representations and warranties of Confluence made herein
shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date ( as though
made on and as of the Closing Date except (i) to the extent
such representations and warranties are by their express
provisions made as of a specific date and (ii) for the
effect of transactions contemplated by this Agreement) and Firstbank
shall have received a signed certificate of the Chief
Executive Officer and Corporate Secretary of Confluence,
signing on behalf of Confluence, to that effect. The condition
set forth in this paragraph requires that all said representations
and warranties made by Confluence in connection with this
Agreement are absolutely true in all material respects (whether or
not made to the best knowledge and belief of Confluence).
(b) Performance of Obligations. Confluence shall
have performed in all material respects all obligations
required to be performed by it under this Agreement prior to
the Closing Date, and Firstbank shall have received a signed
certificate of the Chief Executive Officer and Corporate
Secretary of Confluence, signing on behalf of Confluence, to
that effect.
(c) Permits, Authorizations, etc. Confluence shall
have obtained any and all material consents or waivers from
other parties to loan agreements, leases, or other contracts
material to Confluence's and Duchesne's businesses
required for the consummation of the Merger, and Confluence
and Duchesne shall have obtained any and all material permits,
authorizations, consents, waivers, and approvals required
for the lawful consummation of the Merger.
(d) No Material Adverse Change. Notwithstanding any
amended or supplemental Schedules delivered to Firstbank
since the date of this Agreement, there shall have been no
material adverse change in the business, financial condition,
results of operations, or prospects of Confluence or Duchesne
taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the
banking industry generally or changes in the general level of
interest rates).
(e) Election of Dissenting Shareholders. The
number of shares of Confluence Common Stock which have neither
voted in favor of the Merger nor consented thereto in a
writing pursuant to the Missouri Act and as to which written
objection to the Merger thereto has been delivered to
Confluence by the holders thereof prior to or at the time of
the taking of the vote on the Merger shall not exceed such
percentage of the total shares of Confluence Common Stock
outstanding at the time when the vote is taken, as would
cause the transaction not to be treated as a pooling of
interests for accounting purposes.
(f) Opinion of Counsel. Confluence shall
have delivered to Firstbank an opinion of counsel to Confluence
dated as of the Closing Date or a mutually agreeable earlier
date in form substantially similar to that attached hereto
as Exhibit 6.03.
(g) Opinion of Accountants. Firstbank shall
have received from KPMG Peat Marwick LLP an unqualified
opinion stating that the acquisition of Confluence by Firstbank
shall be properly accounted for as a pooling of interests
transaction, and the SEC shall not have objected to such
treatment.
(h) Tax Treatment. Firstbank shall have received
an opinion, which opinion shall not have been withdrawn prior
to the Effective Time, of its counsel or accountants to
the effect that (A) the transactions contemplated herein will
constitute a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each constituent party to the transaction
constitutes a "party to a reorganization" within the meaning
of Section 368(b) of the Code, (B) no gain or loss will be
recognized by the constituent parties as a result of the
Merger, (C) each shareholder of Confluence who exchanges his or
her shares of Confluence Common Stock solely for shares of
Firstbank Common Stock will recognize no gain or loss, (D) the
basis of such Firstbank Common Stock will equal the basis of
the Confluence Common Stock for which it is exchanged, and (E)
the holding period of the Firstbank Common Stock will include
the holding period of the Firstbank Common Stock for which
it is exchanged, assuming that such Confluence Common
Stock is a capital asset in the hands of the holder thereof
at the Effective Time.
(i) Shareholders' Undertakings and Agreements
of Affiliates. Each of the Confluence Insiders shall have
executed and delivered to Firstbank a shareholder
undertaking substantially in the form of Exhibit 5.09, and
each "affiliate" (as that term is used in Rules 144 and 145 of
the Securities Act) of Confluence shall have executed and
delivered to Firstbank an affiliate agreement substantially in
the form of Exhibit 5.05.
ARTICLE VII
Termination, Amendment, and Waiver
7.01 Termination. This Agreement may be terminated at
any time prior to the Closing Date, whether before or after
approval by the shareholders of Confluence:
(a) By mutual consent of the Boards of Directors
of all parties hereto; or
(b) By the Board of Directors of any party hereto
at any time after March 31, 1996, if the Merger shall
not theretofore have been consummated; or
(c) By the Board of Directors of any party hereto
if the Federal Reserve Board, the Division of Finance, or any
other federal and/or state regulatory agency whose approval is
required for the consummation of the transactions
contemplated hereby shall have denied approval of such
transaction and such denial has, after exhaustion of any
and all available appellate procedures, become final; or
(d) By the Board of Directors of Firstbank or
the Board of Directors of Confluence in the event of a
material breach by the other of any representation, warranty,
or agreement contained in this Agreement, which breach is not
cured within 15 days (or such longer period not exceeding 40
days in the event such breach cannot reasonably be cured
within 15 days and a cure is being pursued with reasonable
diligence) after written notice thereof is given to the party
committing such breach or waived by such other party(ies); or
(e) By Firstbank, in its sole discretion and
without penalty, by written notice to Confluence within
five (5) Business Days after the end of the Firstbank Due
Diligence Review Period; or
(f) By Firstbank, in its sole discretion and
without penalty to Firstbank, in the event Confluence or
Duchesne engages in conduct described in Section 4.02(c) or
Section 4.02(j), whether or not such conduct is necessary
pursuant to the exercise of the fiduciary duties of
Confluence's or Duchesne's Board of Directors; or
(g) By Confluence, in its sole discretion and
without penalty, by written notice to Firstbank within five
(5) Business Days after the end of the Confluence Due Diligence
Review Period.
7.02 Effect of Termination. In the event of termination of
this Agreement as provided in Section 7.01 above, this
Agreement shall forthwith become void and without further
effect and there shall be no liability on the part of any
party hereto or the respective officers and directors of any
party, except as set forth in the second sentence of
Section 5.01 (respecting confidentiality and the return of
information) and in Section 5.06 (respecting payment of
certain expenses), and, except that no termination of this
Agreement pursuant to subsection (d) of Section 7.01 shall
relieve the non-performing or defaulting party of any
liability to any other party hereto arising from the non
performance and/or breach prior to the date of such
termination of any covenant, agreement, term, provision,
representation, warranty required to be observed, performed,
complied with and/or kept by such non-performing or
defaulting party; provided, however, that there shall be
no liability for breach of a representation or warranty
that was, when given, true and correct to the best knowledge
and belief of the party giving same and which later turns
out (without any other fault of the party giving same) to be
incorrect.
7.03 Amendment. This Agreement and the Exhibits and
Schedules hereto may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors.
at any time before or after approval of this Agreement by
the shareholders of Confluence; provided, however, that
after any such approval no such modification shall (i) alter the amount
or change the form of the consideration contemplated by
this Agreement to be received by shareholders of
Confluence, (ii) adversely affect the tax treatment to the
Confluence shareholders as a result of receiving the
Firstbank Conversion Stock in the Merger, or (iii) alter or
change any of the terms of this Agreement if such
alteration or change would materially and adversely affect
the shareholders of Confluence. This Agreement may not be
amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.04 Waiver. Any term, condition or provision of
this Agreement may be waived in writing at any time by the
party which is, or whose stockholders or shareholders, as the
case may be, are entitled to the benefits thereof.
ARTICLE VIII
General Provisions
8.01 Survival of Representations, Warranties, and
Agreements. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and
warranties of the parties which are contained herein and each
such representation and warranty shall survive such
investigation. Except as set forth herein in this Section 8.01,
all representations, warranties, and agreements in this
Agreement of the Firstbank Entities and of Confluence or in
any instrument delivered by Confluence pursuant to this
Agreement shall expire at the Effective Time or upon
termination of this Agreement in accordance with its terms.
In the event of consummation of the Merger, the agreements
contained in or referred to in Sections 1.08, 5.12, 5.13 and
5.16 shall survive the Effective Time. In the event of termination
of this Agreement in accordance with its terms prior to the
Effective Time, the agreements contained in Sections 5.01 (second
sentence), 5.06, 5.11, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification. Confluence and the Firstbank
Entities (hereinafter, in such capacity being referred to
individually and/or collectively as the "lndemnifying Party"),
agree to indemnify and hold harmless each other (each such other
party being hereinafter referred to, individually and/or
collectively, as the "lndemnified Party") against any and all
losses, claims, damages, or liabilities, joint or several, to
which the Indemnified Party may become subject under the Securities
Act, the Exchange Act, or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such
losses, claims, damages, or liabilities for actions in respect
thereof) (a) arise out of any information furnished to the Indemnified
Party by the Indemnifying Party or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or
in any amendment thereof, or in the Proxy Statement or in any
amendment thereof or supplement thereto, and provided by
the Indemnifying Party or (b) arise out of or are based
upon the omission, or alleged omission by the Indemnifying
Party to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and the Indemnifying Party agrees to reimburse each such
Indemnified Party as incurred, for, any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action. The obligations of the Indemnifying Party
under this Section shall survive any termination of this Agreement.
8.03 No Assignment; Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
but neither this Agreement nor any right or obligation set
forth in any provision hereof may be transferred or assigned
by any party hereto without the prior written consent of all
other parties, and any purported transfer or assignment in
violation of this Section shall be void and of no effect. There
shall not be any third party beneficiary of any provisions hereof
except Sections 1.08, 5.12, 5.13, and 8.02, which may be enforced
against the Firstbank Entities or Confluence by the parties
therein identified.
8.04 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be held to be prohibited
by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part
of either party hereto to exercise any right, power, or privilege
hereunder or under any instrument executed pursuant hereto
shall operate as a waiver nor shall any single or partial
exercise of any right, power, or privilege preclude any
other further exercise thereof or the exercise of any other
right, power, or privilege.
