MERCANTILE BANCORPORATION INC, S-4, 1996-05-10

MERCANTILE BANCORPORATION INC
S-4, 1996-05-10
NATIONAL COMMERCIAL BANKS

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<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

----------------------
MERCANTILE BANCORPORATION INC.
(Exact name of registrant as specified in its charter)

MISSOURI 6712 43-0951744
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)

----------------------
JON W. BILSTROM, ESQ.
General Counsel and Secretary
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)

----------------------
Copy to:

JOHN Q. ARNOLD ROBERT M. LaROSE, ESQ. HOWARD H. MICK, ESQ.
Chief Financial Officer Thompson Coburn Stinson, Mag &
Mercantile Bancorporation Inc. One Mercantile Center Fizzell, P.C.
P.O. Box 524 St. Louis, Missouri 1201 Walnut Street
St. Louis, Missouri 63166-0524 63101-1693 Suite 2800
(314) 425-2525 (314) 552-6000 Kansas City, Missouri
64141
(816) 842-8600

----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /

----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per unit aggregate offering price<F2> registration fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $5.00 par value<F1> 325,843 shares N/A $8,021,730.12 $2,766.13
============================================================================================================================
<FN>
<F1> Includes one attached Preferred Share Purchase Right per share.

<F2> Estimated solely for purposes of computing the Registration Fee pursuant to the provisions of Rule 457(f)(2),
and based upon the $8,021,730.12 aggregate book value of the 22,500 shares of Common Stock, $100.00 par value,
of Peoples State Bank issued and outstanding as of April 30, 1996.
</TABLE>
------------------------------------

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> 2

MERCANTILE BANCORPORATION INC.

CROSS REFERENCE SHEET FURNISHED PURSUANT TO ITEM 501(b)
OF REGULATION S-K SHOWING HEADING OR LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-4
-----------------------------------------------------------
<TABLE>
<CAPTION>
Form S-4 Item Number and Caption Heading or Location in Prospectus
- -------------------------------- ---------------------------------
<S> <C>
A. Information about the Transaction Facing Page; Cross Reference Sheet; Outside
1. Forepart of Registration Front Cover Page of Prospectus
Statement and Outside Front
Cover Page of Prospectus

2. Inside Front and Outside Available Information; Incorporation of
Back Cover Pages of Certain Information by Reference; Table of
Prospectus Contents

3. Risk Factors, Ratio of Summary Information; Pro Forma Financial
Earnings to Fixed Charges and Information
Other Information

4. Terms of the Transaction Summary Information; Incorporation of Certain
Information by Reference; Terms of the
Proposed Acquisition; Certain Federal Income
Tax Consequences of the Acquisition;
Information Regarding MBI Common Stock

5. Pro Forma Financial Pro Forma Financial Information
Information

6. Material Contacts with Summary Information; Terms of the Proposed
the Company Being Acquired Acquisition

7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters

8. Interests of Named Legal Matters
Experts and Counsel

9. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act Liabilities

-i-
<PAGE> 3
<CAPTION>
Form S-4 Item Number and Caption Heading or Location in Prospectus
- -------------------------------- ---------------------------------
<S> <C>
B. Information About the Registrant

10. Information with Respect Incorporation of Certain Information by
to S-3 Registrants Reference; Summary Information; Information
Regarding MBI Common Stock

11. Incorporation of Certain Incorporation of Certain Information by
Information by Reference Reference

12. Information with Respect Not Applicable
to S-2 or S-3 Registrants

13. Incorporation of Certain Not Applicable
Information by Reference

14. Information with Respect Not Applicable
to Registrants Other Than S-2
or S-3 Registrants

C. Information About the Company Being
Acquired

15. Information with Respect Not Applicable
to S-3 Companies

16. Information with Respect Not Applicable
to S-2 or S-3 Companies

17. Information with Respect Summary Information; Information Regarding
to Companies Other Than S-2 Peoples Bankshares and Peoples Bank
or S-3 Companies

D. Voting and Management Information

18. Information if Proxies, Information Regarding Special Meetings;
Consents or Authorizations Incorporation of Certain Information by
are to be Solicited Reference; Dissenters' Rights of Stockholders
of Peoples Bank; Information Regarding
Peoples Bankshares and Peoples Bank

19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited in an
Exchange Offer
</TABLE>

-ii-
<PAGE> 4

[letterhead of Peoples State Bankshares, Inc.]

----------------, 1996
Dear Stockholder:

The Board of Directors cordially invites you to attend a Special
Meeting of Stockholders of Peoples State Bankshares, Inc. ("Peoples
Bankshares") to be held at ---:-0 -.m., Central Time, on ---------,
- -----------, 1996, at -----------------------, -------------------------,
Topeka, Kansas (the "Special Meeting"). At this important meeting, you will
be asked to consider and vote upon the Agreement and Plan of Reorganization
(the "Reorganization Agreement") dated as of December 19, 1995, pursuant to
which Ameribanc, Inc. ("Ameribanc"), a wholly owned subsidiary of Mercantile
Bancorporation Inc. ("MBI"), will acquire all of the outstanding capital
stock of Peoples State Bank, a Kansas state-chartered bank ("Peoples Bank"),
through the consummation of two concurrent and interdependent transactions:
(i) the exchange (the "Exchange") of all of the shares of common stock of
Peoples Bank owned beneficially and of record by Peoples Bankshares for
shares of MBI common stock, and (ii) the merger (the "Merger") of Mercantile
Bank of Shawnee County, a Kansas state-chartered bank in organization and
wholly owned subsidiary of Ameribanc, with and into Peoples Bank.

I have enclosed the following items relating to the Special
Meeting and the proposed transactions:

1. Joint Proxy Statement/Prospectus;

2. Proxy card; and

3. A pre-addressed return envelope to Peoples
Bankshares for the proxy card.

The Joint Proxy Statement/Prospectus and related proxy materials
set forth, or incorporate by reference, financial data and other important
information relating to Peoples Bankshares, Peoples Bank, MBI and Ameribanc,
and describe the terms and conditions of the proposed Exchange and Merger.
The Board of Directors requests that you carefully review these materials
before completing the enclosed proxy card or attending the Special Meeting.

THE BOARD OF DIRECTORS OF PEOPLES BANKSHARES CAREFULLY
CONSIDERED AND APPROVED THE TERMS OF THE REORGANIZATION AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AS BEING IN THE BEST
INTEREST OF PEOPLES BANKSHARES AND ITS STOCKHOLDERS. THE PEOPLES
BANKSHARES BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
---
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.

APPROVAL OF THE REORGANIZATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY IS A CONDITION TO THE CONSUMMATION OF THE EXCHANGE AND
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 card and return it to
Peoples Bankshares in the enclosed pre-addressed 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 delivering to the
Secretary of Peoples Bankshares a written

<PAGE> 5

notice of revocation or another proxy relating to the same shares bearing a
later date than the proxy being revoked or by attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not in itself
constitute a revocation of an earlier dated proxy.

If you need assistance in completing your proxy card or if you
have any questions about the Joint Proxy Statement/Prospectus, please feel
free to contact ------------------ at (913) --------.

Sincerely,

Ronald D. Lutz
President

<PAGE> 6

[letterhead of Peoples State Bank]

---------------, 1996
Dear Stockholder:

The Board of Directors cordially invites you to attend a Special
Meeting of Stockholders of Peoples State Bank ("Peoples Bank") to be held at
- --:-0 -.m., Central Time, on -------, ----------, 1996, at
- ----------------------, --------------------, Topeka, Kansas (the "Special
Meeting"). At this important meeting, you will be asked to consider and vote
upon the Agreement and Plan of Reorganization (the "Reorganization
Agreement") dated as of December 19, 1995, and the related Plan of Merger
dated as of May 2, 1996 (the "Plan of Merger" and, collectively with the
Reorganization Agreement, the "Acquisition Agreements"), pursuant to which
Ameribanc, Inc. ("Ameribanc"), a wholly owned subsidiary of Mercantile
Bancorporation Inc. ("MBI"), will acquire all of the outstanding capital
stock of Peoples Bank through the consummation of two concurrent and
interdependent transactions: (i) the exchange (the "Exchange") of all of the
shares of common stock of Peoples Bank owned beneficially and of record by
Peoples State Bankshares, Inc. ("Peoples Bankshares") for shares of MBI
common stock, and (ii) the merger (the "Merger") of Mercantile Bank of
Shawnee County, a wholly owned subsidiary of Ameribanc in organization, with
and into Peoples Bank.

I have enclosed the following items relating to the Special
Meeting and the proposed transactions:

1. Joint Proxy Statement/Prospectus;

2. Proxy card; and

3. A pre-addressed return envelope to Peoples Bank for the
proxy card.

The Joint Proxy Statement/Prospectus and related proxy materials
set forth, or incorporate by reference, financial data and other important
information relating to Peoples Bank, Peoples Bankshares, MBI and Ameribanc,
and describe the terms and conditions of the proposed Exchange and Merger.
The Board of Directors requests that you carefully review these materials
before completing the enclosed proxy card or attending the Special Meeting.

THE BOARD OF DIRECTORS OF PEOPLES BANK CAREFULLY
CONSIDERED AND APPROVED THE TERMS OF THE ACQUISITION AGREEMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY AS BEING IN THE BEST
INTEREST OF PEOPLES BANK AND ITS STOCKHOLDERS. THE PEOPLES BANK
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO
---
APPROVE THE ACQUISITION AGREEMENTS AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

APPROVAL OF THE ACQUISITION AGREEMENTS AND THE TRANSACTIONS
CONTEMPLATED THEREBY IS A CONDITION TO THE CONSUMMATION OF THE EXCHANGE AND
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 card and return it to
Peoples Bank in the enclosed pre-addressed 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.

<PAGE> 7

You may revoke your proxy by delivering to the Secretary of Peoples Bank a
written notice of revocation or another proxy relating to the same shares
bearing a later date than the proxy being revoked or by attending the
Special Meeting and voting in person. Attendance at the Special Meeting will
not in itself constitute a revocation of an earlier dated proxy.

If you need assistance in completing your proxy card or if you
have any questions about the Joint Proxy Statement/Prospectus, please feel
free to contact ------------------ at (913) --------.

Sincerely,

Ronald D. Lutz
Chairman and Chief Executive Officer

<PAGE> 8

PEOPLES STATE BANKSHARES, INC.
1080 S.W. Wanamaker Road, Suite A
Topeka, Kansas 66604-3888

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held
-------------, 1996

TO THE STOCKHOLDERS OF PEOPLES STATE BANKSHARES, INC.:

Notice is hereby given that a Special Meeting of Stockholders of
PEOPLES STATE BANKSHARES, INC., a Kansas corporation ("Peoples Bankshares"),
will be held at -----------------, ---------------------, Topeka, Kansas on
- ---------, --------------, 1996, at --:-0 -.m., Central Time, for the
following purposes:

(1) To consider and vote upon the adoption and approval of the
Agreement and Plan of Reorganization dated as of December 19, 1995 (the
"Reorganization Agreement"), pursuant to which (i) Peoples Bankshares and
Ameribanc, Inc. ("Ameribanc"), a wholly owned subsidiary of Mercantile
Bancorporation Inc. ("MBI"), will effect an exchange (the "Exchange") of all
of the shares of common stock of Peoples State Bank ("Peoples Bank") owned by
Peoples Bankshares for shares of MBI common stock, (ii) Mercantile Bank of
Shawnee County, a wholly owned subsidiary of Ameribanc in organization, will
be merged with and into Peoples Bank (the "Merger"), whereby, (x) upon
consummation of the Exchange, each share of Peoples Bank common stock that is
beneficially owned by Peoples Bankshares will be transferred to Ameribanc in
exchange for 14.4819 shares of MBI common stock and (y) upon consummation of
the Merger, each outstanding share of Peoples Bank common stock (other than
the shares that have been transferred to Ameribanc pursuant to the Exchange
or shares as to which a stockholder has exercised dissenters' rights) will be
converted into the right to receive 14.4819 shares of MBI common stock.

(2) To consider and vote upon a proposal to permit the Special
Meeting to be adjourned or postponed, in the discretion of the proxies, which
adjournment or postponement could be used for the purpose, among others, of
allowing time for the solicitation of additional votes to approve the
Reorganization Agreement.

The record date for determining the stockholders entitled to
receive notice of, and to vote at, the Special Meeting or any adjournment
thereof has been fixed as of the close of business on ------------, 1996.

WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ACCOMPANYING ENVELOPE. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE VOTE AT THE SPECIAL MEETING BY
FOLLOWING THE PROCEDURES SET FORTH IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.

BY ORDER OF THE BOARD OF DIRECTORS

Joyce M. Lutz
Secretary

Topeka, Kansas
- -----------, 1996

<PAGE> 9

PEOPLES STATE BANK
1064 S.W. Wanamaker Road
Topeka, Kansas 66604-3888

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held
-------------, 1996

TO THE STOCKHOLDERS OF PEOPLES STATE BANK:

Notice is hereby given that a Special Meeting of Stockholders of
PEOPLES STATE BANK, a Kansas state-chartered bank ("Peoples Bank"), will be
held at ----------------------, -----------------, Topeka, Kansas, on
- ---------, -------------, 1996, at --:-0 a.m., Central Time, for the
following purposes:

(1) To consider and vote upon the adoption and approval of the
Agreement and Plan of Reorganization dated as of December 19, 1995 (the
"Reorganization Agreement") and the related Plan of Merger dated as of
- -------------, 1996 (the "Plan of Merger" and, collectively with the
Reorganization Agreement, the "Acquisition Agreements"), pursuant to which
(i) Peoples State Bankshares, Inc. ("Peoples Bankshares") and Ameribanc, Inc.
("Ameribanc"), a wholly owned subsidiary of Mercantile Bancorporation Inc.
("MBI"), will effect an exchange (the "Exchange") of all of the shares of
Peoples Bank common stock owned by Peoples Bankshares for shares of MBI
common stock, (ii) Mercantile Bank of Shawnee County, a wholly owned
subsidiary of Ameribanc in organization, will be merged with and into Peoples
Bank (the "Merger") whereby, (x) upon consummation of the Exchange, each
share of Peoples Bank common stock that is beneficially owned by Peoples
Bankshares will be transferred to Ameribanc in exchange for 14.4819 shares of
MBI common stock and (y) upon consummation of the Merger, each outstanding
share of Peoples Bank common stock (other than the shares that have been
transferred to Ameribanc pursuant to the Exchange or shares as to which a
stockholder has exercised dissenters' rights) will be converted into the
right to receive 14.4819 shares of MBI common stock.

BY ORDER OF THE BOARD OF DIRECTORS

Joyce M. Lutz
Secretary
Topeka, Kansas
- -----------, 1996

<PAGE> 10
MERCANTILE BANCORPORATION INC.
PROSPECTUS

----------

PEOPLES STATE BANKSHARES, INC.
PEOPLES STATE BANK
JOINT PROXY STATEMENT
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON --------------, 1996

This Prospectus of Mercantile Bancorporation Inc. ("MBI") relates
to up to 325,843 shares of common stock, $5.00 par value ("Common Stock"),
and attached Preferred Share Purchase Rights (the "Rights"), of MBI (the
Common Stock and the Rights are collectively referred to herein as the "MBI
Common Stock"), to be issued upon the acquisition by Ameribanc, Inc., a
Missouri corporation and wholly owned subsidiary of MBI ("Ameribanc"), of all
of the outstanding common stock, $100.00 par value ("Peoples Bank Common
Stock"), of Peoples State Bank, a Kansas state-chartered bank ("Peoples
Bank"). The acquisition will be accomplished through the consummation of two
concurrent and interdependent transactions: (i) the exchange (the "Exchange")
of all of the shares of Peoples Bank Common Stock owned beneficially and of
record by Peoples State Bankshares, Inc., a Kansas corporation ("Peoples
Bankshares"), for shares of MBI Common Stock, and (ii) the merger (the
"Merger") of Mercantile Bank of Shawnee County, a wholly owned subsidiary of
Ameribanc in organization ("MBSC"), with and into Peoples Bank, whereby all
of the outstanding shares of Peoples Bank Common Stock (other than shares
received by Ameribanc pursuant to the Exchange or shares as to which a
stockholder has exercised dissenters' rights) will be converted into the
right to receive shares of MBI Common Stock (the "Merger" and the "Exchange"
are hereinafter referred to collectively as the "Acquisition"). The
Acquisition will be consummated in accordance with the terms and conditions,
including regulatory and stockholder approvals, as set forth more fully in
the Agreement and Plan of Reorganization (the "Reorganization Agreement"),
dated as of December 19, 1995, by and among MBI, Ameribanc, Peoples Bank and
Peoples Bankshares, and the related Plan of Merger (the "Plan of Merger" and,
together with the Reorganization Agreement, the "Acquisition Agreements")
dated as of May 2, 1996 by and between Peoples Bank and MBSC. This
Prospectus also serves as the Proxy Statement for each of Peoples Bankshares
and Peoples Bank in connection with the Special Meeting of Stockholders of
Peoples Bankshares (the "Peoples Bankshares Special Meeting") and the Special
Meeting of Stockholders of Peoples Bank (the "Peoples Bank Special Meeting"
and, collectively with the Peoples Bankshares Special Meeting, the "Special
Meetings"), both of which will be held on ---------------, 1996, at the times
and places and for the purposes stated in the Notice of Special Meeting of
Stockholders of Peoples Bankshares and Notice of Special Meeting of
Stockholders of Peoples Bank accompanying this Joint Proxy
Statement/Prospectus.