8.06 Headings. Article, section, subsection, and
paragraph titles, captions and headings herein are inserted
only as a matter of convenience and for reference, and in no way
define, limit, extend, or describe the scope of this Agreement or
the intent of any provision hereof.
8.07 Entire Agreement. This Agreement, and the
Schedules and Exhibits hereto constitute the entire agreement
between and among the parties with respect to the subject
matter hereof, and supersedes all prior negotiations,
representations, warranties, commitments, offers, letters of
interest or intent, proposal letters, contracts, writings,
or other agreements or understandings with respect thereto.
No waiver and no modification or amendment of any provision
of this Agreement shall be effective unless specifically made in
writing and duly signed by all parties thereto.
8.08 Schedules. The Schedules referenced in Article II
and Article III hereof are incorporated in this Agreement as
of the date of its execution. A representation in one
Schedule shall constitute a representation in all Schedules.
8.09 Counterparts. This Agreement may be executed in one or
more counterparts, and any party to this Agreement may
execute and deliver this Agreement by executing and
delivering any of such counterparts, each of which when
executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one and the same
instrument.
8.10 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed to be duly received (i) on the date given if delivered
personally or by cable, telegram, or telex or (ii) on the date
received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses for at such other
address for a party as shall be specified by like notice):
If to the Firstbank Entities:
Firstbank of Illinois Co.
205 South Fifth Street
Springfield, Illinois 62701
Attention: Mr. Mark H. Ferguson, Chairman
Copy to: Jeffery M. Wilday
Brown, Hay & Stephens
700 First National Bank Bldg.
Springfield, Illinois 62701
If to Confluence:
Confluence Bancshares Corporation
5500 Mexico Road
St. Peters, Missouri 63376
Attention: Mr. James L. Wilhite, Chairman
Copy to: Gerard K. Sandweg, Jr.
Thompson & Mitchell
Suite 3300
1 Mercantile Center
St. Louis, MO 63101-1693
provided, however, that the providing of notice to counsel
shall not, of itself, be deemed the providing of notice to
a party hereto.
8.11 Governing Law. This Agreement shall be governed by and
controlled as to validity, enforcement, interpretation,
effect, and in all other respects by the internal laws of the
State of Missouri applicable to contracts made in that state.
8.12 Best Knowledge and Belief. Whenever a
representation or warranty contained in this Agreement is
made to the best knowledge and belief of a party, it is
understood and agreed that such representation or warranty was
made only after careful due diligence and that the party
making same knows of no reason not disclosed in this
Agreement or in the Schedules attached hereto to believe
that such representation or warranty is false,
misleading, incorrect, or omits to state a material
fact necessary to prevent same from being false,
misleading, or otherwise incorrect.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their respective officers
thereunto duly authorized as of the 15th day of June, 1995.
FIRSTBANK: Firstbank of Illinois Co.
By: /s/ Mark H. Ferguson
Chairman and CEO
(Title)
COLONIAL: Colonial Bancshares, Inc.
By: /s/ Mark H. Ferguson
Chairman and CEO
(Title)
CONFLUENCE: Confluence Bancshares Corporation
By: /s/ James Wilhite
Chairman of the Board
(Title)
EXHIBIT 5.05
AFFILIATE AGREEMENT
Firstbank of Illinois Co.
250 South Fifth Street, 9th Floor
Springfield, Illinois 62701
Re: Affiliate Agreement
Gentlemen:
I have been advised that I may be deemed an "affiliate"
of Confluence Bancshares Corporation ("Confluence") within the
meaning of paragraph (c) of Rule 145 of the Rules and
Regulations of the Securities and Exchange Commission (the
"SEC") promulgated under the Securities Act of 1933, as amended
(the "1933 Act") and might be deemed such at the time of
merger of Confluence and Colonial Bancshares Inc.
("Colonial"). Pursuant to the Agreement and Plan of Merger
by and among Firstbank of Illinois Co. ("Firstbank"), Colonial,
and Confluence dated _________, 1995 (the "Agreement and Plan of
Merger"), I will receive shares of Firstbank common stock in
exchange for those shares of Confluence common stock owned by me.
I agree that I will not make any sale, transfer, or other
disposition of any shares of Firstbank Common Stock received
pursuant to the Agreement and Plan of Merger in violation of the
1933 Act or the rules and regulations promulgated thereunder by
the SEC.
I have been advised that the issuance of the
Firstbank common stock to me pursuant to the Agreement and
Plan of Merger has been registered under the 1933 Act with the
SEC pursuant to a Registration Statement on Form S-4.
However, I have also been advised that, since at the
Effective Time of the Agreement and Plan of Merger, I may be
deemed to have been an "affiliate" of Confluence, any
offering or sale by me of any of the shares of Firstbank
common stock so received will, under current law, require
either: (i) the further registration under the 1933 Act of
the Firstbank common stock to be sold; (ii) compliance with
Rule 145 promulgated under the 1933 Act; or (iii) the
availability of another exemption from such registration.
In addition, I understand that any transferee from me in a
private offering or other similar disposition will be subject
to the same limitations as those imposed upon me.
I represent and warrant to Firstbank and agree that:
1. I have carefully read this letter discussing certain of
the requirements and other applicable limitations
upon the sale, transfer, or other disposition of such
shares of Firstbank common stock by me.
2. I have been informed by Firstbank that any sale or
other disposition by me of the shares of
Firstbank common stock has not been registered under
the 1933 Act and that the shares of Firstbank common
stock must be held by me indefinitely unless: (i)
such sale or other disposition of the shares of
Firstbank common stock has been registered under the
1933 Act; (ii) a sale or other disposition of
the shares of Firstbank common stock is made in
conformity with the provisions of Rule 145; or (iii)
some other exemption from registration is available
with respect to any such proposed sale or other
disposition of the shares of Firstbank common
stock. I will deliver to Firstbank evidence of
compliance with one of those three conditions
in connection with any proposed sale or other
disposition by me of any of the shares of Firstbank
common stock which may include, in the case of a
distribution under some other exemption from
registration, an opinion of counsel satisfactory to
counsel for Firstbank that such exemption is
available.
3. If I rely on the exemption from the registration
provisions provided by Section 4 of the 1933 Act
(other than that contained in Rule 144 or 145), I
will obtain and deliver to Firstbank a copy of a
letter from any prospective transferee which
will contain, to the satisfaction of counsel
for Firstbank: (i) representations reasonably
satisfactory to Firstbank as to the nondistributive
intent, sophistication, ability to bear risk, and
access to information of such transferee; (ii)
an acknowledgment concerning restrictions on
transfer of the shares of Firstbank common stock;
and (iii) an assumption of the obligations of the
undersigned under paragraphs 2, 3, and 4.
4. I also understand that to enforce the foregoing
commitments, the transfer agent of Firstbank
common stock will have stop transfer instructions
with respect to the shares of Firstbank common stock
and that there will be placed on the certificates
for the shares of Firstbank common stock or any
substitutions therefor, a legend stating in
substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ISSUED IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS OF
RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER
SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
In addition to the foregoing matters, I understand that
in order for the merger acquisition of Confluence to be
properly accounted for by Firstbank as a pooling of interests,
affiliates of Firstbank and Confluence must observe certain
restrictions with respect to the sale of Firstbank common
stock. As such, I hereby agree that I shall not, for a
period beginning 30 days prior to consummation of the merger
of Colonial and Confluence and ending when financial results
covering at least 30 days of post-merger combined operations
of Firstbank and Confluence have been published by Firstbank,
sell or otherwise dispose any shares of Firstbank common stock.
Firstbank is hereby authorized to give stop transfer instructions
to its transfer agent, or refuse to execute any transfer if
Firstbank is acting as its own transfer agent, with respect
to any shares of Firstbank common stock owned by me until financial
results covering at least 30 days of post-merger combined
operations of Firstbank and Confluence have been
published. I also understand that, when initially issued,
the certificates for shares of Firstbank common stock shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AN "AFFILIATE AGREEMENT" WHICH
PLACES CERTAIN RESTRICTIONS UPON THE TRANSFER
OF THE SECURITIES REPRESENTED HEREBY. A COPY
OF THE "AFFILIATE AGREEMENT" MAY BE OBTAINED FROM
THE SECRETARY OF THE CORPORATION.
Said legend will be removed by Firstbank upon my request,
after financial results covering at least 30 days of
post-merger combined operations of Firstbank and
Confluence have been published.
Very truly yours,
Signature
Print Name
DATE: EXHIBIT 5.09
SHAREHOLDER UNDERTAKING AGREEMENT
In consideration of the execution and delivery by
Firstbank of Illinois Co. ("Firstbank"), of that Agreement
and Plan of Merger, dated as of June______, 1995,
(the "Agreement"), by and between Firstbank, Colonial Bancshares Inc.
("Colonial"), and Confluence Bancshares Corporation ("Confluence") which
provides for the Merger of Colonial with and into Confluence,
the undersigned in his, her or its capacity as a shareholder
of Confluence hereby agrees (except as necessary pursuant to
the exercise of fiduciary duties as a director of Confluence
if the undersigned serves in such capacity) that, until the
Agreement has been terminated pursuant to the terms of the Agreement:
1. He, she, or it will not, without the prior written
consent of Firstbank, enter into any negotiations,
discussions, agreements, or understandings, or
entertain any proposals, for the purpose of merger
or consolidating Confluence or any of its
subsidiaries with any other entity or causing
Confluence or any of its subsidiaries to sell its
assets or any shares of its capital stock to any
other person or to issue or grant any options or
rights to purchase shares of any class of its stock.
2. He, she, or it will not, without the prior written
consent of Firstbank, enter into any negotiations,
discussions, agreements or undertakings or entertain
any proposals for the purpose of selling any of his,
her or its shares of stock of Confluence.
3. He, she, or it will vote all shares of Confluence he or
she owns or controls, directly or indirectly, in
favor of the transactions described in the Agreement
and will use his, her or its best efforts to
encourage the remaining shareholders of Confluence
to vote his, her or its stock of Confluence in a
similar manner.
IN WITNESS WHEREOF, the undersigned has set his or her
hand this ______ day of ___________, 1995.
__________________________________________
Shareholder Signature
__________________________________________
Print
Name EXHIBIT 6.02
[Brown, Hay & Stephens Letterhead]
[Date]
Confluence Bancshares Corporation
5500 Mexico Road
St. Peters, Missouri 63376
Re: Agreement and Plan of Merger dated as of
June____ , 1995, among Firstbank of Illinois Co.,
Colonial Bancshares, Inc. and Confluence Bancshares
Corporation (the "Merger Agreement")
Gentlemen:
We have served as counsel to Firstbank of Illinois
Co. ("Firstbank") and Colonial Bancshares, Inc.
("Colonial") in connection with the Merger Agreement and the
merger transaction contemplated thereunder, pursuant to
which Confluence is to merge with and into Colonial
Bancshares, Inc. , with Colonial being the surviving or
resulting corporation. This opinion is rendered to you
pursuant to Section 6.02(d) of the Merger Agreement. All
terms appearing but not otherwise defined in this opinion
shall have the meanings ascribed to them in the Merger
Agreement.
For purposes of rendering this opinion, we have examined
the following:
(i) The Merger Agreement;
(ii) Certified copies of the Certificate
of Incorporation of Firstbank and all
amendments thereto and restatements thereof, as
issued by the Secretary of State of Delaware;
(iii) By-Laws of Firstbank and all
amendments thereto, certified as true and
complete by the Secretary of Firstbank;
(iv) Certificate of Good Standing furnished by
the Secretary of the State of Delaware in
respect of Firstbank;
(v) Certificate of Good Standing furnished by
the Secretary of State of Illinois in
respect to Firstbank as a foreign corporation
doing business in the State of Illinois;
(vi) Certified copy of the Articles of
Incorporation for Colonial and all
amendments thereto and restatements thereof,
as issued by the Secretary of State of
Missouri;
(vii)By-Laws of Colonial and all amendments thereto,
certified as true and complete by the Secretary
of Colonial;
(viii)Certificate of Good Standing furnished by
the Secretary of State of Missouri in
respect of Colonial;
(ix) Certificates of the Chief Executive Officer
and Chief Financial Officer of Firstbank and
Colonial attached hereto as Exhibits A and B, as
to factual matters deemed relevant to the
opinions expressed herein;
(x) Registration Statement prepared in connection
with the issuance of 500,000 shares of
Firstbank of Illinois Co. common stock,
including the Proxy Statement/Prospectus
included therein; and
(xi) Such other agreements, instruments,
records, certificates, and documents as we
have deemed necessary.
In connection with this opinion, we have made such
other inquiries as we deemed necessary or appropriate for the
purpose of rendering the opinions stated herein. In
rendering this opinion, we have assumed: the genuineness of
all signatures on documents, statements, records,
certificates, and instruments reviewed by us; the
accurateness and authenticity of all documents,
statements, records, certificates, and instruments submitted
to or reviewed by us as certified, conformed,
photostatic, or other reproduced copies; and, the due
authority of all persons executing any and all of the
foregoing (except with respect to the authority of persons
executing the Merger Agreement on behalf of Firstbank and
Colonial).
Based upon and subject to the foregoing and subject to
the assumptions, limitations, and exceptions set forth herein,
we are of the opinion that:
1. Organization and Power of Firstbank. Firstbank is a
corporation duly organized, validly existing, and
in good standing under the laws of the State of
Delaware, is duly qualified to do business and
is in good standing in all jurisdictions where
its ownership or leasing of property or the
conduct of its business requires it to be so
qualified and has corporate power and authority to
own its properties and assets and to carry on its
business as it is now being conducted. Firstbank is
registered as a bank holding company with the Board
of Governors of the Federal Reserve System under
the Bank Holding Company Act of 1956, as amended (the
"BHC Act").
2. Organization and Power of Colonial. Colonial is a
corporation duly organized, validly existing, and in
good standing under the laws of the State of Missouri,
is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business
requires it to be so qualified and has corporate power
and authority to own its properties and assets and to
carry on its business as it is now being conducted.
Colonial is registered as a bank holding company with
the Board of Governors of the Federal Reserve System
under the BHC Act.
3. Authority of Firstbank. The execution and delivery by
Firstbank of the Merger Agreement and the consummation
of the merger contemplated thereunder (i) have been
duly authorized by all requisite corporate and
shareholder action, and (ii) do not, and will not,
require the consent, waiver, approval, or authorization
of any person, entity, or governmental authority other
than the approvals by the Board of Governors of the
Federal Reserve System, or by delegation, the Federal
Reserve Bank of Chicago, and the Missouri Division of
Finance, which approvals, to our knowledge, have been
obtained (collectively, the "Requisite Regulatory
Approvals"). To the best of our knowledge, such
Requisite Regulatory Approvals are not now contested by
any federal or state governmental or regulatory
authority, or by any other party.
4. Authority of Colonial. Except for the issuance of the
Certificate of Merger, the application for which is now
pending with the Missouri Secretary of State, the
execution and delivery by Colonial of the Merger
Agreement and the consummation of the merger
contemplated thereunder (i) have been duly authorized
by all requisite corporate and shareholder action, and
(ii) do not, and will not, require the consent, waiver,
approval, or authorization of any person, entity, or
governmental authority other than the approvals by the
Board of Governors of the Federal Reserve System, or by
delegation, the Federal Reserve Bank of Chicago, and
the Missouri Division of Finance, which approvals, to
our knowledge, have been obtained (collectively, the
"Requisite Regulatory Approvals"). To the best of our
knowledge, such Requisite Regulatory Approvals are not
now contested by any federal or state governmental or
regulatory authority, or by any other party.
5. Binding Effect. The Merger Agreement constitutes the
legal, valid, and binding obligation of both Firstbank
and Colonial, respectively, enforceable against both or
either of them in accordance with its terms.
6. No Conflict or Violation. The execution and delivery
of the Merger Agreement and the consummation of the
merger do not conflict with or violate the provisions
of either Firstbank's or Colonial's Certificate or
Articles of Incorporation or By-Laws, or, to the best
of our knowledge, any order or decree of any
governmental or regulatory agency, or of any court, to
which either Firstbank or Colonial is a party or
subject, or by which either Firstbank or Colonial is
bound.
7. No Default or Breach. To the best of our knowledge,
the execution and delivery of the Merger Agreement and
the consummation of the merger do not result in any
breach or default, or give rise to any right of
termination, cancellation, or acceleration under
any material note, bond, mortgage, indenture, lease,
contract, or other agreement to which either Firstbank or
Colonial is a party or subject, or by which either Firstbank
or Colonial is bound.
8. Absence of Litigation. To the best of our knowledge,
there is no action, suit, proceeding, claim, or
investigation pending or, to the best of our knowledge,
threatened which affects or seeks to prohibit the
consummation of the Merger.
9. Capitalization of Firstbank. The authorized capital
stock of Firstbank consists of (i) 20,000,000 shares
of common stock, $1.00 par value ("Firstbank Common
Stock"), of which as of this date, ___________ shares are
issued and outstanding, and (ii) 1,000,000 shares of preferred
stock, no par value, of which none are issued and outstanding.
To the best of our knowledge, except for________ of shares of
Firstbank Common Stock subject to outstanding options, shares
of Firstbank Common Stock reserved for issuance under the
Firstbank Incentive Stock Option Plan,_________ shares of
Firstbank Common Stock reserved for issuance under the Firstbank
Dividend Reinvestment and Stock Purchase Plan, ________shares
of Firstbank Common Stock reserved for issuance under the
Firstbank Directors Stock Option Plan, and shares of Firstbank
Common Stock issued but not outstanding and held in
treasury, there are no other shares of capital stock or other
equity securities of Firstbank outstanding and no other
outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any
character whatsoever relating to, or securities or
rights convertible into, shares of any capital
stock of Firstbank, or contracts, commitments,
understandings or arrangements by which Firstbank
is or may become bound to issue additional
shares of its capital stock or options,
warrants, or rights to purchase or acquire
any additional shares of its capital stock.
To the best of our knowledge, all of the issued
and outstanding shares of Firstbank Common Stock
are validly issued and have not been issued in
violation of any preemptive right of any
shareholder of Firstbank.
10. Firstbank Common Stock. The shares of Firstbank
common stock to be issued pursuant to the Merger
Agreement conform to the description thereof
contained in the Registration Statement.
11. Registration Statement. The Registration Statement
has become effective under the Securities Act of
1933 and, to the best of our knowledge, no stop
order suspending the effectiveness of the
Registration Statement has been issued and no
proceedings for that purpose have been instituted
or threatened.
12. The shares of Firstbank Common Stock that are to
be issued to the shareholders of Confluence
pursuant to the Merger have been duly
authorized and, when so issued in accordance
with the terms of the Merger Agreement, will
be validly issued and outstanding, fully paid
and nonassessable.