Pursuant to the Acquisition, MBI will issue up to an aggregate of
325,843 shares of MBI Common Stock (the "Acquisition Consideration"). Upon
the consummation of the Exchange, Peoples Bankshares will transfer each share
of Peoples Bank Common Stock that is beneficially owned by Peoples Bankshares
to Ameribanc in exchange for 14.4819 shares of MBI Common Stock. Within six
months after the Exchange, Peoples Bankshares shall liquidate and dissolve
and effect a liquidating distribution to the holders of the capital stock of
Peoples Bankshares of all of the shares of MBI Common Stock then owned
beneficially and of record by Peoples Bankshares (the "Liquidation"). Upon
consummation of the Merger, the business and operations of Peoples Bank will
be continued through Peoples Bank as a wholly owned subsidiary of Ameribanc,
and each issued and outstanding share of Peoples Bank Common Stock

<PAGE> 11

(other than those shares that have been transferred to Ameribanc pursuant to the
Exchange or those shares as to which a stockholder of Peoples Bank has
exercised dissenters' rights under Section 17-6712 of the General Corporation
Code of Kansas (the "Kansas Corporation Code")) will be converted into the
right to receive 14.4819 shares of MBI Common Stock. The fair market value
of the MBI Common Stock to be issued as the Acquisition Consideration may
fluctuate and at the consummation of the Acquisition may be more or less than
the current fair market value of such shares. See "TERMS OF THE PROPOSED
ACQUISITION - General Description of the Acquisition." No fractional shares
of MBI Common Stock will be issued in the Acquisition, but cash will be paid
in lieu of such fractional shares. See "TERMS OF THE PROPOSED ACQUISITION -
Fractional Shares."

The Acquisition is intended to qualify as a tax-deferred
reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"), and, accordingly, is intended to achieve certain tax-deferral
benefits for federal income tax purposes for Peoples Bankshares and the
stockholders of Peoples Bank and Peoples Bankshares with respect to those
shares of MBI Common Stock received pursuant to the Acquisition. See
"SUMMARY INFORMATION - Federal Income Tax Consequences in General" and
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION."

MBI Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "MTL." On ------------, 1996, the closing sale
price for MBI Common Stock as reported on the NYSE Composite Tape was $-----.
This Joint Proxy Statement/Prospectus, the Notices of the Special Meetings
and the forms of proxy were first mailed to the stockholders of Peoples
Bankshares and Peoples Bank on or about ---------------, 1996.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SHARES OF MBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.

The date of this Joint Proxy Statement/Prospectus is -------------,
1996.

- 2 -

<PAGE> 12
AVAILABLE INFORMATION
---------------------

MBI is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by MBI with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Commission's regional offices located at Suite 1300, Seven
World Trade Center, New York, New York 10048 and Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661. MBI Common Stock is listed
on the NYSE, and such reports, proxy statements and other information
concerning MBI are also available for inspection and copying at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.

This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and exhibits
thereto (the "Registration Statement") covering the securities offered hereby
which has been filed by MBI with the Commission. As permitted by the rules
and regulations of the Commission, this Joint Proxy Statement/Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Statements contained in this Joint Proxy
Statement/Prospectus provide a summary of the contents of certain contracts
or other documents referenced herein but are not necessarily complete and in
each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement. For such further
information, reference is made to the Registration Statement.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. DOCUMENTS RELATING TO MBI, EXCLUDING EXHIBITS
UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE, WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST TO JON W. BILSTROM, GENERAL
COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O. BOX
524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY ---------------, 1996.

The following documents filed with the Commission by MBI under
the Exchange Act are incorporated herein by reference:

(a) MBI's Annual Report on Form 10-K for the year ended
December 31, 1995.

(b) MBI's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.

(d) The description of MBI Common Stock set forth in Item #1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.

(e) The description of MBI Preferred Share Purchase Rights set
forth in Item 1 of MBI's Registration Statement on Form
8-A, dated March 5, 1993, and any amendment or report filed
for the purpose of updating such description.

- 3 -

<PAGE> 13

All documents filed by MBI pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and until the date of the
Special Meetings shall be deemed to be incorporated by reference herein and
made a part hereof from the date any such document is filed. The information
relating to MBI contained in this Joint Proxy Statement/Prospectus does not
purport to be complete and should be read together with the information in
the documents incorporated by reference herein. Any statement contained
herein or in a document incorporated herein by reference shall be deemed to
be modified or superseded for purposes hereof to the extent that a subsequent
statement contained herein or in any other subsequently filed document
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof.

Any statements contained in this Joint Proxy Statement/Prospectus
involving matters of opinion, whether or not expressly so stated, are
intended as such and not as representations of fact.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MBI, PEOPLES BANKSHARES OR PEOPLES BANK. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF MBI COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO SHALL IMPLY OR
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF MBI OR ITS SUBSIDIARIES, PEOPLES BANKSHARES OR PEOPLES BANK OR
IN THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF.

- 4 -

<PAGE> 14
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE

<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . 3

SUMMARY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of MBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of Peoples Bankshares and Peoples Bank . . . . . . . . . . . . . . . . . . 8
The Proposed Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Interests of Certain Persons in the Acquisition . . . . . . . . . . . . . . . . . . 10
Special Meetings of Stockholders of Peoples Bankshares and Peoples Bank . . . . . . 10
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Federal Income Tax Consequences in General. . . . . . . . . . . . . . . . . . . . . 12
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dissenters' Rights of Peoples Bank Stockholders . . . . . . . . . . . . . . . . . . 13
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Comparative Unaudited Per Share Data. . . . . . . . . . . . . . . . . . . . . . . . 15
Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

INFORMATION REGARDING SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Date, Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Record Date; Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

TERMS OF THE PROPOSED ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
General Description of the Acquisition. . . . . . . . . . . . . . . . . . . . . . . 23
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Interests of Certain Persons in the Acquisition . . . . . . . . . . . . . . . . . . 25
Background of and Reasons for the Acquisition; Board Recommendations. . . . . . . . 25
Conditions of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Termination of the Reorganization Agreement . . . . . . . . . . . . . . . . . . . . 30
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Surrender of Peoples Bank Stock Certificates and Receipt of MBI Common Stock. . . . 31
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Certain Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Business Pending the Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

- 5 -

<PAGE> 15

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION. . . . . . . . . . . . . . . . 36

DISSENTERS' RIGHTS OF STOCKHOLDERS OF PEOPLES BANK. . . . . . . . . . . . . . . . . . . . 38

PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Comparative Unaudited Per Share Data. . . . . . . . . . . . . . . . . . . . . . . . 40
Pro Forma Combined Consolidated Financial Statements (Unaudited). . . . . . . . . . 41

INFORMATION REGARDING PEOPLES BANKSHARES AND PEOPLES BANK . . . . . . . . . . . . . . . . 47
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Management's Discussion and Analysis of Financial Condition and Results of Operations 47
Security Ownership of Certain Beneficial Owners and Management of Peoples Bankshares 65
Security Ownership of Certain Beneficial Owners and Management of Peoples Bank. . . 66

INFORMATION REGARDING MBI COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . 67
Description of MBI Common Stock and Attached Preferred Share Purchase Rights. . . . 67
Restrictions on Resale of MBI Common Stock by Affiliates. . . . . . . . . . . . . . 69
Comparison of the Rights of Shareholders of MBI and the Rights of
Stockholders of Peoples Bankshares and Peoples Bank . . . . . . . . . . . . . 69

SUPERVISION AND REGULATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Certain Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 73
Payment of Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
FDIC Insurance Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Proposals to Overhaul the Savings Association Industry. . . . . . . . . . . . . . . 74
Support of Subsidiary Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
FIRREA and FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Depositor Preference Statute. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
The Interstate Banking and Community Development Legislation. . . . . . . . . . . . 76

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 76

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

FINANCIAL STATEMENTS INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

ANNEX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
- 6 -

<PAGE> 16

SUMMARY INFORMATION
-------------------

THE FOLLOWING IS A SUMMARY OF THE IMPORTANT TERMS OF
THE PROPOSED ACQUISITION AND RELATED INFORMATION DISCUSSED
ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS BUT DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION WHICH APPEARS ELSEWHERE
IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN, INCLUDING THE ANNEX ATTACHED TO
THIS JOINT PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS OF PEOPLES
BANKSHARES AND PEOPLES BANK ARE URGED TO READ THIS JOINT PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY. ALL MBI PER SHARE DATA
REFLECT A THREE-FOR-TWO STOCK SPLIT DISTRIBUTED IN THE FORM OF A
DIVIDEND ON APRIL 11, 1994.

BUSINESS OF MBI

MBI, a Missouri corporation, was organized in 1970 and is a
registered bank holding company under the federal Bank Holding Company Act of
1956, as amended (the "BHCA"). MBI is also registered as a savings and loan
holding company under the Home Owners' Loan Act of 1933, as amended (the
"HOLA"). At March 31, 1996, MBI owned, directly or indirectly, all of the
capital stock of Mercantile Bank of St. Louis National Association
("Mercantile Bank") and 72 other commercial banks which operate from 411
banking offices and 399 Fingertip Banking automated teller machines,
including 40 off-premises machines, located throughout Missouri, Illinois,
eastern Kansas, northern Arkansas and Iowa. MBI's services concentrate in
four major lines of business -- consumer, corporate, investment banking and
trust services. MBI also operates non-banking subsidiaries which provide
related financial services, including investment management, brokerage
services and asset-based lending. As of March 31, 1996, MBI had 63,124,053
shares of its Common Stock issued and outstanding. As of March 31, 1996, MBI
reported, on a consolidated basis, total assets of $17.9 billion, total
deposits of $14.0 billion, total loans and leases of $11.8 billion and
shareholders' equity of $1.6 billion.

On January 2, 1996, MBI completed the acquisitions of (i) Hawkeye
Bancorporation ("Hawkeye"), an Iowa corporation and registered bank holding
company under the BHCA, located in Des Moines, Iowa, and (ii) First Sterling
Bancorp, Inc. ("Sterling"), an Illinois corporation and registered bank
holding company under the BHCA, located in Sterling, Illinois. These
acquisitions were accounted for under the pooling-of-interest method of
accounting. As of January 2, 1996, Hawkeye and Sterling reported total
assets of $2.0 billion and $168 million, respectively.

On February 9, 1996 and March 7, 1996, respectively, MBI
completed the acquisitions of (i) Security Bank of Conway, F.S.B. ("Conway"),
a federal stock savings bank located in Conway, Arkansas, and (ii) Metro
Savings Bank, F.S.B. ("Metro"), a federal stock savings bank located in Wood
River, Illinois. These acquisitions were accounted for under the purchase
method of accounting. As of February 9, 1996 and March 7, 1996, Conway and
Metro reported total assets of $103 million and $81 million, respectively.

On March 19, 1996, MBI entered into an agreement to acquire
TODAY'S BANCORP, INC. ("TODAY'S"), located in Freeport, Illinois. TODAY'S, a
Delaware corporation and registered bank holding company under the BHCA,
operates from twelve locations in northern Illinois. As of March 31, 1996,
TODAY'S reported total assets of $510 million, total deposits of $437
million, total loans of $368 million and stockholders' equity of $47 million.
The acquisition of TODAY'S will be accounted for under the purchase method
of accounting.

- 7 -

<PAGE> 17
In connection with the acquisition of Hawkeye, MBI restated its
consolidated financial statements as of and for the years ended December 31,
1995, 1994 and 1993. MBI filed supplemental financial statements as of and
for the years ended December 31, 1995, 1994 and 1993 in a Current Report on
Form 8-K, dated March 11, 1996, which has been incorporated by reference into
this Joint Proxy Statement/Prospectus. Due to the immateriality of the
financial condition and results of operation of Sterling to that of MBI, the
supplemental consolidated financial statements of MBI do not reflect the
acquisition of Sterling.

MBI's principal executive offices are located at One Mercantile
Center, St. Louis, Missouri 63101-1693, and its telephone number is (314)
425-2525.

BUSINESS OF PEOPLES BANKSHARES AND PEOPLES BANK

Peoples Bankshares, a Kansas corporation, commenced operations in
1973 and is a registered bank holding company under the BHCA. Peoples
Bankshares currently owns 88.88% of the issued and outstanding shares of the
capital stock of Peoples Bank, a Kansas state-chartered bank founded in 1909
which operates from five locations in eastern Kansas. As of March 31, 1996,
Peoples Bankshares had 97,455 shares of its common stock, $1.00 par value
("Peoples Bankshares Common Stock"), issued and outstanding and Peoples Bank
had 22,500 shares of Peoples Bank Common Stock issued and outstanding. As of
March 31, 1996, Peoples Bankshares reported, on a consolidated basis, total
assets of $94 million, total deposits of $76 million, net loans of $52
million and stockholders' equity of $8 million, and Peoples Bank reported
total assets of $94 million, total deposits of $77 million, net loans of
$51 million and stockholders' equity of $8 million.

The principal executive offices of Peoples Bankshares are located
at 1080 S.W. Wanamaker Road, Suite A, Topeka, Kansas 66604-3888, and the
principal executive offices of Peoples Bank are located at 1064 S.W.
Wanamaker Road, Topeka, Kansas 66604-3888.

THE PROPOSED ACQUISITION

Pursuant to the Acquisition Agreements, Ameribanc will acquire
all of the outstanding capital stock of Peoples Bank through the consummation
of two concurrent and interdependent transactions: (i) the exchange of all of
the shares of Peoples Bank Common Stock owned beneficially and of record by
Peoples Bankshares for shares of MBI Common Stock, and (ii) the merger of
MBSC, a wholly owned subsidiary of Ameribanc in organization, with and into
Peoples Bank. Upon consummation of the Acquisition, the separate corporate
existence of MBSC will terminate, and the business and operations of Peoples
Bank will be continued through Peoples Bank as a wholly owned subsidiary of
Ameribanc. Following the Closing Date (as hereinafter defined), MBI intends
to cause Mercantile Bank of Topeka, a Kansas state-chartered bank and wholly
owned subsidiary of Ameribanc, to merge with and into Peoples Bank (the
"Topeka Merger"), with the surviving entity to be a Kansas state-chartered
bank named "Mercantile Bank of Topeka."

Pursuant to the Acquisition, MBI will issue up to an aggregate of
325,843 shares of MBI Common Stock as the Acquisition Consideration. Upon
consummation of the Exchange, Peoples Bankshares will be entitled to receive
14.4819 shares of MBI Common Stock for each share of Peoples Bank Common
Stock that is beneficially owned by Peoples Bankshares. Pursuant to the
Reorganization Agreement, within six months of the Exchange, Peoples
Bankshares shall effect the Liquidation and distribute all of the shares of
MBI Common Stock then owned beneficially and of record by Peoples Bankshares
to the holders of Peoples Bankshares Common Stock.

- 8 -

<PAGE> 18
Upon consummation of the Merger, each issued and outstanding
share of Peoples Bank Common Stock (other than shares transferred to
Ameribanc pursuant to the Exchange or shares as to which a stockholder has
exercised dissenters' rights under Section 17-6712) will cease to be
outstanding and will be converted into the right to receive 14.4819 shares of
MBI Common Stock. THE FAIR MARKET VALUE OF THE MBI COMMON STOCK TO
BE ISSUED AS THE ACQUISITION CONSIDERATION MAY FLUCTUATE AND AT
THE CONSUMMATION OF THE ACQUISITION MAY BE MORE OR LESS THAN THE
CURRENT FAIR MARKET VALUE OF SUCH SHARES.

The Reorganization Agreement provides that the consummation of
the Acquisition is subject to certain terms and conditions, including (i) the
approval of the Reorganization Agreement and the transactions contemplated
thereby by the affirmative vote of the holders of a majority of the
outstanding shares of Peoples Bankshares Common Stock, (ii) the approval of
the Acquisition Agreements and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the outstanding shares of
Peoples Bank Common Stock, (iii) the receipt of certain regulatory approvals
and (iv) an opinion of counsel regarding certain federal income tax aspects
of the Acquisition. For a discussion of each of the conditions to the
Acquisition, see "TERMS OF THE PROPOSED ACQUISITION - Conditions of the
Acquisition." The Acquisition will be consummated and become effective on
the date and at the time (the "Effective Time") that the authorization of the
Kansas State Bank Commissioner (the "Kansas Commissioner") is filed with the
Office of the Secretary of State of the State of Kansas.

Unless the parties otherwise agree, the date of the closing of
the Acquisition (the "Closing Date") shall be on the first business day of
the month commencing at least five business days following the last to occur
of (i) the receipt of the requisite approval of the Reorganization Agreement
and the transactions contemplated thereby by the stockholders of Peoples
Bankshares and of the Acquisition Agreements and the transactions
contemplated thereby by the stockholders of Peoples Bank and (ii) the receipt
of approval of the Acquisition by each of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the Federal Deposit
Insurance Corporation (the "FDIC"), the Kansas Commissioner and any other
bank regulatory agency that may be necessary or appropriate (the Federal
Reserve Board, the FDIC, the Kansas Commissioner and any other bank
regulatory agency that may be necessary or appropriate are collectively
referred to herein as the "Regulatory Authorities" and individually as a
"Regulatory Authority"), and the expiration of all required waiting periods.
The Reorganization Agreement may be terminated at any time prior to the
Closing Date by mutual consent of the parties thereto or unilaterally by any
party thereto upon the occurrence of certain events or if the Acquisition is
not consummated by December 31, 1996. See "TERMS OF THE PROPOSED
ACQUISITION - Conditions of the Acquisition" and "- Termination of the
Agreements."

OTHER AGREEMENTS

In addition to and contemporaneously with the Reorganization
Agreement, MBI executed separate agreements (the "Voting Agreements") with
each of Ronald D. Lutz, President of Peoples Bankshares and Chairman and
Chief Executive Officer of Peoples Bank, and Joyce M. Lutz, Secretary of
both Peoples Bankshares and Peoples Bank, whereby such individuals agreed
that they will vote all of the shares of Peoples Bankshares Common Stock
that they then owned or subsequently acquire in favor of approval of the
Reorganization Agreement and the transactions contemplated thereby at the
Peoples Bankshares Special Meeting. On a combined basis, Mr. and Mrs. Lutz
control 82.09% of the voting power of the issued and outstanding shares of
Peoples Bankshares Common Stock. The vote by Mr. and Mrs. Lutz will be
sufficient to assure the stockholder vote required to approve the
Reorganization Agreement and the transactions contemplated thereby. In
addition, pursuant to the Voting Agreements, until the earliest to occur of
the Closing Date,

- 9 -
<PAGE> 19

the termination of the Reorganization Agreement or the abandonment of the
Acquisition, Mr. and Mrs. Lutz further agreed that they each will not transfer
such shares or vote any such shares in favor of the approval of any other
competing acquisition proposal involving any merger with or sale of
substantially all of the assets of Peoples Bankshares to any person other than
MBI or its affiliates.

Pursuant to the Reorganization Agreement, Peoples Bankshares has
agreed that, upon approval of the Reorganization Agreement and the
transactions contemplated thereby by the stockholders of Peoples Bankshares,
Peoples Bankshares will vote all of its shares of Peoples Bank Common Stock,
which represent 88.88% of the total number of outstanding shares of Peoples
Bank Common Stock, in favor of the Acquisition Agreements and the
transactions contemplated thereby. The vote by Peoples Bankshares will be
sufficient to assure the stockholder vote required to approve the Acquisition
Agreements and the transaction contemplated thereby.

INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION

MBI has entered into an arrangement with Ronald D. Lutz whereby
Mr. Lutz shall serve as a member of the Board of Directors of Peoples Bank,
which shall be renamed "Mercantile Bank of Topeka" upon consummation of the
Topeka Merger, for a period of two years commencing on the Closing Date.
During such two-year period, Mr. Lutz shall be entitled to the same
directors' fees as are paid to the other members of the Board of Directors of
Mercantile Bank of Topeka.

SPECIAL MEETINGS OF STOCKHOLDERS OF PEOPLES BANKSHARES AND PEOPLES BANK

The Peoples Bankshares Special Meeting will be held on
- -----------, --------------, 1996, at ---:-0 -.m. Central Time, at
- -------------------------, --------------------, Topeka, Kansas. Approval of
the Reorganization Agreement and the transactions contemplated thereby by the
stockholders of Peoples Bankshares requires the affirmative vote of the
holders of a majority of the outstanding shares of Peoples Bankshares Common
Stock.

The Peoples Bank Special Meeting will be held on -----------,
- --------------, 1996, at ---:-0 -.m. Central Time, at
- -------------------------, --------------------, Topeka, Kansas. Approval of
the Acquisition Agreements and the transactions contemplated thereby by the
stockholders of Peoples Bank requires the affirmative vote of the holders of
a majority of the outstanding shares of Peoples Bank Common Stock.

Only holders of record of Peoples Bankshares Common Stock and
Peoples Bank Common Stock at the close of business on ------------, 1996 (the
"Record Date") will be entitled to notice of, and to vote at, the Special
Meetings. As of the Record Date, there were 97,455 shares of Peoples
Bankshares Common Stock and 22,500 shares of Peoples Bank Common Stock
outstanding.

As of the Record Date, the directors and executive officers of
Peoples Bankshares and their affiliates in the aggregate owned beneficially
all of the shares of Peoples Bankshares Common Stock entitled to vote at the
Peoples Bankshares Special Meeting. Pursuant to the Voting Agreements, Ronald
D. Lutz and Joyce M. Lutz have agreed to vote 80,008 shares, or 82.09% of the
outstanding shares of the Peoples Bankshares Common Stock, for the approval
of the Reorganization Agreement and the transactions contemplated thereby.
The vote by Mr. And Mrs. Lutz will be sufficient to assure the stockholder
vote required to approve the Reorganization Agreement and the transactions
contemplated thereby. The remaining directors and executive officers of
Peoples Bankshares, who own beneficially and of record the remaining 17,447
outstanding shares of Peoples Bankshares Common Stock, have also

- 10 -
<PAGE> 20

indicated their intention to vote such shares for the approval of the
Reorganization Agreement and the transactions contemplated thereby.

As of the Record Date, Peoples Bankshares and the directors and
executive officers of Peoples Bank and their affiliates owned beneficially an
aggregate of 20,282 shares of Peoples Bank Common Stock, or 90.01%, of the
shares entitled to vote at the Peoples Bank Special Meeting. Pursuant to the
Reorganization Agreement, Peoples Bankshares has agreed to vote the 19,997
shares owned beneficially and of record by it, or 88.88% of the outstanding
shares of Peoples Bank Common Stock, for the approval of the Acquisition
Agreements and the transactions contemplated thereby. The vote by Peoples
Bankshares will be sufficient to assure the stockholder vote required to
approve the Acquisition Agreements and the transactions contemplated thereby.
The directors and executive officers of Peoples Bank and their affiliates,
who own beneficially and of record 285 shares, or 1.27% of the outstanding
shares of Peoples Bank Common Stock, have also indicated their intention to
vote such shares for the approval of the Acquisition Agreements and the
transactions contemplated thereby.

THE BOARD OF DIRECTORS OF PEOPLES BANKSHARES CAREFULLY
CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE REORGANIZATION AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AS BEING IN THE BEST INTEREST OF
PEOPLES BANKSHARES AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE
REORGANIZATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.

THE BOARD OF DIRECTORS OF PEOPLES BANK CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE ACQUISITION AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY AS BEING IN THE BEST INTEREST OF PEOPLES BANK
AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE ACQUISITION AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY.

REASONS FOR THE ACQUISITION

The respective Boards of Directors of Peoples Bankshares and
Peoples Bank believe that the Acquisition will result in a combined entity
that is (i) committed to serving the banking and other financial needs of
Peoples Bank's depositors, employees, customers and communities, (ii) capable
of competing more effectively with larger financial institutions that have
exerted increased competitive pressure on Peoples Bank and (iii) well
capitalized and capable of enjoying significant market penetration throughout
the Topeka bank market. In addition, the boards believe that the Acquisition
will provide the holders of Peoples Bankshares Common Stock and Peoples Bank
Common Stock with an opportunity to receive a premium over the book value of
their shares, and will enable such stockholders to participate as MBI
shareholders, on a tax deferred basis, in the expanded opportunities for
growth and profitability made possible by the Acquisition. See "TERMS OF THE
PROPOSED ACQUISITION - Background of and Reasons for the Acquisition; Board
Recommendations."

The Board of Directors of MBI believes that the Acquisition will
enable MBI to (i) take advantage of an opportunity for MBI to increase its
presence in eastern Kansas through the acquisition of an established banking
organization and (ii) enhance MBI's ability to compete in the increasingly

- 11 -
<PAGE> 21

competitive banking and financial services industry. See "TERMS OF THE
PROPOSED ACQUISITION - Background of and Reasons for the Acquisition; Board
Recommendations."

FRACTIONAL SHARES

No fractional shares of MBI Common Stock will be issued to
Peoples Bankshares or any other stockholders of Peoples Bank in connection
with the Acquisition. Peoples Bankshares and each former holder of Peoples
Bank Common Stock who otherwise would have been entitled to receive a
fraction of a share of MBI Common Stock will receive in lieu thereof cash,
without interest, in an amount equal to the holder's fractional share
interest in Peoples Bank multiplied by the closing stock price of MBI Common
Stock on the NYSE Composite Tape as reported in The Wall Street Journal,
Midwest Edition, on the Closing Date of the Acquisition. Cash received by
Peoples Bankshares or the other former stockholders of Peoples Bank in lieu
of fractional shares may give rise to taxable income. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE ACQUISITION."

WAIVER AND AMENDMENT

Any provision of the Reorganization Agreement, including, without
limitation, the conditions to the consummation of the Acquisition and the
restrictions described under the caption "TERMS OF THE PROPOSED ACQUISITION -
Business Pending the Acquisition," may be (i) waived in writing at any time
by the party that is, or whose shareholders or stockholders are, entitled to
the benefits thereof or (ii) amended at any time by written agreement of the
parties, if such written agreement is approved by or on behalf of the
parties' respective Boards of Directors, whether before or after the Special
Meetings; provided, however, that after approval at the Special Meetings of
the Reorganization Agreement and the transactions contemplated thereby by the
stockholders of Peoples Bankshares and the Acquisition Agreements and the
transactions contemplated thereby by the stockholders of Peoples Bank, no
such modification may (i) alter or change the form of the Acquisition
Consideration to be received by Peoples Bankshares or the other stockholders
of Peoples Bank, (ii) adversely affect the tax treatment of the stockholders
of Peoples Bankshares or Peoples Bank, (iii) alter or change any of the terms
of the Reorganization Agreement or the Plan of Merger if such alteration or
change would adversely affect the stockholders of Peoples Bank or (iv) impede
or delay receipt of any approval from a Regulatory Authority.

FEDERAL INCOME TAX CONSEQUENCES IN GENERAL

Thompson Coburn, MBI's legal counsel, has delivered its opinion
to the effect that, assuming the Acquisition occurs in accordance with the
Acquisition Agreements and conditioned on the accuracy of certain
representations made by MBI, Peoples Bankshares, Peoples Bank and certain
stockholders of Peoples Bankshares or Peoples Bank, the Acquisition will
constitute a "reorganization" for federal income tax purposes and that,
accordingly, no gain or loss will be recognized by Peoples Bankshares, the
stockholders of Peoples Bankshares or the stockholders of Peoples Bank, upon
the exchange of shares of Peoples Bank Common Stock or Peoples Bankshares
Common Stock solely for shares of MBI Common Stock pursuant to the Exchange,
the Liquidation or the Merger, respectively. However, cash received in lieu
of fractional shares in the Merger may give rise to taxable income. EACH
STOCKHOLDER OF PEOPLES BANKSHARES OR PEOPLES BANK IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX
CONSEQUENCES OF THE EXCHANGE, THE LIQUIDATION OR THE MERGER TO
SUCH STOCKHOLDER, INCLUDING THE APPLICABILITY OF VARIOUS STATE,
LOCAL AND FOREIGN TAX LAWS. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE ACQUISITION."

- 12 -
<PAGE> 22

REGULATORY APPROVALS

The Acquisition is subject to the prior approval of each of the
Federal Reserve Board, the FDIC and the Kansas Commissioner. MBI will file
the required applications for approval with such Regulatory Authorities. In
reviewing the Acquisition, the Regulatory Authorities will consider various
factors, including possible anticompetitive effects of the Acquisition, and
will examine the financial and managerial resources and future prospects of
the combined organization. There can be no assurance that the necessary
regulatory approvals will be received or as to the timing of such approvals.
See "TERMS OF THE PROPOSED ACQUISITION - Certain Regulatory Approvals" and
"SUPERVISION AND REGULATION."

DISSENTERS' RIGHTS OF PEOPLES BANK STOCKHOLDERS

Under Section 9-1724 of the Kansas Banking Code (the "Kansas
Banking Code"), which incorporates by reference Section 17-6712 of the Kansas
Corporation Code, each holder of shares of Peoples Bank Common Stock may, in
lieu of the consideration such stockholder would otherwise receive in the
Merger, seek payment of the value of such shares and receive payment of such
value in cash upon consummation of the Merger by following certain procedures
set forth in Section 17-6712, the text of which is attached hereto as Annex A.
-------
Failure to follow such procedures may result in the loss of such dissenters'
rights. Any Peoples Bank stockholder who returns a blank executed proxy card
will be deemed to have approved the Acquisition Agreements and the transactions
contemplated thereby and to have waived any such dissenters' rights.
Stockholders of Peoples Bankshares do not have dissenters' rights with respect
to the Exchange or the Liquidation. See "DISSENTERS' RIGHTS OF STOCKHOLDERS OF
PEOPLES BANK."

ACCOUNTING TREATMENT

It is intended that the Acquisition will be accounted for under
the purchase method of accounting. See "TERMS OF THE PROPOSED ACQUISITION -
Accounting Treatment."

- 13 -
<PAGE> 23

MARKETS AND MARKET PRICES

MBI Common Stock is currently traded on the NYSE under the symbol
"MTL." The last sale price reported for MBI Common Stock on December 19,
1995, the last trading date preceding the public announcement of the
Acquisition, was $44.375. Management of Peoples Bank is not aware of any
transactions in Peoples Bank Common Stock during the years ended December 31,
1994 and 1995 or during the current fiscal year. The last sale price for
Peoples Bank Common Stock known to management prior to the public
announcement of the Acquisition on December 20, 1995 was $270 per share in
March 1993. Because of the lack of an established trading market for shares
of Peoples Bank Common Stock, this sale price may not reflect the prices that
would have been paid in an active market.

<TABLE>
<CAPTION>
MBI<F1> PEOPLES BANK
------- ------------

SALES PRICE CASH SALES PRICE CASH
----------- DIVIDEND ----------- DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1994
- ----
First Quarter. . . . . . . $34.125 $29.875 $.28 <F2> <F2> $15.56
Second Quarter . . . . . . 38.125 31.125 .28 <F2> <F2> --
Third Quarter. . . . . . . 39.250 34.875 .28 <F2> <F2> --
Fourth Quarter . . . . . . 36.875 29.500 .28 <F2> <F2> --

1995
- ----
First Quarter. . . . . . . $37.250 $31.250 $.33 <F2> <F2> $10.00
Second Quarter . . . . . . 44.875 36.000 .33 <F2> <F2> --
Third Quarter. . . . . . . 47.000 41.625 .33 <F2> <F2> --
Fourth Quarter . . . . . . 46.500 41.500 .33 <F2> <F2> --

1996
- ----
First Quarter. . . . . . . $46.500 $41.500 $.41 <F2> <F2> $20.00
Second Quarter
(through May 9, 1996). . . 44.250 43.750 .41 <F2> <F2> 5.00
<FN>
- ------------

<F1> For a recent sale price of MBI Common Stock, see the cover of this Joint Proxy Statement/Prospectus.