In addition to the assumptions and other qualifications
stated elsewhere herein, we make the following further
qualifications with respect to the opinions stated herein:
a. Except as specifically stated in the aforesaid opinion
or otherwise specifically stated below, all of
the opinions expressed herein are based upon and
relate only to the laws and regulations of the
States of Missouri and Delaware and federal laws
and regulations, all as presently in effect, and
we express no opinion herein with respect to
the laws of any other jurisdiction.
b. Our opinions are subject to public policy, bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium, and other laws relating to or affecting
the rights of creditors generally, and the
exercise of judicial discretion in accordance
with general principles applicable to
equitable and similar remedies.
c. We express no opinion as to the enforceability of
provisions which purport to indemnify any person
or entity for his, her, or its reckless or
intentional wrongs or which exculpate any person
or entity as to liability for wrongs committed
with respect to persons other than a party to
the instrument purporting to create such
exculpation.
d. We have conducted no independent investigation as to
the factual matters stated herein. We have relied
with respect to those factual matters on the
documents, statements, records, certificates,
and instruments submitted to and/or reviewed by
us as well as on Certifications supplied to us
by Firstbank and Colonial (in the form attached
hereto) to the effect that the facts, assumptions,
and factual statements set forth in this opinion
are true, accurate, and correct. However, we have
no knowledge from any other source of any other
facts which, if true, would make any of the
opinions expressed herein incorrect.
e. The opinions expressed herein are subject to exchange
of legal consideration.
f. Any opinion that is expressed herein to our knowledge
or to the best of our knowledge is based upon
information known to us without independent
investigation or research and represents our good
faith belief that the opinion expressed is correct.
g. No opinion should be considered to be given except as
expressly stated herein. Our opinions are limited
to the specific issues addressed and are limited
in all respects to laws and facts existing on the
date hereof. By rendering our opinions, we do
not undertake to advise you of any changes in
such laws or facts which may occur after the date
hereof. An opinion is not an assurance or a
guaranty.
h. Our opinion with respect to the issuance of the
outstanding shares of capital stock of Firstbank
and Colonial is based entirely upon
Certifications or certain factual information
supplied to us by Firstbank and Colonial.
This opinion is solely for the benefit of Confluence
Bancshares Corporation and may not be relied upon in any manner
by any other person, nor may copies be delivered or furnished to
any person, nor may all or any portions of this opinion
be quoted, circulated, or referred to in any other document
without our prior written consent. Delivery of a copy of
this opinion to any other person, whether with or without
prior consent, shall not entitle such person to rely hereon.
Very truly yours,
EXHIBIT A
Come now the undersigned, acting for and on behalf
of FIRSTBANK OF ILLINOIS CO., a Delaware corporation
("Firstbank"), and state as follows:
1. I have reviewed the Opinion of Counsel of Brown, Hay &
Stephens to Confluence Bancshares Corporation dated
June_____ , 1995, to which this certificate is attached as
Exhibit A.
2. Without attempting to express or verify any legal opinion
stated therein, the undersigned hereby certifies that
the facts, assumptions and factual statements set forth
in said Opinion of Counsel with respect to
Firstbank are true, accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against Firstbank, before any court
or governmental or regulatory body or otherwise
wherein an unfavorable judgment, decree, or order
would have a materially adverse effect on said
entity or would prevent the carrying out by said
entity of the transactions contemplated in said
Opinion of Counsel.
4. With respect to the issued and outstanding shares of capital
stock of Firstbank: (i) the entire amount of
consideration for which said shares were issued has
been received; (ii) the form of consideration was
either cash, services actually rendered, property, or a
combination thereof; and (iii) the consideration was
not less than the amount determined to be capital (at
least the par or stated value).
It is understood and agreed that Brown, Hay & Stephens
will rely upon this Certification in giving said Opinion of
Counsel.
IN WITNESS WHEREOF, this Certification has been
executed as of this _____ day of _______________________,
1995.
FIRSTBANK OF ILLINOIS CO.
BY:______________________________
Chief Executive Officer
BY:_______________________________
Chief Financial Officer
EXHIBIT B
Come now the undersigned, acting for and on behalf
of COLONIAL BANCSHARES, INC., a Missouri corporation
("Colonial"), and state as follows:
1. I have reviewed the Opinion of Counsel of Brown, Hay &
Stephens to Confluence Bancshares Corporation dated
June_____, 1995, to which this certificate is attached as Exhibit B.
2. Without attempting to express or verify any legal opinion
stated therein, the undersigned hereby certifies that
the facts, assumptions and factual statements set forth
in said Opinion of Counsel with respect to
Colonial are true, accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against Colonial before any court or
governmental or regulatory body or otherwise wherein
an unfavorable judgment, decree, or order would
have a materially adverse effect on said entity or
would prevent the carrying out by said entity of
the transactions contemplated in said Opinion of
Counsel.
4. With respect to the issued and outstanding shares of capital
stock of Firstbank: (i) the entire amount of
consideration for which said shares were issued has
been received; (ii) the form of consideration was
either cash, services actually rendered, property, or a
combination thereof; and (iii) the consideration was
not less than the amount determined to be capital (at
least the par or stated value).
It is understood and agreed that Brown, Hay & Stephens
will rely upon this Certification in giving said Opinion of
Counsel.
IN WITNESS WHEREOF, this Certification has been
executed as of this _____ day of _______________________,
1995.
COLONIAL BANCSHARES, INC.
BY:______________________________
Chief Executive Officer
BY:_______________________________
Chief Financial Officer
EXHIBIT 6.03
[Thompson & Mitchell Letterhead]
[Date]
Firstbank of Illinois Co.
205 South Fifth Street
Springfield, Illinois 62701
Re: Agreement and Plan of Merger dated as of
June_________, 1995, among Firstbank of Illinois Co.,
Colonial Bancshares, Inc., and Confluence
Bancshares Corporation (the "Merger Agreement")
Gentlemen:
We have served as counsel to Confluence
Bancshares Corporation ("Confluence") in connection with
the Merger Agreement and the merger transaction
contemplated thereunder, pursuant to which Confluence
Bancshares Corporation ("Confluence") is to merge with and
into Colonial Bancshares, Inc. ("Colonial"), with Colonial
being the surviving or resulting corporation. This opinion is
rendered to you pursuant to Section 6.03(f) of the Merger Agreement.
All terms appearing but not otherwise defined in this opinion
shall have the meanings ascribed to them in the Merger Agreement.
Whenever our opinion herein with respect to the
existence or absence of facts is indicated to be based on
our knowledge or awareness, the best of our knowledge or
the best of our knowledge after due inquiry, it is limited
to the actual present knowledge of the attorneys of our
firm who have devoted substantive attention to legal
matters referred to us by Confluence or Duchesne. Any
knowledge of our partner, John C. Hannegan, obtained as
a shareholder, officer or Director of either
Confluence or Duchesne Bank is specifically excluded from
our knowledge insofar as it relates to factual matters known
to us. Except to the extent expressly set forth herein,
we have not undertaken any independent investigation
to determine the existence or absence of such facts and no
inference as to our knowledge of the existence or absence
of such facts should be drawn from our representation of Confluence or
Duchesne.
For purposes of rendering this opinion, we have examined
the following:
(i) The Merger Agreement;
(ii) Certified copies of the Articles of
Incorporation of Confluence and all
amendments thereto and restatements
thereof, as issued by the Secretary of State
of Missouri;
(iii) By-Laws of Confluence and all
amendments thereto, certified as true and
complete by the Secretary of Confluence;
(iv) Certificate of Good Standing furnished by
the Secretary of the State of Missouri in
respect of Confluence;
(v) Certified copy of the Articles of Association
and Good Standing Certificate in respect
of the Duchesne Bank ("Duchesne Bank"), as issued in
each case by the Missouri Division of Finance;
(vi) By-Laws of Duchesne Bank and all
amendments thereto, certified as true and
complete by the Secretary of Duchesne Bank;
(vii)Certificates of the Chief Executive
Officers and Chief Financial Officers of
Colonial and each of the Banks attached
hereto as Exhibits A and B as to factual
matters deemed relevant to the opinions
expressed herein;
(viii)Registration Statement prepared in
connection with the issuance of 500,000
shares of Firstbank of Illinois Co. common
stock, including the Proxy Statement/Prospectus
included therein; and
(ix) Such other agreements, instruments,
records, certificates, and documents as we
have deemed necessary.
In connection with this opinion, we have made such
other inquiries as we deemed necessary or appropriate for
the purpose of rendering the opinions stated herein. In
rendering this opinion, we have assumed: the genuineness
of all signatures on documents, statements, records,
certificates, and instruments reviewed by us; the
accurateness and authenticity of all documents, statements,
records, certificates, and instruments submitted to or
reviewed by us as certified, conformed, photostatic, or other
reproduced copies; and, the due authority of all persons executing
any and all of the foregoing (except with respect to the authority
of persons executing the Merger Agreement on behalf of Colonial).
Based upon and subject to the foregoing and subject to
the assumptions, limitations, and exceptions set forth
herein, we are of the opinion that:
1. Organization and Power of Confluence. Confluenceis a
corporation duly organized, validly existing, and
in good standing under the laws of the State of
Missouri, is duly qualified to do business and
is in good standing in all jurisdictions where
its ownership or leasing of property or the
conduct of its business requires it to be so
qualified and has corporate power and authority
to own its properties and assets and to carry on
its business as it is now being conducted.
Confluence is registered as a bank holding company
with the Board of Governors of the Federal
Reserve System under the Bank Holding Company Act
of 1956, as amended.
2. Authority. Except for the issuance of the Certificate
of Merger, the application for which is now
pending with the Missouri Secretary of State, the
execution and delivery by Confluence of the Merger
Agreement and the consummation of the merger
contemplated thereunder (i) have been duly
authorized by all requisite corporate and
shareholder action, and (ii) do not, and will not,
require the consent, waiver, approval, or
authorization of any person, entity, or
governmental authority other than the approvals
by the Board of Governors of the Federal Reserve
System, or by delegation, the Federal Reserve
Bank of Chicago, and the Missouri Division of
Finance, which approvals, to our knowledge, have
been obtained (collectively, the "Requisite
Regulatory Approvals"). To the best of our
knowledge, such Requisite Regulatory Approvals are
not now contested by any federal or state
governmental or regulatory authority, or by any
other party.