<F2> No trades known to management of Peoples Bank.
</TABLE>

- 14 -
<PAGE> 24

COMPARATIVE UNAUDITED PER SHARE DATA

The following table sets forth for the periods indicated selected
historical per share data of MBI and Peoples Bank and the corresponding pro
forma per share amounts, giving effect to the proposed acquisitions of
Peoples Bank and TODAY'S. The data presented is based upon the consolidated
financial statements and related notes of MBI and Peoples Bank included in
this Joint Proxy Statement/Prospectus or in the documents incorporated herein
by reference, TODAY'S consolidated financial statement and related note, and
the pro forma combined consolidated balance sheet and income statements,
including the notes thereto, appearing elsewhere herein. This information
should be read in conjunction with such historical and pro forma financial
statements and related notes thereto. Due to the immateriality of the
financial condition and results of operations of Sterling, Conway and Metro,
individually and in the aggregate, to that of MBI, the table only reflects
the acquisitions of Sterling, Conway and Metro from their closing dates
forward. The assumptions used in the preparation of this table are set forth
in the notes to the pro forma financial information appearing elsewhere in
this Joint Proxy Statement/Prospectus. See "PRO FORMA FINANCIAL INFORMATION."
This data is not necessarily indicative of the results of the future
operations of the combined organization or the actual results that would have
occurred if the proposed acquisitions of Peoples Bank and TODAY'S had been
consummated prior to the periods indicated.
<TABLE>
<CAPTION>
MBI/ MBI/ PEOPLES BANK/
PEOPLES PEOPLES BANK PEOPLES BANK ALL ENTITIES ALL ENTITIES
MBI BANK PRO FORMA PRO FORMA PRO FORMA PRO FORMA
REPORTED REPORTED COMBINED<F1> EQUIVALENT<F2> COMBINED<F3> EQUIVALENT<F2>
-------- -------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
March 31, 1996 . . . . . . . . . . . . $ 25.47 $ 360.09 $ 25.36 $ 367.26 $ 25.27 $ 365.96
December 31, 1995. . . . . . . . . . . 26.04 376.09 25.94 375.66 25.83 374.07

Cash Dividends Declared per Share:
Three months ended March 31, 1996. . . . $ .41 $ 20.00 $ .41 $ 5.94 $ .41 $ 5.94
Year ended December 31, 1995 . . . . . 1.32 10.00 1.32 19.11 1.32 19.11

Earnings per Share:
Three months ended March 31, 1996. . . $ .07 $ 12.27 $ .07 $ 1.01 $ (.05) $ (.72)
Year ended December 31, 1995 . . . . . 3.74 51.69 3.75 54.31 3.57 51.70

Market Price per Share:
At December 19, 1995<F4> . . . . . . . $ 44.375 N/A -- -- -- --
At May 9, 1996<F4>. . . . . . . . . . 44.250 N/A -- -- -- --

<FN>
- ----------
<F1> Includes the effect of pro forma adjustments for Peoples Bank as appropriate. See "PRO FORMA FINANCIAL INFORMATION."

<F2> Based on the pro forma combined per share amounts multiplied by 14.4819, the exchange ratio applicable to one share of
Peoples Bank common stock. Further explanation of the assumptions used in the preparation of these pro forma combined
consolidated financial statements is included in the notes to pro forma financial statements. See "PRO FORMA
FINANCIAL INFORMATION."

<F3> Includes the effect of pro forma adjustments for Peoples Bank and TODAY'S, as appropriate.

<F4> The market value of MBI Common Stock was determined as of the last trading day preceding the public announcement of
the proposed Acquisition and as of the latest available date prior to the filing of the Joint Proxy Statement/
Prospectus, based on the last sale price as reported on the NYSE Composite Tape. The market values of Peoples Bank
Common Stock as of the dates set forth in the table can not be accurately estimated because the last transaction in
Peoples Bank Common Stock known to management of Peoples Bank prior to the public announcement of the proposed
Acquisition occurred in March 1993.
</TABLE>

- 15 -
<PAGE> 25

SUMMARY FINANCIAL DATA

The following table sets forth for the periods indicated certain
summary historical consolidated financial information for MBI and certain
summary historical financial information for Peoples Bankshares and Peoples
Bank. The balance sheet data and income statement data included in the
summary financial data for the five years ended December 31, 1995 are taken
from the audited supplemental consolidated financial statements of MBI as of
and for such years, the audited consolidated financial statements of Peoples
Bankshares and the audited financial statements of Peoples Bank as of and for
the year ended December 31, 1995 and the unaudited consolidated financial
statements of Peoples Bankshares and the unaudited financial statements of
Peoples Bank as of and for the four years ended December 31, 1994. The
balance sheet data and income statement data included in the summary
financial data as of and for the three months ended March 31, 1996 and 1995
are taken from the unaudited consolidated financial statements of MBI and
Peoples Bankshares and the unaudited financial statements of Peoples Bank as
of and for the three months ended March 31, 1996 and 1995. This data
includes all adjustments which are, in the opinion of the respective
managements of MBI, Peoples Bankshares and Peoples Bank, necessary to present
a fair statement of these periods and are of a normal recurring nature
(except non-recurring merger expenses for MBI of $40,012,000, or $.63 per
share, for the three months ended March 31, 1996). Results for the three
months ended March 31, 1996 are not necessarily indicative of results for the
entire year. The following information should be read in conjunction with
the supplemental consolidated financial statements of MBI, the consolidated
financial statements of Peoples Bankshares and the financial statements of
Peoples Bank, and the related notes thereto, included herein or in documents
incorporated herein by reference, and in conjunction with the unaudited pro
forma combined consolidated financial information, including the notes
thereto, appearing elsewhere in this Joint Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "PRO FORMA FINANCIAL
INFORMATION."

- 16 -
<PAGE> 26
<TABLE>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Three Months Ended As of or for the
March 31 Year Ended December 31
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income<F1>. . . . . . . . . . . . $ .07 $ .91 $ 3.74 $ 3.19 $ 2.79 $ 2.40 $ 2.34
Dividends declared. . . . . . . . . . .41 .33 1.32 1.12 .99 .93 .93
Book value at period end. . . . . . . 25.47 23.82 26.04 23.32 21.59 19.44 18.12
Average common shares outstanding
(thousands) . . . . . . . . . . . . 63,052 60,774 61,884 59,757 58,751 55,050 47,159

EARNINGS (THOUSANDS)
Interest income . . . . . . . . . . . $325,240 $314,196 $1,293,944 $1,118,069 $1,094,611 $1,139,807 $1,156,821
Interest expense. . . . . . . . . . . 155,504 142,283 620,534 450,950 444,573 549,642 668,578
-------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income . . . . . . . . . 169,736 171,913 673,410 667,119 650,038 590,165 488,243
Provision for possible loan losses. . 33,168 13,990 36,530 43,265 64,302 79,551 64,028
Other income. . . . . . . . . . . . . 59,284 62,701 273,653 236,561 245,589 224,456 195,237
Other expense . . . . . . . . . . . . 182,770 135,926 553,748 555,176 570,182 529,645 486,490
Income taxes. . . . . . . . . . . . . 8,517 29,265 124,109 113,165 96,074 69,681 28,418
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income. . . . . . . . . . . . . . $ 4,565 $ 55,433 $ 232,676 $ 192,074 $ 165,069 $ 135,744 $ 104,544
======== ======== ========== ========== ========== ========== ==========

ENDING BALANCE SHEET (MILLIONS)
Total assets. . . . . . . . . . . . . $ 17,902 $ 17,097 $ 17,928 $ 16,724 $ 16,293 $ 16,033 $ 14,045
Earning assets. . . . . . . . . . . . 16,483 15,872 16,264 15,427 14,980 14,678 12,854
Investment securities . . . . . . . . 4,321 4,288 4,211 4,280 4,670 4,632 3,412
Loans and leases,
net of unearned income. . . . . . . 11,840 11,322 11,731 10,904 9,809 9,570 8,809
Deposits. . . . . . . . . . . . . . . 14,002 13,021 13,714 12,865 13,243 13,260 11,685
Long-term debt. . . . . . . . . . . . 324 323 325 330 316 336 238
Shareholders' equity. . . . . . . . . 1,608 1,456 1,640 1,409 1,295 1,143 939
Reserve for possible loan losses. . . 212 217 202 216 206 199 176

SELECTED RATIOS
Return on average assets. . . . . . . .10% 1.30% 1.33% 1.17% 1.03% .89% .78%
Return on average equity. . . . . . . 1.09 15.35 15.14 14.06 13.46 12.76 11.81
Net interest rate margin. . . . . . . 4.23 4.48 4.28 4.53 4.52 4.33 4.12
Equity to assets. . . . . . . . . . . 8.98 8.52 9.15 8.42 7.95 7.13 6.68
Reserve for possible loan losses to:
Outstanding loans . . . . . . . . . 1.79 1.92 1.72 1.98 2.10 2.08 2.00
Non-performing loans. . . . . . . . 259.41 548.87 245.18 583.17 290.02 154.17 109.79

<FN>
- ------------------------------
<F1> Based on weighted average common shares outstanding.
</TABLE>

- 17 -
<PAGE> 27

<TABLE>
PEOPLES STATE BANKSHARES, INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Three Months Ended As of or for the
March 31 Year Ended December 31
------------------ ------------------------------------------------------
1996 1995 1995 1994<F1> 1993 1992 1991
---- ---- ---- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income (loss) . . . . . . . . . . $ 1.07 $ (.38) $ 7.01 $ 14.77 $ 7.56 $ 7.49 $ 5.42
Dividends declared. . . . . . . . . . -- -- -- -- -- -- --
Book value at period end. . . . . . . 82.08 71.16 82.70 70.70 57.54 49.91 42.58
Average common shares outstanding . . 97,455 97,455 97,455 97,455 97,588 99,847 100,000

EARNINGS (THOUSANDS)
Interest income . . . . . . . . . . . $ 1,837 $ 1,568 $ 7,114 $ 6,860 $ 7,450 $ 8,121 $ 9,459
Interest expense. . . . . . . . . . . 919 753 3,512 3,127 3,499 4,316 6,085
-------- -------- -------- -------- -------- -------- --------
Net interest income . . . . . . . . . 918 815 3,602 3,733 3,951 3,805 3,374
Provision for possible loan losses. . -- 15 45 97 144 170 167
Other income. . . . . . . . . . . . . 146 112 581 1,886 708 669 547
Other expense . . . . . . . . . . . . 854 932 2,879 3,086 3,285 3,052 2,864
Minority interest . . . . . . . . . . (31) (24) (129) (106) (109) (114) (93)
Income taxes. . . . . . . . . . . . . 75 (7) 447 891 383 390 255
-------- -------- -------- -------- -------- -------- --------
Net Income (loss) . . . . . . . . . . $ 104 $ (37) $ 683 $ 1,439 $ 738 $ 748 $ 542
======== ======== ======== ======== ======== ======== ========

ENDING BALANCE SHEET (THOUSANDS)
Total assets. . . . . . . . . . . . . $ 94,306 $ 84,682 $ 97,860 $ 85,656 $112,875 $109,304 $104,382
Earning assets. . . . . . . . . . . . 88,405 78,228 90,664 78,034 104,942 98,478 94,670
Investment securities . . . . . . . . 36,757 28,550 37,364 29,345 50,158 38,913 45,142
Loans and leases, net . . . . . . . . 51,625 49,556 52,325 47,479 54,774 51,799 49,528
Deposits. . . . . . . . . . . . . . . 76,285 64,520 74,130 64,836 86,435 86,985 89,773
Other borrowings. . . . . . . . . . . 8,661 12,105 14,138 12,448 15,100 11,352 5,287
Long-term debt. . . . . . . . . . . . -- -- -- -- 4,100 4,251 3,216
Stockholders' equity. . . . . . . . . 7,999 6,935 8,060 6,890 5,608 4,955 4,258
Reserve for possible loan losses. . . 712 688 713 673 808 732 621

SELECTED RATIOS
Return on average assets. . . . . . . .43% (.17)% .75% 1.43% .67% .71% .51%
Return on average equity. . . . . . . 5.21 (2.08) 9.48 23.86 14.48 16.23 13.44
Net interest rate margin. . . . . . . 4.07 4.07 4.29 3.98 3.82 3.90 3.39
Equity to assets. . . . . . . . . . . 8.48 8.19 8.24 8.04 4.97 4.53 4.08
Reserve for possible loan losses to:
Outstanding loans . . . . . . . . . 1.38 1.39 1.36 1.42 1.48 1.41 1.25
Non-performing loans. . . . . . . . 501.41 380.11 584.43 384.57 153.61 306.28 453.28

<FN>
- -----------------
<F1> On July 31, 1994, Peoples Bankshares sold its majority-owned subsidiary,
Citizens State Bank ("Citizens"), located in Osage City, Kansas. The
consolidated financial condition and result of operations of Peoples
Bankshares for the period ended July 31, 1994 and preceding periods include
Citizens. In 1994, Peoples Bankshares' consolidated results of operations
include a gain resulting from the sale of Citizens of $1,241,000 ($734,000
net of tax).
</TABLE>

- 18 -
<PAGE> 28

<TABLE>
PEOPLES STATE BANK
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Three Months Ended As of or for the
March 31 Year Ended December 31
------------------ -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income. . . . . . . . . . . . . . $ 12.27 $ 9.47 $ 51.69 $ 35.56 $ 30.62 $ 33.87 $ 26.98
Dividends declared. . . . . . . . . . 20.00 10.00 10.00 15.56 15.56 5.01 --
Book value at period end. . . . . . . 360.09 313.64 376.09 310.04 297.91 280.89 252.04
Average common shares outstanding . . 22,500 22,500 22,500 22,500 22,500 22,500 22,500

EARNINGS (THOUSANDS)
Interest income . . . . . . . . . . . $ 1,832 $ 1,557 $ 7,086 $ 5,700 $ 5,411 $ 5,853 $ 6,903
Interest expense. . . . . . . . . . . 923 753 3,517 2,558 2,476 3,017 4,382
------- ------- ------- ------- ------- ------- -------
Net interest income . . . . . . . . . 909 804 3,569 3,142 2,935 2,836 2,521
Provision for possible loan losses. . -- 15 45 68 120 120 90
Other income. . . . . . . . . . . . . 146 112 581 502 475 465 371
Other expense . . . . . . . . . . . . 633 578 2,314 2,372 2,259 2,047 1,910
Income taxes. . . . . . . . . . . . . 146 110 628 404 342 372 285
------- ------- ------- ------- ------- ------- -------
Net income. . . . . . . . . . . . . . $ 276 $ 213 $ 1,163 $ 800 $ 689 $ 762 $ 607
======= ======= ======= ======= ======= ======= =======

ENDING BALANCE SHEET (THOUSANDS)
Total assets. . . . . . . . . . . . . $93,985 $84,434 $97,566 $84,582 $81,930 $78,822 $75,185
Earning assets. . . . . . . . . . . . 88,145 78,054 90,439 77,054 76,247 72,344 70,030
Investment securities . . . . . . . . 36,757 28,550 37,364 28,565 34,794 26,493 33,808
Loans and leases, net . . . . . . . . 51,365 49,382 52,100 47,279 41,443 38,085 35,072
Deposits. . . . . . . . . . . . . . . 76,684 64,823 74,369 64,846 61,523 61,710 64,626
Stockholders' equity. . . . . . . . . 8,102 7,057 8,462 6,976 6,703 6,320 5,671
Other borrowings. . . . . . . . . . . 8,661 12,105 14,138 12,448 12,355 9,347 4,287
Reserve for possible loan losses. . . 712 688 713 673 621 518 441

SELECTED RATIOS
Return on average assets. . . . . . . 1.16% 1.01% 1.29% .94% .86% 1.01% .78%
Return on average equity. . . . . . . 13.41 12.29 15.68 12.02 10.94 12.99 11.47
Net interest rate margin. . . . . . . 4.04 4.06 4.28 3.94 3.90 4.04 3.46
Equity to assets. . . . . . . . . . . 8.62 8.36 8.67 8.25 8.18 8.02 7.54
Reserve for possible loan losses to:
Outstanding loans . . . . . . . . . 1.39 1.39 1.37 1.42 1.50 1.36 1.26
Non-performing loans. . . . . . . . 501.41 380.11 584.43 384.57 118.06 216.74 321.90
</TABLE>

- 19 -
<PAGE> 29

INFORMATION REGARDING SPECIAL MEETINGS
--------------------------------------

GENERAL

This Joint Proxy Statement/Prospectus is being furnished to
holders of Peoples Bankshares Common Stock and Peoples Bank Common Stock in
connection with the solicitation of proxies by the respective Boards of
Directors of Peoples Bankshares and Peoples Bank for use at the Special
Meetings and any adjournments thereof at which the stockholders of Peoples
Bankshares and Peoples Bank will consider and vote upon proposals to approve
the Reorganization Agreement and the transactions contemplated thereby and
the Acquisition Agreements and the transactions contemplated thereby,
respectively, and consider and vote upon any other business which may
properly be brought before the Special Meetings or any adjournments thereof.
Each copy of this Joint Proxy Statement/Prospectus is accompanied by a Notice
of Special Meeting of Stockholders of Peoples Bankshares or Notice of Special
Meeting of Stockholders of Peoples Bank, as the case may be, a proxy card and
related instructions and a self-addressed return envelope to Peoples
Bankshares or Peoples Bank for the proxy card.