3. Binding Effect. The Merger Agreement constitutes the
legal, valid, and binding obligation of
Confluence enforceable against Confluence in
accordance with its terms.
4. No Conflict or Violation. The execution and delivery
of the Merger Agreement and the consummation of
the merger do not conflict with or violate the
provisions of Confluence's Certificate or Articles of
Incorporation or By-Laws, or, to the best of
our knowledge, any order or decree of any
governmental or regulatory agency, or of any
court, to which Confluence or Duchesne Bank is a
party or subject, or by which Confluence or
Duchesne Bank is bound.
5. No Default or Breach. To the best of our knowledge,
the execution and delivery of the Merger Agreement
and the consummation of the merger do not result
in any breach or default, or give rise to
any right of termination, cancellation, or
acceleration under any material note, bond,
mortgage, indenture, lease, contract, or other
agreement to which Confluence or Duchesne Bank
is a party or subject, or by which Confluence
or Duchesne Bank is bound.
6. Absence of Litigation. To the best of our knowledge,
there is no action, suit, proceeding, claim, or
investigation pending or, to the best of our knowledge,
threatened which affects or seeks to prohibit the
consummation of the Merger.
7. Capitalization of Confluence. The authorized capital
stock of Confluence consists of 200,000 shares of one
class of common stock, $1.00 par value ("Confluence
Common Stock"), of which as of this date, based upon
the stock records of Confluence, 200,000 shares are
issued and outstanding. There are no other shares of
capital stock or other equity securities of Confluence
outstanding and, to the best of our knowledge, no other
outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights
convertible into, shares of any capital stock of
Confluence, or contracts, commitments, understandings
or arrangements by which Confluence is or may become
bound to issue additional shares of its capital stock
or options, warrants or rights to purchase of acquire
any additional shares of its capital stock. To the
best of our knowledge, all of the issued and
outstanding shares of Confluence Common Stock are
validly issued and have not been issued in violation of
any preemptive right of any shareholder of Confluence.
8. Corporate Existence of Duchesne Bank. Duchesne Bank is
chartered as a Missouri banking association by the
Missouri Division of Finance, is duly authorized,
validly existing, and in good standing under the laws
of the State of Missouri, and is a bank insured by the
Federal Deposit Insurance Corporation under the Federal
Deposit Insurance Act of 1950, as amended. To the best
of our knowledge, Duchesne Bank possesses all corporate
power and authority to own and operate its properties
and to carry out its businesses as and where the same
are now being conducted. The character of the
properties owned or leased by Duchesne Bank and the
nature of the business transacted by it do not require
that such Bank be qualified to do business in any other
jurisdiction.
9. Capitalization of Duchesne Bank. The authorized
capital stock of Duchesne Bank consists solely of
200,000 shares of common stock, par value $10.00 per
share, all of which are issued and outstanding.
Confluence has good and marketable title to all such
currently issued and outstanding shares of common stock
of Duchesne Bank, free and clear of any liens, claims,
charges, encumbrances, and assessments of any kind or
nature whatsoever, except for director qualifying
shares which Confluence has the right to reacquire for
a nominal sum and except as set forth in Schedule 2.05
of the Merger Agreement. To the best of our knowledge,
there are no other shares of capital stock or other
equity securities of Duchesne Bank outstanding and no
other outstanding options, of any character whatsoever
relating to, or securities or rights convertible into,
shares of any capital stock of Duchesne Bank, or
contracts, commitments, understandings, or arrangements
by Duchesne Bank is or may become bound to issue
additional shares of capital stock or options,
warrants, or rights to purchase or acquire any
additional shares of capital stock. To the best of our
knowledge, all of the issued and outstanding shares
of Duchesne Banks' common stock are validly issued
and are fully paid and nonassessable.
In addition to the assumptions and other qualifications
stated elsewhere herein, we make the following further
qualifications with respect to the opinions stated herein:
a. Except as specifically stated in the aforesaid opinion
or otherwise specifically stated below, all of
the opinions expressed herein are based upon and
relate only to the laws and regulations of the
State of Missouri and federal laws and
regulations, all as presently in effect, and we
express no opinion herein with respect to the laws
of any other jurisdiction.
b. Our opinions are subject to public policy, bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium, and other laws relating to or affecting
the rights of creditors generally, and the exercise
of judicial discretion in accordance with general
principles applicable to equitable and similar
remedies.
c. We express no opinion as to the enforceability of
provisions which purport to indemnify any person
or entity for his, her, or its reckless or
intentional wrongs or which exculpate any person
or entity as to liability for wrongs committed
with respect to persons other than a party to
the instrument purporting to create such
exculpation.
d. We have conducted no independent investigation as to
the factual matters stated herein. We have relied
with respect to those factual matters on the
documents, statements, records, certificates,
and instruments submitted to and/or reviewed by
us as well as on Certifications supplied to
us by Confluence and Duchesne Bank (in the
form attached hereto) to the effect that the facts,
assumptions, and factual statements set forth in this
opinion are true, accurate, and correct. However, we
have no knowledge from any other source of any other
facts which, if true, would make any of the
opinions expressed herein incorrect.
e. The opinions expressed herein are subject to exchange
of legal consideration.
f. Any opinion that is expressed herein to our knowledge
or to the best of our knowledge is based
upon information known to us without independent
investigation or research and represents our good
faith belief that the opinion expressed is correct.
g. No opinion should be considered to be given except as
expressly stated herein. Our opinions are limited
to the specific issues addressed and are limited
in all respects to laws and facts existing on the
date hereof. By rendering our opinions, we do
not undertake to advise you of any changes in
such laws or facts which may occur after the date
hereof. An opinion is not an assurance or a
guaranty.
h. Our opinion with respect to the issuance of the
outstanding shares of capital stock of Confluence
and Duchesne Bank are fully paid and nonassessable
is based entirely upon Certifications or certain
factual information supplied to us by Confluence and
Duchesne Bank.
This opinion is solely for the benefit of Firstbank
of Illinois Co. and may not be relied upon in any manner
by any other person, nor may copies be delivered or
furnished to any person, nor may all or any portions of
this opinion be quoted, circulated, or referred to in any other
document without our prior written consent. Delivery of a copy of
this opinion to any other person, whether with or
without prior consent, shall not entitle such person to rely
hereon.
Very truly yours,
EXHIBIT 2.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger is made and
entered into this 14th day of July, 1995, by and among FIRSTBANK OF
ILLINOIS CO., a Delaware corporation ("Firstbank"), COLONIAL BANCSHARES,
INC., a Missouri corporation ("Colonial"), and CONFLUENCE BANCSHARES
CORPORATION, a Missouri corporation ("Confluence").
WHEREAS, Firstbank, Colonial and Confluence entered into that certain
Agreement and Plan of Merger dated as of June 15, 1995 (the "Agreement");
and
WHEREAS, the Agreement provides for the merger of Confluence with and
into Colonial upon receipt of all requisite approvals and the achievement
of various other conditions, pursuant to which the separate corporate
existence of Confluence will cease and the shareholders of Confluence Common
Stock will receive equity securities of Firstbank (the "Merger"); and
WHEREAS, it is the desire of Firstbank, Colonial and Confluence that
the Agreement be amended in certain respects and the Agreement provides that
all such amendments shall be in writing signed by all parties to the
Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and promises contained herein, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
The first sentence of Section 5.02(b) of the Agreement is amended by
deleting the same in its entirety and substituting therefor in its entirety
the following:
Firstbank shall prepare and, subject to the review
and consent of Confluence with respect to matters
relating to Confluence file, within forty-five (45)
days of the date of execution of this Agreement, an
application for approval of the Merger with the
Federal Reserve Board.
This First Amendment may be executed in one or more counterparts and
any party to this First Amendment may execute and deliver this First
Amendment by executing and delivering any such counterparts, each of which
when executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment on the day and year first above written.
FIRSTBANK: Firstbank of Illinois Co.
By: /s/ Mark H. Ferguson
Its Chairman and CEO
COLONIAL: Colonial Bancshares, Inc.
By: /s/ Mark H. Ferguson
Its Chairman and CEO
CONFLUENCE: Confluence Bancshares Corporation
By: /s/ Richard C. Lueck
Its President
EXHIBIT 5.1
July 31, 1995
Firstbank of Illinois Co.
205 South Fifth Street, 9th Floor
Springfield, IL 62701
Re: Form S-4 Registration Statement Relating to 500,000
Shares of Common Stock, Par Value $1.00 Per Share,
of Firstbank of Illinois Co.
Gentlemen:
We have acted as counsel for Firstbank of Illinois Co.
("Firstbank") in connection with the Form S-4 Registration
Statement to be filed by Firstbank with the Securities and
Exchange Commission relating to the shares of Common Stock, par
value $1.00 per share, of Firstbank (the "Common Stock") issuable
pursuant to the Agreement and Plan of Merger dated June 15, 1995,
by and among Firstbank, Colonial Bancshares, Inc., a wholly-owned
subsidiary of Firstbank, and Confluence Bancshares Corporation,
as amended by a First Amendment to Agreement and Plan of Merger
dated July 14, 1995 (as amended, the "Merger Agreement"). As
such counsel, we have examined and relied upon such records,
documents, certificates and other instruments as in our judgment
are necessary or appropriate to form the basis for the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(i) Firstbank is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of
Delaware.
(ii) The shares of Common Stock issuable in connection with
the Merger (as defined in the Registration Statement), when
issued in accordance with the terms set forth in the Merger
Agreement and as described in the Registration Statement, will
be validly issued and outstanding, fully paid, and nonassessable.
We consent to the filing of this opinion as an Exhibit to
the Registration Statement and to the reference to us under the
caption "Legal Matters" in the Proxy Statement/Prospectus that
is included in the Registration Statement.
Very truly yours,
EXHIBIT 8.1
July 31, 1995
Board of Directors
Confluence Bancshares Corporation
5500 Mexico Road
St. Peters, Missouri 63376
Gentlemen:
You have requested our opinion with regard to certain federal
income tax consequences of the proposed merger (the "Merger") of
Confluence Bancshares Corporation ("Confluence") with and into
Colonial Bancshares, Inc. ("Colonial"), a wholly owned subsidiary
of Firstbank of Illinois Co. ("Firstbank").
In connection with the preparation of our opinion, we have
examined and have relied upon the following:
(i) The Agreement and Plan of Merger by and among Firstbank,
Colonial, and Confluence, dated June 15, 1995, the amendment
thereto dated July 14, 1995, and the schedules and exhibits
to the foregoing (the "Plan");
(ii) Firstbank's Registration Statement on Form S-4,
including the Proxy Statement and Prospectus contained
therein, filed with the Securities and Exchange Commission
on July 31, 1995 (the "Registration Statement");
(iii) The representations and undertaking of Firstbank
substantially in the form of Exhibit A hereto; and
(iv) The representations and undertakings of Confluence
and certain holders of Confluence common stock, par value
$1.00 per share ("Confluence Common Stock"), substantially
in the form of Exhibits B and C hereto.
Our opinion is based solely upon applicable law and the factual
information and undertakings contained in the above mentioned
documents. In rendering our opinion, we have assumed the accuracy
of all information and the performance of all undertakings
contained in each of such documents. We also have assumed the
authenticity of all original documents, the conformity of all
copies to the original documents, and the genuineness of all
signatures. We have not attempted to verify independently the
accuracy of any information in any such document, and we have
assumed that such documents accurately and completely set forth
all material facts relevant to this opinion. All of our
assumptions were made with your consent. If any fact or assumption
described herein or below is incorrect, any or all of the federal
income tax consequences described herein may be inapplicable.
OPINION
Subject to the foregoing, to the conditions and limitations
expressed elsewhere herein, and assuming that the Merger is
consummated in accordance with the Plan, we are of the opinion
that for federal income tax purposes:
1. The Merger will constitute a reorganization
within the meaning of sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended to the date hereof (the "Code").
2. Each shareholder of Confluence who exchanges,
in the Merger, shares of Confluence Common Stock solely
for shares of Firstbank common stock, par value $1.00 per
share ("Firstbank Common Stock"):
a) will recognize no gain or loss, except with
regard to cash received in lieu of a fractional
share, as discussed below (Code section 354(a)(1));
b) will have an aggregate basis for the shares
of Firstbank Common Stock received (including any
fractional share of Firstbank Common Stock deemed
to be received, as described in paragraph 3, below)
equal to the aggregate basis of the shares of
Confluence Common Stock surrendered (Code
section 358(a)(1)); and
c) will have a holding period for the shares
of Firstbank Common Stock received (including any
fractional share of Firstbank Common Stock deemed
to be received, as described in paragraph 3, below)
which includes the period during which the shares
of Confluence Common Stock surrendered were held,
provided that the shares of Confluence Common Stock
surrendered were capital assets in the hands of
such holder at the time of the Merger (Code
section 1223(1)).
3. Each shareholder of Confluence who receives, in
the Merger, cash in lieu of a fractional share of Firstbank
Common Stock will be treated as if the fractional share had
been received in the Merger and then redeemed by Firstbank.
Provided that the shares of Confluence Common Stock
surrendered were capital assets in the hands of such
holder at the time of the Merger, 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 aggregate adjusted tax
basis in the shares of Firstbank Common Stock allocable
to the fractional share (Code sections 1001 and 1222;
Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41,
1977-2 C.B. 574).
4. Each shareholder of Confluence who receives solely
cash as a result of the exercise of dissenters' rights
will recognize gain or loss (determined separately as to
each block of Confluence Common Stock exchanged) in an
amount equal to the difference between (x) the amount of
cash received by such shareholder and (y) such shareholder's
basis for the shares of Confluence Common Stock surrendered,
provided that the cash payment does not have the effect of
the distribution of a dividend (Code sections 1001 and
302(a)). Such gain or loss will be capital gain or loss
if the shares of Confluence Common Stock surrendered were
capital assets in the hands of the holder, and long-term
or short-term depending on the holder's holding period for
each block of Confluence Common Stock surrendered (Code
section 1222). However, if the cash payment does have the
effect of the distribution of a dividend, such shareholder
will recognize income in the amount of the cash received
(without regard to such shareholder's basis in the Confluence
Common Stock surrendered), which generally will be taxable
as a dividend (Code sections 302(d) and 301).
The determination of whether a cash payment has the effect of
the distribution of a dividend will be made pursuant to the
provisions and limitations of section 302 of the Code, taking into
account the stock ownership attribution rules of section 318 of
the Code. Because such determination generally will depend on the
facts and circumstances of each Confluence shareholder, we express
no opinion as to whether the cash payments discussed in this
paragraph 4 will be treated as having the effect of the distribution
of a dividend.
A cash payment will be considered not to have the effect of
the distribution of a dividend under section 302 of the Code only
if the cash payment (i) results in a "complete redemption" of such
shareholder's actual and constructive stock interest, (ii) qualifies
as a "substantially disproportionate" reduction in such shareholder's
actual and constructive stock interest, or (iii) is not "essentially
equivalent to a dividend" (Code section 302(b)(1), (2), (3)).
A cash payment will result in a "complete redemption" of a
shareholder's stock interest if such shareholder does not actually
or constructively own any stock after the Merger. A reduction
in a shareholder's stock interest will be "substantially
disproportionate" if (i) the percentage of outstanding shares
actually and constructively owned by such shareholder after the
receipt of the cash payment is less than four-fifths (i.e., 80%)
of the percentage of outstanding shares actually and constructively
owned by such shareholder immediately prior to the receipt of the
cash payment, and (ii) such shareholder actually and constructively
owns less than 50 percent of the number of shares outstanding after
the receipt of the cash payment (Code section 302(b)(2)). The
cash payment will not be "essentially equivalent to a dividend" if
there has been a "meaningful reduction" (as the quoted term has
been interpreted by judicial authorities and by rulings of the
Internal Revenue Service (the "Service")) of the shareholder's
actual and constructive ownership interest (Code section 302(b)(1);
United States v. Davis, 397 U.S. 301 (1970); see, e.g., Rev.
Rul. 76 385, 1976-2 C.B. 92; Rev. Rul. 76-364, 1976-2 C.B. 91).
Under the traditional analysis (which apparently continues
to be used by the Service), section 302 of the Code will apply as
though the distribution of cash were made by Confluence in a
hypothetical redemption of Confluence Common Stock immediately
prior to, and in a transaction separate from, the Merger (a
"deemed Confluence redemption"). Thus, under the traditional
analysis, the determination of whether a cash payment results
in a complete redemption of interest, qualifies as a substantially
disproportionate reduction of interest, or is not essentially
equivalent to a dividend will be made by comparing (x) the
shareholder's actual and constructive stock interest in Confluence
before the deemed Confluence redemption, with (y) such shareholder's
actual and constructive stock interest in Confluence after the
deemed Confluence redemption (but before the Merger). Nevertheless,
in view of Commissioner v. Clark, 489 U.S. 726 (1989), many tax
practitioners believe that the continuing validity of the traditional
analysis is open to question and that, in a transaction such as the
Merger, the receipt of solely cash in exchange for stock actually
owned should be treated in accordance with the principles of
Commissioner v. Clark, supra, as if the Confluence Common Stock
exchanged for cash in the Merger had instead been exchanged in the
Merger for shares of Firstbank Common Stock followed immediately
by a redemption of such shares by Firstbank for the cash payment
(a "deemed Firstbank redemption"). Under this analysis, the
determination of whether a cash payment satisfies any of the
foregoing tests would be made by comparing (i) the shareholder's
actual and constructive stock interest in Firstbank before the
deemed Firstbank redemption (determined as if such shareholder
had received solely Firstbank Common Stock in the Merger), with
(ii) such shareholder's actual and constructive stock interest
in Firstbank after the deemed Firstbank redemption. Because
this analysis may be more likely to result in capital gain treatment
than the traditional analysis, each Confluence shareholder
who receives solely cash in exchange for all of the Confluence
Common Stock he or she actually owns should consult his or
her own tax advisor with regard to the proper treatment of
such cash.
The determination of ownership for purposes of the foregoing
tests will be made by taking into account both shares actually
owned by such shareholder and shares constructively owned by
such shareholder pursuant to section 318 of the Code (Code
section 302(c)). Under section 318 of the Code, a shareholder
will be deemed to own stock that is owned or deemed to be 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 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. Section 302(c)(2) of
the Code provides certain exceptions to the family attribution
rules for the purpose of determining whether a complete redemption
of a shareholder's interest has occurred for purposes of Code
section 302.
* * * * * * * * * * * *
We express no opinion with regard to (1) the federal income
tax consequences of the Merger not addressed expressly by this
opinion, including without limitation, (i) the tax consequences,
if any, to those shareholders of Confluence who acquired shares
of Confluence Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation, and (ii) the tax
consequences to special classes of shareholders, if any, including
without limitation, foreign persons, insurance companies,
tax-exempt entities, retirement plans, and dealers in securities;
and (2) federal, state, local, or foreign taxes (or any other
federal, state, local, or foreign laws) not specifically referred
to and discussed herein. Further, our opinion is based upon
the Code, Treasury Regulations proposed or promulgated thereunder,
and administrative interpretations and judicial precedents relating
thereto, all of which are subject to change at any time, possibly
with retroactive effect, and we assume no obligation to advise
you of any subsequent change thereto. If there is any change in
the applicable law or regulations, or if there is any new
administrative or judicial interpretation of the applicable law
or regulations, any or all of the federal income tax consequences
herein may become inapplicable.