This Joint Proxy Statement/Prospectus is also furnished by MBI to
each holder of Peoples Bankshares Common Stock and Peoples Bank Common Stock
as a prospectus in connection with the issuance of shares of MBI Common Stock
upon the consummation of the Acquisition. This Joint Proxy
Statement/Prospectus and the Notices of Special Meetings, proxy card and
related materials are being first mailed to stockholders of Peoples
Bankshares and Peoples Bank on--------------------------------, 1996.

DATE, TIME AND PLACE

The Peoples Bankshares Special Meeting will be held at the
offices of ------------ at ------------------------------, on ------------,
- -----------, 1996, at ------- --.m. Central Time. The Peoples Bank Special
Meeting will be held at the offices of ------------------------------- at
- ------------------------------, on ------------, -----------, 1996, at
- ------- --.m. Central Time.

RECORD DATE; VOTE REQUIRED

On the Record Date, there were 97,455 shares of Peoples
Bankshares Common Stock outstanding and entitled to vote at the Peoples
Bankshares Special Meeting. Each such share is entitled to one vote on each
matter properly brought before the Peoples Bankshares Special Meeting. The
affirmative vote of the holders of a majority of the outstanding shares of
Peoples Bankshares Common Stock is required to approve the Reorganization
Agreement and the transactions contemplated thereby.

As of the Record Date, the directors and officers of Peoples
Bankshares and their affiliates in the aggregate owned beneficially all of
the shares of Peoples Bankshares Common Stock entitled to vote at the Peoples
Bankshares Special Meeting. Pursuant to the Voting Agreements, Ronald D.
Lutz and Joyce M. Lutz, President and Secretary, respectively, of
Peoples Bankshares, have agreed to vote 80,008 shares owned beneficially and
of record by them, or 82.09% of the outstanding shares of Peoples Bankshares
Common Stock, for approval of the Reorganization Agreement and the
transactions contemplated thereby. The vote by Mr. and Mrs. Lutz will be
sufficient to assure the stockholder vote required to approve the
Reorganization Agreement and the transactions contemplated

- 20 -
<PAGE> 30

thereby. The remaining directors and executive officers of Peoples Bankshares,
who own beneficially and of record the remaining 17,447 outstanding shares of
Peoples Bankshares Common Stock, have also indicated their intention to vote
such shares for the approval of the Reorganization Agreement and the
transactions contemplated thereby.

On the Record Date, there were 22,500 shares of Peoples Bank
Common Stock outstanding and entitled to vote at the Peoples Bank Special
Meeting. Each such share is entitled to one vote on each matter properly
brought before the Peoples Bank Special Meeting. The affirmative vote of the
holders of a majority of the outstanding shares of Peoples Bank Common Stock
is required to approve the Acquisition Agreements and the transactions
contemplated thereby.

As of the Record Date, Peoples Bankshares and the directors and
officers of Peoples Bank and their affiliates owned beneficially an aggregate
of 20,282 shares of Peoples Bank Common Stock, or 90.01% of the outstanding
shares of Peoples Bank Common Stock entitled to vote at the Peoples Bank
Special Meeting. Pursuant to the Reorganization Agreement, Peoples
Bankshares has agreed to vote 19,997 shares owned beneficially and of record
by it, or 88.88% of the outstanding shares of Peoples Bank Common Stock, for
the approval of the Acquisition Agreements and the transactions contemplated
thereby. The vote by Peoples Bankshares will be sufficient to assure the
stockholder vote required to approve the Acquisition Agreements and the
transactions contemplated thereby. The directors and executive officers of
Peoples Bank and their affiliates, who own beneficially and of record 285
shares, or 1.27% of the outstanding shares of Peoples Common Stock, have also
indicated their intention to vote such shares for the approval of the
Acquisition Agreements and the transactions contemplated thereby.

VOTING AND REVOCATION OF PROXIES

Shares of Peoples Bankshares Common Stock or Peoples Bank Common
Stock which are represented by a properly executed proxy received prior to
the vote at the Peoples Bankshares or Peoples Bank Special Meeting will be
voted at such Special Meeting in the manner directed on the proxy card,
unless such proxy is revoked in the manner set forth herein in advance of
such vote. ANY PEOPLES BANKSHARES OR PEOPLES BANK STOCKHOLDER RETURNING A BLANK
EXECUTED PROXY CARD WILL BE DEEMED TO HAVE APPROVED THE REORGANIZATION AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACQUISITION AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AS THE CASE MAY BE. Failure to
return a properly executed proxy card or to vote in person at the Peoples
Bankshares or Peoples Bank Special Meeting will have the practical effect of
a vote against the Reorganization Agreement and the transactions contemplated
thereby or the Acquisition Agreements and the transactions contemplated
thereby, as the case may be.

Shares subject to abstentions will be treated as shares that are
present at the Special Meetings for purposes of determining the presence of a
quorum and as voted for the purposes of determining the base number of shares
voting on the proposal. Shares subject to abstentions will, therefore, have
the effect of a vote against the approval of the Reorganization Agreement and
the transactions contemplated thereby or the Acquisition Agreements and the
transactions contemplated thereby, as the case may be. If a broker or other
nominee holder indicates on the proxy card that it does not have
discretionary authority to vote the shares it holds of record on the
proposal, those shares will not be treated as shares that are present at the
Special Meetings for purposes of determining the presence of a quorum and
will not be considered as voted for purposes of determining the approval of
stockholders on the proposal.

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<PAGE> 31

Any stockholder of Peoples Bankshares or Peoples Bank giving a
proxy may revoke it at any time prior to the vote at the Peoples Bankshares
or Peoples Bank Special Meeting. Stockholders of Peoples Bankshares or
Peoples Bank wishing to revoke a proxy prior to the vote may do so by
delivering to the Secretary of Peoples Bankshares at 1080 S.W. Wanamaker
Road, Topeka, Kansas 66604-3888, or the Secretary of Peoples Bank at 1064
S.W. Wanamaker Road, Topeka, Kansas 66604-3888, as the case may be, a written
notice of revocation bearing a later date than the proxy or a later dated
proxy relating to the same shares, or by attending the Peoples Bankshares or
Peoples Bank Special Meeting and voting such shares in person. Attendance at
the Special Meetings will not in itself constitute the revocation of a proxy.

The respective Boards of Directors of Peoples Bankshares and
Peoples Bank are not currently aware of any business to be brought before the
Special Meetings other than that described herein. If, however, any other
matters are properly brought before such Special Meetings, or any
adjournments thereof, the persons appointed as proxies will have authority to
vote the shares represented by duly executed proxies in accordance with their
discretion and judgment as to the best interest of Peoples Bankshares or
Peoples Bank.

SOLICITATION OF PROXIES

Each of Peoples Bankshares and Peoples Bank will bear its own
costs of soliciting proxies, except that MBI will pay printing and mailing
expenses and registration fees incurred in connection with preparing this
Joint Proxy Statement/Prospectus. Proxies will initially be solicited by
mail, but directors, officers and selected other employees of Peoples
Bankshares and Peoples Bank may also solicit proxies in person or by
telephone. Directors, executive officers and any other employees of Peoples
Bankshares or Peoples Bank who solicit proxies will not be specially
compensated for their services. Brokerage houses, nominees, fiduciaries and
other custodians will be requested to forward proxy materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in
sending proxy materials to beneficial owners.

HOLDERS OF PEOPLES BANKSHARES COMMON STOCK OR PEOPLES BANK COMMON
STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE APPROPRIATE ACCOMPANYING
PROXY CARD(S) AND RETURN SUCH PROXY CARD(S) PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.

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<PAGE> 32

TERMS OF THE PROPOSED ACQUISITION
---------------------------------

THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS AND CONDITIONS OF
THE ACQUISITION AGREEMENTS, WHICH DOCUMENTS ARE INCORPORATED BY REFERENCE
HEREIN. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE
ACQUISITION AGREEMENTS. MBI, UPON WRITTEN REQUEST, WILL FURNISH A COPY OF THE
ACQUISITION AGREEMENTS, WITHOUT CHARGE, TO ANY PERSON WHO RECEIVES A COPY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. SUCH REQUESTS SHOULD BE DIRECTED TO JON
W. BILSTROM, GENERAL COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O.
BOX 524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525.

GENERAL DESCRIPTION OF THE ACQUISITION

Pursuant to the Acquisition Agreements, Ameribanc will acquire
all of the outstanding capital stock of Peoples Bank through the consummation
of two concurrent and interdependent transactions: (i) the Exchange of all of
the shares of Peoples Bank Common Stock owned beneficially and of record by
Peoples Bankshares for shares of MBI Common Stock, and (ii) the Merger of
MBSC with and into Peoples Bank. Upon consummation of the Exchange and the
Merger, the separate corporate existence of MBSC will terminate, and the
business and operations of Peoples Bank will be continued through Peoples
Bank as a wholly owned subsidiary of Ameribanc. Following the Closing Date,
MBI intends to cause Mercantile Bank of Topeka, a Kansas state-chartered bank
and wholly owned subsidiary of Ameribanc, to merge with and into Peoples
Bank, with the surviving entity being a Kansas state-chartered bank named
"Mercantile Bank of Topeka."

Pursuant to the Acquisition, MBI will issue up to an aggregate of
325,843 shares of MBI Common Stock as Acquisition Consideration. Upon
consummation of the Exchange, Peoples Bankshares will be entitled to receive
14.4819 shares of MBI Common Stock for each share of Peoples Bank Common
Stock that is beneficially owned by Peoples Bankshares. Pursuant to the
Reorganization Agreement, within six months after the Exchange, Peoples
Bankshares shall effect the Liquidation. Upon consummation of the Merger,
each issued and outstanding share of Peoples Bank Common Stock (other than
shares that have been transferred to Ameribanc or shares as to which
stockholder of Peoples Bank has exercised dissenters' rights under Section
17-6712) shall cease to be outstanding and will be converted into the right
to receive 14.4819 shares of MBI Common Stock.

The amount and nature of the Acquisition Consideration was
established through arm's-length negotiations between MBI, Ameribanc, Peoples
Bankshares and Peoples Bank, and reflects the balancing of a number of
countervailing factors. The total amount of the Acquisition Consideration
reflects a price all parties concluded was appropriate. The fair market value
of MBI Common Stock to be issued as the Acquisition Consideration may
fluctuate and at the consummation of the Acquisition may be more or less than
the current fair market value of such shares. See "- Background of and
Reasons for the Acquisition; Board Recommendations." The fact that the
Acquisition Consideration is payable in shares of MBI Common Stock reflects
the desire to have the favorable tax attributes of a "reorganization" for
federal income tax purposes (see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE ACQUISITION"), and the potential for appreciation in the value of the MBI
Common Stock.

NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET
VALUE OF MBI COMMON STOCK WILL BE EQUIVALENT TO THE FAIR MARKET VALUE OF MBI
COMMON STOCK ON THE DATE SUCH STOCK IS RECEIVED BY A

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<PAGE> 33
PEOPLES BANKSHARES OR PEOPLES BANK STOCKHOLDER OR AT ANY OTHER TIME. THE FAIR
MARKET VALUE OF MBI COMMON STOCK RECEIVED BY A PEOPLES BANKSHARES OR PEOPLES
BANK STOCKHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF
MBI COMMON STOCK DUE TO NUMEROUS MARKET FACTORS.

At the closing of the Acquisition, Peoples Bankshares shall
deliver to MBI certificates evidencing all shares of Peoples Bank Common
Stock owned beneficially and of record by Peoples Bankshares on the Closing
Date in exchange for the number of shares of MBI Common Stock to which
Peoples Bankshares is entitled. Following the Closing Date, the stockholders
of Peoples Bank (other than Peoples Bankshares) will be required to submit to
KeyCorp Shareholder Services, Inc., which has been appointed as Exchange
Agent in the Acquisition (the "Exchange Agent"), a properly executed letter
of transmittal and to surrender to the Exchange Agent the stock
certificate(s) formerly representing the shares of Peoples Bank Common Stock
prior to the issuance by the Exchange Agent of the stock certificate
evidencing the shares of MBI Common Stock to which each such stockholder is
entitled. No dividends or other distributions will be paid to any such
Peoples Bank stockholder with respect to shares of MBI Common Stock until
such stockholder's letter of transmittal and stock certificates formerly
representing Peoples Bank Common Stock, or documentation acceptable to the
Exchange Agent in lieu of lost or destroyed certificates, is delivered to the
Exchange Agent. See "TERMS OF THE PROPOSED ACQUISITION - Surrender of
Peoples Bank Stock Certificates and Receipt of MBI Common Stock." No
fractional shares of MBI Common Stock will be issued pursuant to the
Acquisition, but cash will be paid in lieu of such fractional shares, such
cash being calculated by multiplying each such holder's fractional share
interest by the closing stock price of MBI Common Stock on the NYSE Composite
Tape as reported in The Wall Street Journal, Midwest Edition, on the Closing
Date of the Acquisition. See "TERMS OF THE PROPOSED ACQUISITION - Fractional
Shares." The shares of MBI Common Stock to be issued pursuant to the
Acquisition will be freely transferable except by certain stockholders of
Peoples Bankshares or Peoples Bank who are deemed to be "affiliates" of
Peoples Bankshares or Peoples Bank, as the case may be. The shares of MBI
Common Stock issued to such affiliates will be restricted in their
transferability in accordance with the rules and regulations promulgated by
the Commission. See "INFORMATION REGARDING MBI COMMON STOCK - Restrictions on
Resale of MBI Common Stock by Affiliates."

OTHER AGREEMENTS

In addition to and contemporaneously with the Acquisition
Agreements, MBI executed separate Voting Agreements with each of Ronald D.
Lutz, President of Peoples Bankshares and Chairman and Chief Executive
Officer of Peoples Bank, and Joyce M. Lutz, Secretary of both Peoples
Bankshares and Peoples Bank. Pursuant to the Voting Agreements, each of Mr.
and Mrs. Lutz agreed that he or she will vote all of the shares of Peoples
Bankshares Common Stock that he or she then owned or subsequently acquires
in favor of the approval of the Reorganization Agreement and the
transactions contemplated thereby at the Peoples Bankshares Special Meeting.
On a combined basis, Mr. and Mrs. Lutz control 82.09% of the voting power of
the issued and outstanding shares of Peoples Bankshares Common Stock. The
vote by Mr. and Ms. Lutz will be sufficient to assure the stockholder vote
required to approve the Reorganization Agreement and the transactions
contemplated thereby. In addition, until the earliest to occur of the
Closing Date, the termination of the Reorganization Agreement or the
abandonment of the Acquisition, each of Mr. and Mrs. Lutz further agreed that
he or she will not transfer any such shares or vote any such

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<PAGE> 34

shares in favor of the approval of any other competing acquisition proposal
involving any merger with or sale of substantially all of the assets of Peoples
Bankshares to any person other than MBI or its affiliates.

INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION

MBI has entered into an arrangement with Ronald D. Lutz whereby
Mr. Lutz shall serve as a member of the Board of Directors of Peoples Bank,
which shall be named "Mercantile Bank of Topeka" upon consummation of the
Topeka Merger, for a period of two years, commencing on the Closing Date.
During such two-year period, Mr. Lutz shall be entitled to the same
directors' fee as are paid to the other members of the Board of Directors of
Peoples Bank or Mercantile Bank of Topeka, as the case may be. Mr. Lutz's
arrangement with MBI will replace Mr. Lutz's other employment agreements
with Peoples Bankshares and Peoples Bank.

BACKGROUND OF AND REASONS FOR THE ACQUISITION; BOARD RECOMMENDATIONS

BACKGROUND. Throughout its history, Peoples Bank has been an
independent bank with its headquarters located outside the downtown Topeka
area in the western part of Topeka and branches located throughout Shawnee
County, Kansas. Peoples Bank has been a subsidiary of Peoples Bankshares
since 1973. Prior to 1994, Peoples Bankshares also owned and controlled
Citizens State Bank ("Citizens"), located in Osage City, Kansas.

In 1994, Peoples Bankshares determined that, in view of the
changing banking environment, emphasis should be given to expansion of
Peoples Bank in the Topeka market and, as a result, Citizens was sold. The
Board of Peoples Bankshares was not necessarily committed to affiliating with
a larger institution, but felt that Peoples Bank could continue to be a
viable competitor as an independent institution.

Beginning in 1993, a number of contacts were initiated by other
banking organizations to determine whether Peoples Bank might be interested
in a potential combination. Two such contacts were from other community
banking organizations which were interested in acquiring Peoples Bank.
Peoples Bankshares, however, was only interested in either acquiring smaller
institutions in Topeka or being acquired by a large organization in a
tax-deferred exchange for a marketable stock which the stockholders of
Peoples Bankshares (all of whom are on the Board of Directors of Peoples
Bankshares) would be interested in holding for the long term.

In 1993, a large holding company initiated merger negotiations
with Peoples Bankshares, but it was only interested in proceeding with a
merger if it could acquire an additional bank in Topeka. When the efforts to
acquire the other institution were unsuccessful, negotiations were
terminated. In 1995, Peoples Bankshares made an attempt to acquire a small
Topeka bank which it

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<PAGE> 35

planned to combine with Peoples Bank. After several meetings with the proposed
seller, negotiations were terminated. The Board believed there were only about
two other organizations, including MBI, which might be interested in acquiring
Peoples Bank and which met the Board's criteria for a combination.

Although Peoples Bankshares did not engage a financial advisor to
assist it in considering options for expansion, the management and Board of
Directors of Peoples Bankshares took active measures to keep themselves
informed concerning trends in the banking industry and prices being paid for
community banks. For several years, Peoples Bankshares has been a member of
the Sheshunoff High Performance Affiliation Group ("Sheshunoff"), which
provides materials, including pricing information, and sponsors seminars
regarding bank mergers and acquisitions. In late 1994, Peoples Bankshares
obtained an appraisal of its controlling interest in Peoples Bank by the
Sheshunoff organization, which is nationally recognized as an expert in bank
valuations. Those actions were designed to keep the Board and management
informed of developments in the industry and equip them to respond to any
proposals which they might receive.

MBI approached Ronald D. Lutz, the Chairman of the Board of
Directors of both Peoples Bankshares and Peoples Bank, in July of 1995,
indicated an interest in acquiring Peoples Bank and requested information
which would enable MBI to make an acquisition proposal. An additional request
for information was made in September and negotiations commenced in earnest
in November 1995.

During the course of negotiations, the Board consulted with GRA,
Thompson, White & Co., P.C., which, in addition to accounting services,
provides merger and acquisition advice to community banks, and obtained from
Sheshunoff updated information with respect to prices paid in comparable
transactions. The Board also engaged the law firm of Stinson, Mag & Fizzell,
P.C., which is experienced in representing financial institutions in mergers
and acquisitions, to assist in negotiating the Reorganization Agreement. MBI
conducted due diligence on the premises of Peoples Bank in early December
1995. The terms of the Acquisition were unanimously approved by the Boards
of Directors of Peoples Bank and Peoples Bankshares and the Reorganization
Agreement was executed on December 19, 1995.

PEOPLES BANKSHARES' AND PEOPLES BANK'S REASONS AND
BOARD RECOMMENDATIONS. The recommendations of the respective Boards of
Directors of each of Peoples Bankshares and Peoples Bank are based upon a
number of factors, including the terms of the Acquisition Agreements, the
substantial benefits expected to result from the combination of Peoples Bank
and MBI, information concerning the financial condition, results of
operations and prospects of MBI and Peoples Bank, on both a stand-alone and a
combined basis, the market price of MBI Common Stock and the value which
Peoples Bankshares, as the principal stockholder of Peoples Bank, believed
should be realized in a sale transaction. The Acquisition Consideration was
determined pursuant to arms-length negotiations between MBI, Ameribanc,
Peoples Bankshares and Peoples Bank. In arriving at the Acquisition
Consideration, Peoples Bank and Peoples Bankshares considered a recent
appraisal of Peoples Bank and information provided by a bank consulting firm
public information regarding prices paid for comparable banks in similar
transactions, but did not engage an outside firm for advice on the fairness
of the Acquisition Consideration. See "SUMMARY INFORMATION - Markets and
Market Prices."

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<PAGE> 36

The Boards of Directors of both Peoples Bank and Peoples
Bankshares were influenced by the fact that the Acquisition Consideration
significantly exceeded the recent appraised value of Peoples Bank and was
favorable in relation to prices paid for comparable banks in recent
transactions. The Boards did not seek competing offers because they felt
that the Acquisition Consideration was favorable to the stockholders of the
Peoples Bank and Peoples Bankshares and that, based on their knowledge of the
market and previous negotiations with one potential acquiror, and the
organizations which might be interested in entering, or expanding their
presence in, the Topeka market, there was no other such organization which
met the Boards' criteria for a merger partner.

Although the financial aspects of the MBI proposal were
considered paramount, the Board of Peoples Bankshares considered MBI to be
the most appropriate merger partner from the standpoint of the strategic
objectives of Peoples Bank. Central to the decision was the fact that MBI's
subsidiary, Mercantile Bank of Topeka, is headquartered in downtown Topeka,
where Peoples Bank is not located, and also has branches in other areas where
Peoples Bank is not represented. In addition, the Board believed that MBI
and Peoples Bank share similar philosophies with respect to lending and bank
operations and that these factors will help assure that the combination will
be beneficial to the employees and customers of Peoples Bank and to the
greater Topeka community at large.

The respective Boards of Directors of each of Peoples Bankshares
and Peoples Bank believe that the Acquisition will provide the holders of
Peoples Bank Common Stock with the opportunity to receive a substantial
premium over the estimated market value of Peoples Bank Common Stock and will
enable them to participate as MBI shareholders, on a tax-deferred basis, in
the expanded opportunities for growth and profitability made possible by the
Acquisition. The respective Boards of Directors of each of Peoples
Bankshares and Peoples Bank also believe that the Acquisition and the
anticipated merger of Peoples Bank with Mercantile Bank of Topeka will result
in a combined entity that is (i) committed to serving the banking and other
financial needs of Peoples Bank's depositors, employees, customers and
communities, (ii) capable of competing more effectively with larger financial
institutions that have exerted increasing competitive pressure on Peoples
Bank, (iii) well-capitalized and (iv) capable of enjoying significant market
penetration in Topeka and the northeast Kansas banking market.

THE BOARD OF DIRECTORS OF EACH OF PEOPLES BANKSHARES AND PEOPLES
BANK BELIEVES THAT THE ACQUISITION IS IN THE BEST INTEREST OF PEOPLES BANKSHARES
AND PEOPLES BANK, RESPECTIVELY, AND THEIR RESPECTIVE STOCKHOLDERS. THE BOARD OF
DIRECTORS OF PEOPLES BANKSHARES UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
PEOPLES BANKSHARES VOTE FOR THE PROPOSAL TO APPROVE THE REORGANIZATION
---
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE BOARD OF DIRECTORS OF
PEOPLES BANK UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF PEOPLES BANK VOTE
FOR THE PROPOSAL TO APPROVE THE ACQUISITION AGREEMENTS AND THE TRANSACTIONS
- ---
CONTEMPLATED THEREBY.

MBI'S REASONS AND BOARD RECOMMENDATIONS. The Executive Committee
of the Board of Directors of MBI considered a number of factors,
including, among other things, the financial condition of Peoples Bankshares
and Peoples Bank and the projected synergies which are anticipated to result
from the Acquisition. The Executive Committee concluded that the Acquisition
presents an unique opportunity for MBI to increase its presence in the
regional banking market in eastern Kansas through the addition of an established
banking organization. MBI believes that the most effective and least costly

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<PAGE> 37

means to achieve this presence is the acquisition of a banking organization with
significant operations in the targeted area. MBI's decision to pursue
discussions with Peoples Bankshares and Peoples Bank was primarily a result of
MBI's assessment of the value of Peoples Bank's banking franchise, its
substantial asset base within eastern Kansas and the compatibility of the
businesses of the two banking organizations.

CONDITIONS OF THE ACQUISITION

The respective obligations of MBI, Ameribanc, Peoples Bankshares
and Peoples Bank to effect the Acquisition are subject to the satisfaction of
certain mutual conditions, including the following:

(1) The Reorganization Agreement and the transactions
contemplated thereby shall be approved by the holders of a
majority of the outstanding shares of Peoples Bankshares Common
Stock at the Peoples Bankshares Special Meeting.

(2) The Acquisition Agreements and the transactions
contemplated thereby shall be approved by the holders of a
majority of the outstanding shares of Peoples Bank Common Stock
at the Peoples Bank Special Meeting.

(3) The Acquisition Agreements and the transactions
contemplated thereby shall have been approved by the Federal
Reserve Board, the FDIC, the Kansas Commissioner and any other
federal and/or state regulatory agency whose approval is
required for the consummation of the transactions contemplated
thereby.

(4) The Registration Statement of which this Joint Proxy
Statement/Prospectus is a part and which registers the shares of
MBI Common Stock to be issued in the Acquisition shall have been
declared effective and not be subject to a stop order or any
threatened stop order.

(5) None of MBI, Ameribanc, Peoples Bankshares, Peoples
Bank or MBSC shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or
prohibits the he Acquisition.

(6) MBI, Ameribanc and Peoples Bankshares shall have
taken all actions as are necessary to effect the Exchange
simultaneously with the Merger.

(7) Each of MBI, Peoples Bankshares and Peoples Bank
shall have received from Thompson Coburn, counsel for MBI, an
opinion to the effect that the Acquisition will constitute a
reorganization within the meaning of Section 368 of the Code and
that no gain or loss will be recognized by the stockholders of
Peoples Bankshares or Peoples Bank to the extent that they
receive MBI Common Stock in exchange for shares of Peoples
Bankshares Common Stock or Peoples Bank Common Stock,
respectively.

The respective obligations of MBI and Ameribanc to effect the
Acquisition are subject to the satisfaction, unless waived, of certain other
conditions, including the following:

(1) The representations and warranties of Peoples
Bankshares and Peoples Bank made in the Reorganization Agreement
shall be true and correct in all material

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<PAGE> 38

respects, except such as are not of a magnitude as to be materially
adverse to the business, financial condition, results of operations
or prospects of Peoples Bank, as of December 19, 1995 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, (ii) where the
facts which caused the failure of any representation or warranty
to be so true and correct have not resulted, and are not likely
to result, in a material adverse effect on the condition of
Peoples Bank and (iii) for the effect of the transactions
contemplated by the Reorganization Agreement, and all obligations
required to be performed by Peoples Bankshares and Peoples Bank
under the Reorganization Agreement prior to the Closing Date
shall have been performed in all material respects, and MBI shall
have received an officers' certificate from each of Peoples
Bankshares and Peoples Bank to that effect.

(2) Peoples Bankshares and Peoples Bank shall have
obtained any and all material consents or waivers from other
parties to loan agreements, leases or other contracts material to
Peoples Bank's business and any and all material permits,
authorizations, consents, waivers or approvals required for the
lawful consummation of the Acquisition.

(3) Since December 19, 1995, there shall have been no
material adverse change in the business, financial condition,
results of operations or prospects of Peoples Bank.

(4) Stinson, Mag & Fizzell, P.C., counsel to Peoples
Bankshares and Peoples Bank, shall have delivered to MBI an
opinion regarding certain legal matters.

(5) Peoples Bankshares shall have delivered
to the Exchange Agent the certificates evidencing shares of
Peoples Bank Common Stock owned beneficially or of record by
Peoples Bankshares, and such other documentation as shall be
reasonably required by MBI or the Exchange Agent to effect the
Exchange.

The respective obligations of Peoples Bankshares and
Peoples Bank to effect the Acquisition are subject to the
satisfaction, unless waived, of certain other conditions,
including the following:

(1) The representations and warranties of MBI
and Ameribanc made in the Reorganization Agreement shall be true
and correct in all material respects, except such as are not of a
magnitude as to be materially adverse to the business, financial
condition, results of operations or prospects of MBI and its
subsidiaries taken as a whole, as of December 19, 1995 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, (ii)
where the facts which caused the failure of any representation or
warranty to be so true and correct have not resulted, and are not
likely to result, in a material adverse effect on the condition
of MBI and its subsidiaries taken as a whole, and (iii) for the
effect of the transactions contemplated by the Reorganization
Agreement and all obligations required to be performed by MBI and
Ameribanc under the Reorganization Agreement prior to the
Effective Time shall have been performed in all

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<PAGE> 39

material respects, and Peoples Bankshares and Peoples Bank shall
have received an officers' certificate from MBI and Ameribanc to
that effect.

(2) MBI and Ameribanc shall have obtained any
and all material permits, authorizations, consents, waivers and
approvals required of MBI or Ameribanc for the lawful
consummation of the Acquisition.

(3) Since the date of the Reorganization Agreement, there
shall have been no material adverse change in the business,
financial condition, results of operations or prospects of MBI and
its subsidiaries taken as a whole.

(4) Thompson Coburn, counsel to MBI and Ameribanc, shall
have delivered to Peoples Bankshares and Peoples Bank an opinion
regarding certain legal matters.

TERMINATION OF THE REORGANIZATION AGREEMENT

The Reorganization Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the stockholders of
Peoples Bankshares and Peoples Bank, by mutual consent of the Executive
Committee of the Board of Directors of MBI and the Boards of Directors of
Ameribanc, Peoples Bankshares and Peoples Bank, or unilaterally by the
Executive Committee of the Board of Directors of MBI or the Boards of
Directors of Ameribanc, Peoples Bankshares or Peoples Bank: (i) at any time
after December 31, 1996 if the Acquisition has not been consummated by such
date or (ii) if the Federal Reserve Board, the FDIC, the Kansas Commissioner
or any other Regulatory Authority has denied approval of the Acquisition.
The Reorganization Agreement may also be terminated by the Executive
Committee of the Board of Directors of MBI or the Board of Directors of
Ameribanc, on the one hand, or the Board of Directors of Peoples Bankshares
and the Board of Directors of Peoples Bank, on the other, in the event of a
breach of the Reorganization Agreement by the other party, which breach is
of such a magnitude as to be materially adverse to the business, financial
condition, results of operations or prospects of the breaching party taken
as a whole, and is not cured or waived within forty-five days following
written notice of such breach given to the party committing such breach by
the other party.

INDEMNIFICATION

MBI and Ameribanc, on the one hand, and Peoples Bankshares and
Peoples Bank, on the other, have agreed to indemnify each other against any
claims or liabilities to which either such party may become subject under
federal or state securities laws or regulations, to the extent that such
claim or liability arises out of information furnished to the party subject
to such liability by the other party or an omission by such other party to
state a necessary or material fact in the Registration Statement of which
this Joint Proxy Statement/Prospectus is a part.

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<PAGE> 40

CLOSING DATE

The Acquisition will be consummated and become effective on the
Closing Date at the time that the authorization of the Kansas Commissioner is
filed with the Office of the Secretary of State of the State of Kansas.
Pursuant to the Reorganization Agreement, unless the parties otherwise agree,
the Closing Date shall be the first business day of the month commencing at
least five business days following the last to occur of: (i) the receipt of
the requisite approval of the Reorganization Agreement and the transactions
contemplated thereby by the stockholders of Peoples Bankshares and the
Acquisition Agreements and the transactions contemplated thereby by the
stockholders of Peoples Bank; or (ii) the approval of the Acquisition by the
Regulatory Authorities and the expiration of any required waiting period.

SURRENDER OF PEOPLES BANK STOCK CERTIFICATES AND RECEIPT OF MBI
COMMON STOCK

Except for the shares of Peoples Bank Common Stock subject to the
exercise of dissenters' rights, at the Effective Time of the Acquisition,
each outstanding share of Peoples Bank Common Stock will be converted into
the right to receive 14.4819 shares of MBI Common Stock. See "TERMS OF THE
PROPOSED ACQUISITION - General Description of the Acquisition." At the
closing of the Acquisition, Peoples Bankshares will deliver to the Exchange
Agent the stock certificates representing the shares of Peoples Bank Common
Stock owned beneficially and of record by Peoples Bankshares on the Closing
Date and any other documentation reasonably required to effect the Exchange.
Upon such delivery, Peoples Bankshares will be entitled to receive a stock
certificate evidencing the shares of MBI Common Stock to which Peoples
Bankshares is entitled.

As soon as practicable following the Effective Time of the
Acquisition, the Exchange Agent will mail to each former Peoples Bank
stockholder of record as of the Closing Date (other than Peoples Bankshares)
a notification of the consummation of the Acquisition, a letter of
transmittal and instructions as to the procedure for the surrender of stock
certificates evidencing Peoples Bank Common Stock and the receipt of stock
certificates evidencing the shares of MBI Common Stock to which each former
Peoples Bank stockholder is entitled. It will be the responsibility of such
former Peoples Bank stockholders to submit the certificates evidencing such
shares of Peoples Bank Common Stock to the Exchange Agent. No dividends or
other distributions will be paid to a former Peoples Bank stockholder with
respect to shares of MBI Common Stock until the stockholder delivers to the
Exchange Agent a properly completed letter of transmittal and all stock
certificates formerly representing shares of Peoples Bank Common Stock, or
documentation acceptable to the Exchange Agent in lieu of a lost or destroyed
certificate. The Exchange Agent may also require the stockholder of a lost
or destroyed certificate to post an insurance bond acceptable to the Exchange
Agent. All dividends or other distributions on MBI Common Stock declared
between the Closing Date of the Acquisition and the date of the surrender of
a Peoples Bank stock certificate will be held for the benefit of the former
Peoples Bank stockholders and will be paid to each such stockholder, without
interest thereon, upon the surrender of such stock certificate or
documentation and/or insurance bond in lieu thereof.