The foregoing opinion reflects our legal judgment solely on
the issues presented and discussed herein. This opinion has no
official status or binding effect of any kind. Accordingly, we
cannot assure you that the Service or any court of competent
jurisdiction will agree with this opinion.
We hereby consent to the filing of this letter as an exhibit
to the Registration Statement and to all references made to this
letter in the Registration Statement.
Very truly yours,
/s/
Thompson & Mitchell
Exhibit A
CERTIFICATE
The undersigned,_______________________, of Firstbank of
Illinois Co., a Delaware corporation ("Firstbank"), HEREBY
CERTIFIES that (a) I am familiar with the terms and conditions
of the Agreement and Plan of Merger by and among Firstbank,
Colonial Bancshares, Inc., a Missouri corporation ("Colonial"),
and Confluence Bancshares Corporation, a Missouri corporation
("Confluence"), dated June 15, 1995 (the "Agreement"), and (b) I
am aware that (i) this Certificate will be relied on by Thompson
& Mitchell, counsel for Confluence, in rendering its opinion to
Confluence that the merger of Confluence with and into Colonial
(the "Merger") will constitute a reorganization within the
meaning of section 368(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) the representations and
undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF Firstbank,
that:
(1) The fair market value of the Firstbank common
stock, par value $1.00 per share ("Firstbank Common Stock"), to
be received by each Confluence shareholder in the Merger
(including cash to be received in lieu of fractional shares of
Firstbank Common Stock, if any) will be approximately equal to
the fair market value of the Confluence common stock, par value
$1.00 per share ("Confluence Common Stock"), surrendered in the
Merger by each such shareholder.
(2) Except as otherwise set forth by the undersigned
on an attachment hereto, Firstbank is aware of no plan, intention
or arrangement (including any option or pledge) on the part of
any holder of Confluence Common Stock to sell, exchange or
otherwise dispose of any of the Firstbank Common Stock to be
received in the Merger, with the exception of fractional shares
of Firstbank Common Stock to be exchanged for cash pursuant to
the Merger.
(3) Before the Merger, Firstbank will be in control
of Colonial within the meaning of section 368(c) of the Code.
(4) After the Merger, (a) Colonial will not issue
additional shares of its stock that would result in Firstbank
losing control of Colonial within the meaning of section 368(c)
of the Code, and (b) Colonial will not have outstanding any
warrants, options, convertible securities, or any other type of
right (including any preemptive right) pursuant to which any
person could acquire stock in Colonial that, if exercised or
converted, would affect Firstbank's retention of control of
Colonial (as defined above). No stock of Colonial will be issued
in connection with the Merger.
(5) In the Merger, Firstbank and Colonial will
tender no consideration for Confluence Common Stock other than
Firstbank Common Stock and cash in lieu of fractional shares of
Firstbank Common Stock.
(6) Neither Firstbank nor any other member of
Firstbank's "affiliated group" (as the quoted term is defined
in Code section 1504) (the "Firstbank Affiliated Group") has any
plan or intention to redeem or otherwise reacquire any of the
Firstbank Common Stock issued to the shareholders of Confluence
in the Merger.
(7) Neither Firstbank nor any other member of the
Firstbank Affiliated Group has any plan or intention (a) to
liquidate Colonial, (b) to merge Colonial with and into another
corporation, (c) to sell or otherwise dispose (whether by dividend
distribution or otherwise) of the stock of Colonial, or (d) except
for transfers described in section 368(a)(2)(C) of the Code,
dispositions made in the ordinary course of business or
dispositions approved by Thompson & Mitchell to cause, suffer, or
permit Colonial to sell or otherwise dispose (whether by dividend
distribution or otherwise) of (i) any assets of Confluence
acquired in the Merger, or (ii) any assets of any other member
of Confluence's "affiliated group" (as defined above) (the
"Confluence Affiliated Group").
(8) After the Merger, Colonial will continue the
historic businesses of Confluence and the other members of the
Confluence Affiliated Group, or will use a significant portion
of the historic business assets of the members of the Confluence
Affiliated Group in a business (no stock of any member of the
Confluence Affiliated Group shall be treated as a business asset
for purposes of this representation).
(9) Firstbank, Colonial, Confluence, and the
shareholders of Confluence will each pay their respective
expenses, if any, incurred in connection with the Merger;
provided, however, that Firstbank or Colonial may pay and assume
those expenses of Confluence that are solely and directly related
to the Merger in accordance with the guidelines established in
Rev. Rul. 73-54, 1973-1 C.B. 187, including those printing and
filing fees described in Section 5.06(c) of the Agreement.
(10) Except with regard to Transaction Costs (as
defined below), neither Firstbank nor any other member of the
Firstbank Affiliated Group will pay any amount or incur any
liability to or for the benefit of, or assume or cancel any
liability of, any shareholder of Confluence in connection with
the Merger, and no liability to which Confluence Common Stock
is subject will be extinguished as a result of the Merger. For
purposes of this representation, (a) the term "liability" shall
include any undertaking to pay or to cause the reduction,
release, or extinguishment of, any obligation, without regard to
whether any such undertaking or obligation is contingent or
legally enforceable (for example and without limitation, the term
"liability" includes an unenforceable agreement to cause the
repayment of an obligation guaranteed by a Confluence shareholder
or to cause by other means the release of such guaranty), and (b)
the term "Transaction Costs" shall mean amounts paid or
liabilities incurred in connection with the Merger (i) to
dissenters, if any, (ii) to Confluence shareholders with
respect to the Firstbank Common Stock (including cash in lieu of
fractional shares thereof) to be delivered in the Merger, (iii)
for legal, accounting, and investment banking and/or advisor
services rendered to Firstbank or Colonial if any, (iv) for those
expenses payable or assumable by Firstbank or Colonial in
accordance with representation (9) above, and (v) as compensation
to any employee of any member of the Firstbank Affiliated Group or
the Confluence Affiliated Group for services rendered in the
ordinary course of his or her employment.
(11) No indebtedness between Confluence or any other
member of the Confluence Affiliated Group, on the one hand, and
Colonial or Firstbank or any other member of the Firstbank
Affiliated Group, on the other hand, exists or will exist prior
to the Merger that (a) was issued or acquired at a discount, or
(b) will be settled, as a result of the Merger, at a discount.
No "installment obligation" (as the quoted term is defined for
purposes of Code section 453B), between Confluence, on the one
hand, and Colonial, on the other hand, exists or will exist prior
to the Merger that will be extinguished as a result of the Merger.
(12) None of the compensation to be paid or accrued
after the Merger to or for the benefit of any shareholder-employee
of Confluence will be separate consideration for, or allocable to,
any of their shares of Confluence Common Stock; none of the shares
of Firstbank Common Stock received in the Merger by any Confluence
shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and all compensation to
be paid or accrued after the Merger to or for the benefit of any
Confluence shareholder-employee will be for services actually
rendered in the ordinary course of his or her employment and will
be commensurate with amounts paid to third parties bargaining at
arm's length for similar services.
(13) All payments made to dissenters and all cash
payments made in lieu of fractional shares of Firstbank Common
Stock will be funded with assets of Firstbank. No such payments
will be funded with Colonial or Confluence assets.
(14) Neither Firstbank nor any other member of the
Firstbank Affiliated Group has owned, directly or indirectly,
any stock of Confluence within the last five years.
The undersigned HEREBY AGREES to immediately communicate
in writing to Thompson & Mitchell at One Mercantile Center,
St. Louis, Missouri 63101, to the attention of Charles H. Binger,
any information that could indicate (i) any of the foregoing
representations was inaccurate when made, or (ii) any of the
foregoing representations would be inaccurate if it were made
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and
affixed the seal of Firstbank this _____ day of ____________, 1995.
Exhibit B
CERTIFICATE
The undersigned, * , [Officer's Title] of
Confluence Bancshares Corporation, a Missouri corporation
("Confluence"), HEREBY CERTIFIES that (a) I am familiar with the
terms and conditions of the Agreement and Plan of Merger by and
among Firstbank of Illinois Co., a Delaware corporation
("Firstbank"), Colonial Corporation, a Missouri corporation
("Colonial"), and Confluence dated June 15, 1995, and (b) I am
aware that (i) this Certificate will be relied on by Thompson &
Mitchell, counsel for Confluence, in rendering its opinion to
Confluence that the merger of Confluence with and into Colonial
(the "Merger") will constitute a reorganization within the
meaning of section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) the representations and
undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF Confluence,
that:
(1) The fair market value of the Firstbank common
stock, par value $1.00 per share ("Firstbank Common Stock"), to
be received by each Confluence shareholder in the Merger (including
cash to be received in lieu of fractional shares of Firstbank
Common Stock, if any) will be approximately equal to the fair
market value of the Confluence common stock, par value $1.00 per
share ("Confluence Common Stock"), surrendered in the Merger by
each such shareholder.
(2) There is no plan, intention or other arrangement
(including any option or pledge) on the part of the holders of
1% or more of the Confluence Common Stock and, to the best knowledge
of the undersigned, there is no plan, intention or other arrangement
(including any option or pledge) on the part of the other holders of
Confluence Common Stock to sell, exchange or otherwise dispose of a
number of shares of Firstbank Common Stock received by such holders
in the Merger that would reduce such holders' ownership of Firstbank
Common Stock to a number of shares having a value, as of the date
on which the Merger is consummated (the "Effective Date"), of less
than 50 percent of the value of all of the formerly outstanding
Confluence Common Stock as of the Effective Date. For purposes of
this representation, shares of Confluence Common Stock exchanged
for cash or other property, surrendered by dissenters, or exchanged
for cash in lieu of fractional shares of Firstbank Common Stock will
be treated as outstanding on the Effective Date. Moreover, all
shares of Confluence Common Stock and/or shares of Firstbank Common
Stock held by Confluence shareholders and otherwise sold, redeemed,
or disposed of before or after the Effective Date will be taken
into account in making this representation. As with the other
representations contained herein, the undersigned will undertake
any and all actions necessary to ensure the accuracy of the
foregoing representation.