FRACTIONAL SHARES

No fractional shares of MBI Common Stock will be issued to Peoples
Bankshares or the other former stockholders of Peoples Bank in connection with
the Acquisition. Each former holder of Peoples Bank Common Stock who otherwise
would have been entitled to receive a fraction of a share of

- 31 -
<PAGE> 41

MBI Common Stock shall receive in lieu thereof cash, without interest, in
an amount equal to the holder's fractional share interest multiplied by the
closing stock price of MBI Common Stock on the NYSE Composite Tape as
reported in The Wall Street Journal on the Closing Date. Cash received by
Peoples Bank stockholders in lieu of fractional shares may give rise to
taxable income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
ACQUISITION."

CERTAIN REGULATORY APPROVALS

In addition to the approval of the Reorganization Agreement and
the transactions contemplated thereby by the stockholders of Peoples
Bankshares and the Acquisition Agreements and the transactions contemplated
thereby by the stockholders of Peoples Bank, the obligations of the parties
to effect the Acquisition are subject to prior approval of the Federal
Reserve Board, the FDIC and the Kansas Commissioner. Applications for
approval will be filed with such Regulatory Authorities.

In reviewing the applications, the Regulatory Authorities will
consider, among other things, whether the effect of the Acquisition would be
to substantially lessen competition in the relevant market. In addition, the
Regulatory Authorities will consider whether the combined organization meets
the requirements of the Community Reinvestment Act of 1977, as amended, by
assessing the involved entities' respective records of meeting the credit
needs of the local communities in which they are chartered, consistent with
the safe and sound operation of such institutions. In their review, the
Regulatory Authorities will also examine the financial and managerial
resources and future prospects of the combined organization and analyze the
capital structure and soundness of the resulting entity. The Regulatory
Authorities have the authority to deny the applications if they conclude that
the combined organization would have inadequate capital.

MBI, Ameribanc, Peoples Bankshares and Peoples Bank are not aware
of any governmental approvals or actions that may be required for the
consummation of the Acquisition other than as described above. Should any
other approval or action be required, it is presently contemplated that such
approval or action would be sought. There can be no assurance that necessary
approvals or actions will be timely received or taken, that no action will be
brought challenging a necessary approval or action, or, if such a challenge
is brought, as to the result thereof, or that any such approval or action
will not be conditioned in a manner that would cause the parties to abandon
the Acquisition. See "SUPERVISION AND REGULATION."

BUSINESS PENDING THE ACQUISITION

The Reorganization Agreement provides that, during the period
from December 19, 1995 to the Effective Time, Peoples Bankshares and Peoples
Bank will conduct their respective businesses according to the ordinary and
usual course consistent with past and current practices and use their best
efforts to maintain and preserve their respective business organizations,
employees and advantageous business relationships and to retain the services
of their officers and key employees.

Furthermore, from December 19, 1995 to the Closing Date, Peoples
Bankshares and Peoples Bank will not, without the prior written consent of
MBI and Ameribanc:

(1) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of their
capital stock, except that (i) Peoples Bank may declare and

- 32 -
<PAGE> 42
pay a cash dividend of not more than $20.00 per share on the
Peoples Bank Common Stock in January of 1996 for the year
ended December 31, 1995, and (ii) Peoples Bank may declare
and pay dividends of not more than $5.00 per share for each
of the first and second quarter of 1996; provided, however,
that Peoples Bank will coordinate the record and payment
dates of each such quarterly dividend such that the record
and payment dates for a given quarterly dividend are the
same as MBI's record and payment dates for its regular
quarterly dividend for that quarter; and provided further
that if the Effective Time has not occurred on or before
September 10, 1996, Peoples Bank may declare and pay a
dividend for each quarter ending thereafter in which the MBI
Board of Directors shall declare a dividend on shares of MBI
Common Stock that in the aggregate is not in excess of the
greater of (A) the aggregate quarterly dividend that would
have been paid by MBI on the Acquisition Consideration if
the Acquisition had been consummated on September 10, 1996
and (B) $112,500; provided further, however, that Peoples
Bank may not declare or pay a dividend for any quarter in
which Peoples Bank's stockholders will be entitled to
receive a regular quarterly dividend on the shares of MBI
Common Stock to be issued in the Acquisition;

(2) enter into or amend any employment, severance or
similar agreement or arrangement with any director or
officer or employee, materially modify any of their employee
plans, grant any salary or wage increase or materially
increase any employee benefit (including incentive or bonus
payments), except (i) normal individual increases in
compensation to employees consistent with past practice,
(ii) as required by law or contract and (iii) increases of
which Peoples Bank and Peoples Bankshares notify MBI and
Ameribanc in writing and which MBI and Ameribanc do not
disapprove within ten days of the receipt of such notice;

(3) authorize, recommend, propose, announce an
intention to authorize, so recommend or propose, or enter
into an agreement in principle with respect to, any merger,
consolidation or business combination (other than the
Acquisition and the Topeka Merger), any acquisition of a
material amount of assets or securities, any disposition of
a material amount of assets or securities or any release or
relinquishment of any material contract rights;

(4) propose or adopt any amendments to their
articles of incorporation, charter documents or By-Laws;

(5) issue, sell, grant, confer or award any of their
equity securities, effect any stock split or adjust,
combine, reclassify or otherwise change their capitalization
as it existed on December 19, 1995;

(6) purchase, redeem, retire, repurchase or
exchange, or otherwise acquire or dispose of, directly or
indirectly, any of their shares of capital stock or other
equity securities, whether pursuant to the terms of such
securities or otherwise;

(7) (i) without first consulting with MBI, enter
into, renew or increase any loan or credit commitment
(including stand-by letters of credit) to, or invest or
agree to invest in any person or entity or modify any of the
material provisions or renew or

- 33 -
<PAGE> 43
otherwise extend the maturity date of any existing loan or credit
commitment (collectively, "Lend to") in an amount in excess of
$250,000 or in any amount which, when aggregated with any and all
loans or credit commitments of Peoples Bank to such person
or entity, would be in excess of $250,000, provided that no
such consultation is required in respect of single-family
residential loans or credits that (A) remain in Peoples
Bank's loan portfolio, (B) do not exceed $125,000 and (C)
are salable in recognized secondary markets pursuant to
Peoples Bank's lending policies as in effect on
December 19, 1995, (ii) without first obtaining the written
consent of MBI, Lend to any person or entity, in an amount
in excess of $400,000 or in any amount which, when
aggregated with any and all loans or credit commitments of
Peoples Bank to such person or entity would be in excess of
$400,000, (iii) Lend to any person other than in accordance
with Peoples Bank's lending policies as in effect on
December 19, 1995, provided that in the case of clauses (i)
and (ii), Peoples Bank may make any such loan in the event
(A) Peoples Bank delivers to MBI or its designated
representative a notice of its intention to make such loan
and such information as MBI or its designated representative
reasonably requires in respect thereof and (B) MBI or its
designated representative do not reasonably object to such
loan by giving written or facsimile notice of such objection
within two business days following the delivery to MBI or
its designated representative of the notice of intention and
information as aforesaid, or (iv) Lend to any person or
entity any of the loans or other extensions of credit to
which or investments in which are on a "watch list" or
similar or internal report of Peoples Bank (except those
denoted "pass" thereon), in an amount in excess of $25,000;
provided, however, that Peoples Bank may honor any
contractual obligation in existence on December 19, 1995 or,
with respect to loans described in clause (i) above, may
make such loans after consulting with MBI. Notwithstanding
clauses (i) and (ii), however, Peoples Bankshares and
Peoples Bank are authorized, without first consulting with
or obtaining the written consent of MBI or Ameribanc, to
increase the aggregate amount of any credit facilities
theretofore established in favor of any person or entity
(each a "Pre-Existing Facility"), provided that the
aggregate amount of any and all such increases may not be in
excess of the lesser of five percent (5%) of such
Pre-Existing Facilities or $25,000;

(8) directly or indirectly (including through their
officers, directors, employees or other representatives) (i)
initiate, solicit or encourage any discussions, inquiries or
proposals with any third party (other than the MBI,
Ameribanc or the affiliates thereof) relating to the
disposition of any significant portion of the business or
assets of Peoples Bankshares or Peoples Bank, the
acquisition of the capital stock or other equity securities
of Peoples Bankshares or Peoples Bank, the merger of Peoples
Bankshares or Peoples Bank with any person (other than MBI,
Ameribanc or the affiliates thereof) or any similar
transaction, or (ii) provide any such person with
information or assistance or negotiate with any such person
with respect to such a transaction, and Peoples Bankshares
and Peoples Bank will promptly notify MBI orally of all the
relevant details relating to all inquiries, indications of
interest and proposals which they receive with respect to
any such transaction;

(9) take any action that would (i) materially impede
or delay the consummation of the transactions contemplated
by the Acquisition Agreements, or the ability of MBI, Ameribanc,
Peoples Bankshares or Peoples Bank to obtain any approval

- 34 -
<PAGE> 44
of any Regulatory Authority required for the transactions
contemplated by the Acquisition Agreements or perform their
covenants and agreements under the Acquisition Agreements or (ii)
prevent or impede the Acquisition from qualifying as a
reorganization within the meaning of Section 368 of the Code;

(10) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money or assume, guarantee, endorse or otherwise as
an accommodation become responsible or liable for the
obligations of any other individual, corporation or other
entity;

(11) in the case of Peoples Bank, materially
restructure or change its investment securities portfolio,
through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported, or execute
individual investment transactions of greater than $500,000
for U.S. Treasury Securities and Federal Agency securities
and $100,000 for all other investment instruments, provided
that the prior written consent of MBI and Ameribanc is not
unreasonably withheld;

(12) agree in writing or otherwise take any of the
foregoing actions or engage in any activity, enter into any
transaction or intentionally take or omit to take any other
act which would make any of the representations and
warranties in Article II of the Reorganization Agreement
untrue or incorrect in any material respect if made anew
after engaging in such activity, entering into such
transaction, or taking or omitting such other act; or

(13) enter into or increase any loan or credit
commitment (including standby letters of credit) to any
executive officer or director of Peoples Bankshares or
Peoples Bank, any stockholder of Peoples Bankshares or
Peoples Bank, or any entity controlled, directly or
indirectly, by any of the foregoing or engage in any
transaction with any of the foregoing which is of the type
or nature sought to be regulated in 12 U.S.C. Sec. 371c and
12 U.S.C. Sec. 371c-1, without first obtaining the prior
written consent of MBI, which consent may not be
unreasonably withheld.

From December 19, 1995 to the Closing Date, MBI and Ameribanc
will not, without the prior consent of Peoples Bankshares and Peoples Bank,
agree in writing or otherwise engage in any activity, enter into any
transaction or take or omit to take any other action which would make any of
the representations and warranties in Article III of the Reorganization
Agreement untrue or incorrect in any material respect if made anew after
engaging in such activity, entering into such transaction, or taking or
omitting such other action.

WAIVER AND AMENDMENT

- 35 -
<PAGE> 45

Directors, whether before or after the Special Meetings; provided, however,
that after approval of the Reorganization Agreement and the transactions
contemplated thereby by the stockholders of Peoples Bankshares and the
Acquisition Agreements and the transactions contemplated thereby by the
stockholders of Peoples Bank at the Special Meetings, no such modification
may: (A) alter the amount or change the form of Acquisition Consideration to
be received by Peoples Bankshares and the other stockholders of Peoples Bank
in the Acquisition; (B) adversely affect the tax treatment of the
stockholders of Peoples Bankshares or Peoples Bank; (C) alter or change any
of the terms of the Reorganization Agreement if such alteration or change
would adversely affect the stockholders of Peoples Bank; or (D) impede or
delay the receipt of any approval from a Regulatory Authority or the
consummation of the Acquisition.

ACCOUNTING TREATMENT

The Acquisition will be accounted for under the purchase method
of accounting. Accordingly, data regarding the financial condition and
results of operations of Peoples Bank will be included in MBI's consolidated
financial statements on and after the Closing Date.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION
----------------------------------------------------------

The following discussion is based upon an opinion of Thompson
Coburn, counsel to MBI ("Counsel"), and except as otherwise indicated,
reflects Counsel's opinion. The discussion is a general summary of the
material United States federal income tax ("federal income tax") consequences
of the Exchange, the Merger and the Liquidation to certain stockholders of
Peoples Bankshares and to certain stockholders of Peoples Bank 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 Reorganization Agreement, the Acquisition Agreements and the
transactions contemplated by each. The discussion does not address all
aspects of federal income taxation that may be applicable to stockholders of
Peoples Bankshares or Peoples Bank in light of their status or personal
investment circumstances, nor does it address the federal income tax
consequences that are applicable to any stockholder subject to special
federal income tax treatment including (without limitation) foreign persons,
insurance companies, tax-exempt entities, retirement plans, dealers in
securities, persons who acquired their stock pursuant to the exercise of
employee stock options or otherwise as compensation, persons who hold their
stock as part of a "straddle," "hedge" or "conversion transaction," and
persons who acquired their stock after December 19, 1995. In addition, the
discussion does not address the effect of any applicable state, local or
foreign tax laws, or the effect of any federal tax laws other than those
pertaining to the federal income tax. AS A RESULT, EACH STOCKHOLDER OF
PEOPLES BANKSHARES OR PEOPLES BANK IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE
EXCHANGE, THE MERGER AND THE LIQUIDATION TO SUCH STOCKHOLDER. The
discussion assumes that shares of Peoples Bankshares Common Stock and shares
of Peoples Bank Common Stock are held as capital assets (within the meaning
of Section 1221 of the Code) at the Effective Time.

Peoples Bankshares and Peoples Bank have each received an opinion
from Counsel to the effect that, assuming the Exchange and the Merger occur
in accordance with the Acquisition Agreements, each of the Exchange and the
Merger will constitute a "reorganization" for federal income tax purposes
under Section 368(a)(1) with the following federal income tax consequences:

1. No gain or loss will be recognized by Peoples Bankshares on
its transfer of Peoples Bank Common Stock solely in exchange for MBI Common
Stock in the Exchange.

- 36 -
<PAGE> 46

2. No gain or loss will be recognized by Peoples Bankshares on
its distribution of MBI Common Stock to its stockholders in the Liquidation.

3. Each stockholder of Peoples Bankshares who exchanges, in
the Liquidation, his, her or its shares of Peoples Bankshares Common Stock
solely for shares of MBI Common Stock:

a) will recognize no gain or loss;

b) will have an aggregate adjusted basis for the shares
of MBI Common Stock received equal to the aggregate basis of the
shares of Peoples Bankshares Common Stock surrendered; and

c) will have a holding period for the share of MBI
Common Stock received which includes the period during which the
shares of Peoples Bankshares Common Stock surrendered were held.

4. Each stockholder of Peoples Bank who exchanges in the
Merger his, her or its shares of Peoples Bank Common Stock solely for shares
of MBI Common Stock:

a) will recognize no gain or loss, except with regard to
cash received in lieu of a fractional share, as discussed;

b) will have an aggregate adjusted basis for the shares
of MBI Common Stock received (including any fractional share of
MBI Common Stock deemed to be received, as described in paragraph
5, below) equal to the aggregate basis of the shares of Peoples
Bank Common Stock surrendered; and

5. Each stockholder of Peoples Bank who receives cash in lieu
of a fractional share of MBI Common Stock will be treated as if the
fractional share had been received and then redeemed by MBI. The receipt of
such cash will cause the recipient to recognize capital gain or loss, equal
to the difference between the amount of cash received and the portion of such
holder's adjusted tax basis in the shares of MBI Common Stock allocable to
the fractional share interest.

Counsel's opinion is subject to the conditions and assumptions
stated therein and relies upon representations made by MBI, Peoples
Bankshares, Peoples Bank, and certain stockholders of Peoples Bankshares or
Peoples Bank. If any of these representations or assumptions is inaccurate,
the federal income tax consequences of the Acquisition or Liquidation could
differ from those described herein. Counsel's opinion is also based upon 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. Copies of the opinion are
available without charge upon written request to MBI.