(3) Confluence will transfer to Colonial in the Merger
assets representing at least 90 percent of the fair market value of
the net assets and at least 70 percent of the fair market value of
the gross assets, in each case, that were held by Confluence
immediately prior to the Merger. For purposes of this
representation, Confluence assets used to pay shareholders who
receive cash and Confluence assets used to pay expenses of the
Merger or to fund any redemption or distribution within 24 months
before the Merger (except for regular, normal dividends) shall be
included as assets of Confluence held immediately prior to the
Merger. For purposes of this representation, any asset of Confluence
or any other member of Confluence's "affiliated group" (as the
quoted term is defined in Code section 1504) (the "Confluence
Affiliated Group") that is disposed of within 24 months before the
Merger other than in the ordinary course of business also shall be
included as an asset of Confluence held immediately prior to the
Merger.
(4) At the time of the Merger and except with regard to
Transaction Costs (as defined below), each liability of Confluence
and each liability to which an asset of Confluence is subject will
have been incurred by Confluence in the ordinary course of business
and no such liability will have been incurred in anticipation of the
Merger. In addition, at the time of the Merger and except with
regard to Transaction Costs, Confluence will not, directly or
indirectly, have paid (or loaned) any amount or incurred any
liability to or for the benefit of, or assumed or cancelled any
liability of, any Confluence shareholder in connection with the
Merger. For purposes of this representation, (a) the term
"Confluence" shall be deemed also to refer to each other member of
the Confluence Affiliated Group, (b) the term "liability" shall
include any undertaking to pay or to cause the reduction, release,
or extinguishment of, any obligation, without regard to whether
any such undertaking or obligation is contingent or legally
enforceable (for example and without limitation, the term "liability"
includes an unenforceable agreement to cause the repayment of an
obligation guaranteed by a Confluence shareholder or to cause by
other means the release of such guaranty), and (c) the term
"Transaction Costs" shall mean amounts paid or liabilities incurred
in connection with the Merger (i) to dissenters, if any, (ii) for
legal, accounting, and investment banking and/or advisor services
rendered to Confluence or any other member of the Confluence
Affiliated Group, if any, and (iii) as compensation to any employee
of Confluence or any other member of the Confluence Affiliated Group
for services rendered in the ordinary course of his or her employment.
(5) Before the Merger, Confluence will not have outstanding
any warrants, options, convertible securities, or any other type of
right (including any preemptive right) pursuant to which any person
could acquire stock in Confluence that, if exercised or converted
after the Merger, would affect Firstbank's retention of control of
Colonial (within the meaning of section 368(c) of the Code).
(6) Expenses, if any, that are incurred in connection
with the Merger and are properly attributable to Confluence's
shareholders will be paid by those shareholders and not by Confluence.
Confluence will pay its own expenses that are incurred in connection
with the Merger, with the exception of those expenses of Confluence
that are solely and directly related to the Merger in accordance
with the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187,
including those printing and filing fees described in Section 5.06(c)
of the Agreement.
(7) No indebtedness between Confluence or any other
member of the Confluence Affiliated Group, on the one hand, and
Colonial or Firstbank or any other member of Firstbank's
"affiliated group" (defined as above), on the other hand, exists
or will exist prior to the Merger that (a) was issued or acquired
at a discount, or (b) will be settled, as a result of the Merger,
at a discount. No "installment obligation" (as the quoted term is
defined for purposes of Code section 453B), between Confluence, on
the one hand, and Colonial, on the other hand, exists or will exist
prior to the Merger that will be extinguished as a result of the
Merger.
(8) The fair market value of the assets of Confluence
to be transferred to Colonial will exceed the sum of the amount
of liabilities to be assumed by Colonial, plus the amount of
liabilities, if any, to which the assets to be transferred are
subject.
(9) The payment of cash in lieu of fractional shares of
Firstbank Common Stock will be solely for the purpose of avoiding
the expense and inconvenience to Firstbank of issuing fractional
shares and will not represent separately bargained-for consideration.
The total cash consideration that will be paid in the Merger to the
Confluence shareholders in lieu of fractional shares of Firstbank
Common Stock will not exceed one percent of the total consideration
that will be issued in the transaction to the Confluence shareholders
in exchange for their shares of Confluence Common Stock. The
fractional share interests of each Confluence shareholder will be
aggregated, and no Confluence shareholder will receive cash in lieu
of fractional share interests in an amount equal to or greater than
the value of one full share of Firstbank Common Stock.
(10) None of the compensation paid or accrued before the
Merger to or for the benefit of any Confluence shareholder-employee
will be separate consideration for, or allocable to, any of their
shares of Confluence Common Stock; none of the shares of Firstbank
Common Stock received in the Merger by any Confluence shareholder-
employee will be separate consideration for, or allocable to, any
employment agreement; and all compensation paid or accrued before
the Merger to or for the benefit of any Confluence shareholder-
employee will be for services actually rendered in the ordinary
course of his or her employment and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar
services.
(11) All payments made to dissenters and all cash payments
made in lieu of fractional shares of Firstbank Common Stock will be
funded with assets of Firstbank. No such payments will be funded
with Confluence assets.
(12) Except for dispositions to be made in the ordinary
course of business, Confluence is aware of no plan or intention to
sell or otherwise dispose (whether by dividend distribution or
otherwise) of (a) any assets of Confluence acquired in the Merger,
or (b) any assets of any other member of the Confluence Affiliated
Group.
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any
information that could indicate (i) any of the foregoing
representations was inaccurate when made, or (ii) any of the
foregoing representations would be inaccurate if it were made
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of Confluence this _____ day of _______________, 1995.
Exhibit C
SHAREHOLDER CERTIFICATE
The undersigned shareholder of Confluence Bancshares
Corporation, a Missouri corporation ("Confluence"), [shareholder's
name], a holder of * shares of common stock, par value $1.00
per share, HEREBY CERTIFIES that (a) I am familiar with the terms
and conditions of the Agreement and Plan of Merger by and among
Firstbank of Illinois Co., a Delaware corporation ("Firstbank"),
Colonial Bancshares, Inc., a Missouri corporation ("Colonial"),
and Confluence dated June 15, 1995, and (b) I am aware that
(i) this Certificate will be relied on by Thompson & Mitchell,
counsel for Confluence, in rendering its opinion to Confluence that
the merger of Confluence with and into Colonial (the "Merger") will
constitute a reorganization within the meaning of section 368(a)(1)
of the Internal Revenue Code of 1986, as amended, and (ii) the
representations and undertaking recited herein will survive the
Merger.
The undersigned HEREBY FURTHER CERTIFIES that the undersigned
has no plan, intention or arrangement (including any option or
pledge) to sell, exchange or otherwise dispose of any of the
Firstbank common stock, par value $1.00 per share ("Firstbank Common
Stock"), to be received in the Merger, with the exception of any
fractional share of Firstbank Common Stock to be exchanged for cash
pursuant to the Merger.
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any
information that could indicate (i) any of the foregoing
representations was inaccurate when made, or (ii) any of the
foregoing representations would be inaccurate if it were made
immediately before the Merger.
IN WITNESS WHEREOF, the undersigned has executed this
certificate, or caused this certificate to be executed by its duly
authorized representative, this _____ day of ____________, 1995.
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Firstbank of Illinois Co.
Springfield, Illinois:
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. Our report refers to a change in
the method of accounting for investment securities and a change
in the method of accounting for income taxes.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
September 15, 1995
EXHIBIT 23.2
Independent Auditors' Consent
The Board of Directors
Confluence Bancshares Corporation
St. Peters, Missouri:
We consent to the use of our reports included herein by reference
and to the reference to our firm under the heading "experts" in
the prospectus. Our report refers to a change in the method of
accounting for investments in debt securities and a change in the
method of accounting for income taxes.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
September 15, 1995
PROXY
CONFLUENCE BANCSHARES CORPORATION
5500 Mexico Road
St. Peters, Missouri 63376
For the Special Meeting of Shareholders to be held
_________________, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of CONFLUENCE
BANCSHARES CORPORATION ("Confluence"), does hereby nominate,
constitute and appoint John C. Hannegan, James L. Wilhite
and John W. Hammond (or such other person as is designated
by the Board of Directors of Confluence), 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, $1.00 par value, of
Confluence standing in the name of the undersigned on its
books on ______________, 1995, at the Special Meeting of
Shareholders to be held at ________________________ St.
Charles, Missouri, on ___________________, 1995, at _______,
Central Time, and at any adjournments thereof, with all
the powers the undersigned would possess if personally
present, as follows:
1. To consider and vote upon the approval of the
Agreement and Plan of Merger dated June 15, 1995, and amended
July 14, 1995 (as amended, the "Merger Agreement"), by and
among Firstbank of Illinois Co. ("Firstbank"), Colonial
Bancshares, Inc. ("Colonial") and Confluence, pursuant to
which Confluence would merge with and into Colonial
(the "Merger"), the separate existence of Confluence would
cease, and whereby, upon consummation of the Merger,
each share of the Common Stock of Confluence would be
converted into the right to receive 2.5 shares of Common
Stock, $1.00 par value, of Firstbank, subject to certain
limitations and adjustments, as set forth in detail in the
Merger Agreement.
FOR AGAINST ABSTAIN
2. To transact such other business as may properly
come before the Special Meeting or any adjournment thereof.
(Continued on Reverse Side)
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" THE PROPOSAL LISTED ABOVE.
Dated:_____________________, 1995
____________________________________________
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 share, all must sign.
All joint owners must sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