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<PAGE> 47
Consummation of the Acquisition is subject to the condition that Counsel's
opinion shall have been received (and not withdrawn) before the Effective Time.
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 the opinion and, if the matter were
litigated, a court may reach a decision contrary to the opinion. Neither
MBI, Peoples Bankshares nor Peoples Bank has requested an advance ruling as
to the federal income tax consequences of the Exchange, the Merger or the
Liquidation, and the Service is not expected to issue such a ruling.

THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE EXCHANGE, THE MERGER AND THE LIQUIDATION TO
CERTAIN STOCKHOLDERS AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND
CIRCUMSTANCES OF EACH STOCKHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT,
THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY
NOT APPLY TO EACH STOCKHOLDER OF PEOPLES BANKSHARES OR PEOPLES BANK.
ACCORDINGLY, EACH SUCH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE EXCHANGE, THE MERGER, AND THE
LIQUIDATION, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL
AND OTHER TAX LAWS AND THE POSSIBLE EFECTS OF CHANGES IN FEDERAL AND OTHER
TAX LAWS.

DISSENTERS' RIGHTS OF STOCKHOLDERS OF PEOPLES BANK
--------------------------------------------------

Under Section 9-1724 of the Kansas Banking Code, which
incorporates by reference Section 17-6712 of the Kansas Corporation Code,
each stockholder of Peoples Bank has the right to dissent from the Merger
with respect to some or all of his or her shares of Peoples Bank Common Stock
and to receive the fair value of such shares in cash by following the
procedures set forth under Section 17-6712, attached hereto as Annex A and
-------
the material provisions of which are summarized below. Stockholders of
Peoples Bankshares do not have dissenters' rights in connection with the
Exchange.

Under Section 17-6712, a stockholder of Peoples Bank who (i)
files with Peoples Bank prior to the vote on the Merger a written objection
to the Merger, (ii) is not entitled to vote or does not vote in favor of the
approval of the Merger and (iii) within twenty days of receiving notice of
the Merger from Peoples Bank, delivers to Peoples Bank a written demand for
payment of the value of his or her shares, shall be entitled to receive from
Peoples Bank, within thirty days following the expiration of the twenty-day
period for a written demand, the value of his or her shares on the Closing
Date, exclusive of any value derived from the consummation of the Merger. A
VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN
OBJECTION FOR PURPOSES OF ASSERTING APPRAISAL RIGHTS.

If, within thirty days following the expiration of the twenty-day
period for a written demand, Peoples Bank and any such dissenting stockholder
do not agree on the value of his or her shares, the dissenting stockholder
may, within four months after the expiration of such thirty-day period for
agreement, file a complaint in the District Court of Kansas asking for a
finding and determination of the value of such shares. Such dissenting
stockholder shall be entitled to judgment for the amount of the fair value as
determined by a court-appointed appraiser with interest thereon to the date
of such judgment. Any stockholder who demands payment of stock pursuant to
Section 17-6712 will not thereafter be

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<PAGE> 48

entitled to vote for any purpose and will not be entitled to dividends or other
distributions following the Closing Date, unless the appraisal proceedings are
dismissed or such stockholder delivers to the corporation a written withdrawal
of objection and acceptance of the Merger.

THE PRECEDING DISCUSSION IS A FAIR SUMMARY OF THE PROVISIONS
REGARDING DISSENTERS' RIGHTS UNDER THE KANSAS CORPORATION CODE AND IS QUALIFIED
IN ITS ENTIRETY BY THE TEXT OF SECTION 17-6712 OF THE KANSAS CORPORATION CODE,
WHICH IS ATTACHED HERETO AS ANNEX A. PEOPLES BANK STOCKHOLDERS WHO ARE
-------
INTERESTED IN PERFECTING THEIR DISSENTERS' RIGHTS PURSUANT TO SECTION 17-6712
IN CONNECTION WITH THE MERGER MAY WISH TO CONSULT WITH THEIR COUNSEL FOR ADVICE
AS TO THE PROCEDURES REQUIRED TO BE FOLLOWED.

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<PAGE> 49
PRO FORMA FINANCIAL INFORMATION
-------------------------------

COMPARATIVE UNAUDITED PER SHARE DATA

<TABLE>
<CAPTION>
MBI/ MBI/ PEOPLES BANK/
PEOPLES PEOPLES BANK PEOPLES BANK ALL ENTITIES ALL ENTITIES
MBI BANK PRO FORMA PRO FORMA PRO FORMA PRO FORMA
REPORTED REPORTED COMBINED <F1> EQUIVALENT <F2> COMBINED <F3> EQUIVALENT <F2>
-------- -------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
March 31, 1996 . . . . . . . . . . . $25.47 $360.09 $25.36 $367.26 $25.27 $365.96
December 31, 1995. . . . . . . . . . 26.04 376.09 25.94 375.66 25.83 374.07

Cash Dividends Declared per Share:
Three months ended March 31, 1996. . $ .41 $ 20.00 $ .41 $ 5.94 $ .41 $ 5.94
Year ended December 31, 1995 . . . . 1.32 10.00 1.32 19.11 1.32 19.11

Earnings per Share:
Three months ended March 31, 1996. . $ .07 $ 12.27 $ .07 $ 1.01 $ (.05) $ (.72)
Year ended December 31, 1995 . . . . 3.74 51.69 3.75 54.31 3.57 51.70

Market Price per Share:
At December 19, 1995 <F4>. . . . . . $44.375 N/A -- -- -- --
At May 9, 1996 <F4>. . . . . . . . . 44.250 N/A -- -- -- --

<FN>
- --------------------

<F1> Includes the effect of pro forma adjustments for Peoples Bank as
appropriate.

<F2> Based on the pro forma combined per share amounts multiplied by
14.4819, the per share exchange ratio applicable to one share of
Peoples Bank Common Stock. Further explanation of the
assumptions used in the preparation of this pro forma combined
consolidated financial statements is included in the notes to pro
forma financial statements.

<F3> Includes the effect of pro forma adjustments for Peoples Bank and
TODAY'S, as appropriate.

<F4> The market value of MBI Common Stock was determined as of the
last trading day preceding the public announcement of the
proposed Acquisition and as of the latest available date prior to
the filing of the Joint Proxy Statement/Prospectus, based on the
last sale price as reported on the NYSE Composite Tape. The
market values of Peoples Bank Common Stock as of the dates set
forth in the table can not be accurately estimated because the
last transaction in Peoples Bank Common Stock known to management
of Peoples Bank occurred in March 1993.
</TABLE>

- 40 -
<PAGE> 50

PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following unaudited pro forma combined consolidated balance
sheet gives effect to the proposed acquisitions of Peoples Bank and TODAY'S
as if each of the acquisitions had been consummated on March 31, 1996.

The following unaudited pro forma combined consolidated income
statements for the three months ended March 31, 1996 and for the year ended
December 31, 1995 set forth the results of operations of MBI combined with
the results of operations of Peoples Bank and TODAY'S as if the acquisitions
of Peoples Bank and TODAY'S had occurred as of the first day of the period
presented.

The unaudited pro forma combined consolidated financial
statements should be read in conjunction with the accompanying Notes to the
Pro Forma Combined Consolidated Financial Statements and with the historical
financial statements of MBI, Peoples Bank and TODAY'S. The historical interim
financial information for the three months ended March 31, 1996, used as a
basis for the pro forma combined consolidated financial statements, include
all necessary adjustments which, in management's opinion, are necessary to
present the data fairly. These pro forma combined consolidated financial
statements may not be indicative of the results of operations that actually
would have occurred if the proposed acquisitions had been consummated on the
dates assumed above or of the results of operations that may be achieved in
the future.

Due to the immateriality of the financial condition and results
of operation of Sterling, Conway and Metro, individually and in the
aggregate, to that of MBI, the unaudited pro forma combined consolidated
financial statements only reflect the acquisitions of Sterling, Metro and
Conway from their closing dates forward.

- 41 -
<PAGE> 51

<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(THOUSANDS)
(UNAUDITED)

<CAPTION>
MBI/Peoples Bank All Entities
Pro Forma Pro Forma
Peoples Peoples Bank Combined TODAY'S Combined
MBI<F1> Bank Adjustments<F2> Consolidated TODAY'S Adjustments<F2> Consolidated
------------ ------- --------------- ------------ ------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks. . . . . . $ 888,924 $ 2,612 $ (14,670)<F3> $ 876,866 $ 15,770 $(52,965)<F3> $ 805,386
(34,285)<F6>
Due from banks-interest bearing. . 77,206 23 77,229 77,229
Federal funds sold and repurchase
agreements. . . . . . . . . . . . 245,037 -- 245,037 -- 245,037
Investments in debt and equity
securities. . . . . . . . . . . . --
Trading. . . . . . . . . . . . 13,245 -- 13,245 -- 13,245
Available-for-sale . . . . . . 4,307,504 36,757 4,344,261 74,119 4,418,380
Held-to-maturity . . . . . . . -- -- -- 30,780 30,780
----------- ------- --------- ----------- -------- -------- -----------
Total. . . . . . . . . . . 4,320,749 36,757 -- 4,357,506 104,899 -- 4,462,405
Loans and leases . . . . . . . . . 11,840,242 52,077 11,892,319 368,053 12,260,372
Reserve for possible loan losses . (211,608) (712) (212,320) (3,312) (215,632)
----------- ------- --------- ----------- -------- -------- -----------
Net Loans and Leases . . . . . 11,628,634 51,365 -- 11,679,999 364,741 -- 12,044,740
Other assets . . . . . . . . . . . 741,776 3,228 8,102<F4> 751,004 24,259 47,149<F6> 815,963
(8,102)<F5> (47,149)<F7>
6,000<F8> 40,700<F8>

Total Assets . . . . . . . . . . $17,902,326 $93,985 $ (8,670) $17,987,641 $509,669 $(46,550) $18,450,760
=========== ======= ========= =========== ======== ======== ===========

See notes to pro forma combined consolidated financial statements.
</TABLE>

- 42 -
<PAGE> 52

<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(THOUSANDS)
(UNAUDITED)

Total Liabilities . . . . . . . 16,294,439 85,883 -- 16,380,322 462,520 -- 16,842,842

SHAREHOLDERS' EQUITY

Common stock . . . . . . . . . 316,058 2,250 1,630<F4> 317,688 13,714 5,885<F6> 323,573
(2,250)<F5> (13,714)<F7>
Capital surplus. . . . . . . . 234,689 2,250 12,472<F4> 247,161 6,447 47,679<F6> 294,840
(2,250)<F5> (6,447)<F7>

Retained earnings. . . . . . . 1,060,542 3,602 (3,602)<F5> 1,060,542 26,988 (26,988)<F7> 1,060,542

Treasury stock . . . . . . . . (3,402) -- (14,670)<F3> (18,072) -- (52,965)<F3> (71,037)
----------- ------- --------- ----------- -------- -------- -----------

Total Shareholders' Equity . . 1,607,887 8,102 (8,670) 1,607,319 47,149 (46,550) 1,607,918
----------- ------- --------- ----------- -------- -------- -----------

Total Liabilities and
Shareholders' Equity. . . . . $17,902,326 $93,985 $ (8,670) $17,987,641 $509,669 $(46,550) $18,450,760
=========== ======= ========= =========== ======== ======== ===========

See notes to pro forma combined consolidated financial statements.
</TABLE>

- 43 -
<PAGE> 53

<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

Net Interest Income. . . . . . . . 169,736 909 (183) 170,462 4,800 (1,091) 174,171
Provision for Possible Loan Losses . 33,168 -- 33,168 280 33,448
----------- ------ -------- ----------- ------ --------- -----------

Net Interest Income after Provision
for Possible Loan Losses . . . . 136,568 909 (183) 137,294 4,520 (1,091) 140,723
Other Income
Trust. . . . . . . . . . . . . . . 19,354 -- 19,354 476 19,830
Service charges. . . . . . . . . . 19,272 106 19,378 420 19,798
Credit card fees . . . . . . . . . 1,449 -- 1,449 -- 1,449
Securities gains (losses). . . . . (2,956) -- (2,956) 7 (2,949)
Other. . . . . . . . . . . . . . . 22,165 40 22,205 305 22,510
----------- ------ -------- ----------- ------ --------- -----------

Total Other Income . . . . . . . 59,284 146 -- 59,430 1,208 -- 60,638
Other Expense
Salaries and employee benefits . . 79,256 293 79,549 1,885 81,434
Net occupancy and equipment. . . . 21,316 128 21,444 1,017 22,461
Other. . . . . . . . . . . . . . . 82,198 212 100 82,510 899 10,680 94,089
----------- ------ -------- ----------- ------ --------- -----------

Total Other Expense. . . . . . . 182,770 633 100 183,503 3,801 10,680 197,984
----------- ------ -------- ----------- ------ --------- -----------

Income Before Income Taxes . . . 13,082 422 (283) 13,221 1,927 (11,771) 3,377
Income Taxes . . . . . . . . . . . . 8,517 146 (66) 8,597 674 (2,607) 6,664
----------- ------ -------- ----------- ------ --------- -----------

Net Income . . . . . . . . . . . $ 4,565 $ 276 $ (217) $ 4,624 $1,253 $ (9,164) $ (3,287)
=========== ====== ======== =========== ====== ========= ===========

Per Share Data
Average Common Shares Outstanding. 63,052,401 63,052,401 63,052,401
Net Income . . . . . . . . . . . . $ 0.07 $ 0.07 $ (.05)

See notes to pro forma combined consolidated financial statements.
</TABLE>

- 44 -
<PAGE> 54

<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

Net Interest Income. . . . . . . . 673,410 3,569 (734) 676,245 19,405 (4,362) 691,288
Provision for Possible Loan Losses . 36,530 45 36,575 960 37,535
----------- ------ -------- ----------- ------- --------- -----------

Net Interest Income after Provision
for Possible Loan Losses . . . . 636,880 3,524 (734) 639,670 18,445 (4,362) 653,753
Other Income
Trust. . . . . . . . . . . . . . . 70,751 -- 70,751 1,624 72,375
Service charges. . . . . . . . . . 75,408 452 75,860 1,655 77,515
Credit card fees . . . . . . . . . 19,690 -- 19,690 -- 19,690
Securities gains (losses). . . . . 4,042 (14) 4,028 62 4,090
Other. . . . . . . . . . . . . . . 103,762 143 103,905 1,640 105,545
----------- ------ -------- ----------- ------- --------- -----------

Total Other Income . . . . . . . 273,653 581 274,234 4,981 279,215
Other Expense
Salaries and employee benefits . . 298,625 1,148 299,773 7,318 307,091
Net occupancy and equipment. . . . 82,674 576 83,250 3,863 87,113
Other. . . . . . . . . . . . . . . 172,449 590 400 173,439 4,779 12,710 190,928
----------- ------ -------- ----------- ------- --------- -----------

Total Other Expense. . . . . . . 553,748 2,314 400 556,462 15,960 12,710 585,132
----------- ------ -------- ----------- ------- --------- -----------

Income Before Income Taxes . . . 356,785 1,791 (1,134) 357,442 7,466 (17,072) 347,836
Income Taxes . . . . . . . . . . . . 124,109 628 (264) 124,473 2,587 (1,430) 125,630
----------- ------ -------- ----------- ------- --------- -----------

Net Income . . . . . . . . . . . $ 232,676 $1,163 $ (870) $ 232,969 $ 4,879 $ (15,642) $ 222,206
=========== ====== ======== =========== ======= ========= ===========

Per Share Data
Average Common Shares Outstanding. 61,883,723 61,883,723 61,883,723
Net Income . . . . . . . . . . . . $ 3.74 $ 3.75 $ 3.57

See notes to pro forma combined consolidated financial statements.
</TABLE>

- 45 -
<PAGE> 55

MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

[FN]
<F1> Represents MBI restated historical consolidated financial
statements reflecting the acquisition of Hawkeye effective
January 2, 1996. Such acquisition was accounted for as a
pooling-of-interests. The acquisition of Sterling was also
accounted for as a pooling-of-interests; however, due to
immateriality of the financial condition and results of
operations of Sterling to that of MBI, MBI did not restate its
historical financial statements to reflect the acquisition of
Sterling. Sterling, along with Conway and Metro, are included in
these pro forma financial statements only from their acquisition
dates forward. The full year impact of these acquisitions are
immaterial to the pro forma combined financial statements.

<F2> The acquisitions of each of Peoples Bank and TODAY'S will be
accounted for as a purchase transaction. Purchase price
adjustments offset each other or are immaterial. Included herein
are the amortization of goodwill over a 15-year period (see
footnote <F8> below) and the lost interest income on the cash
consideration (TODAY'S) and stock buybacks. Also included for
TODAY'S is $10,000,000 that MBI expects to record upon closing to
conform TODAY'S accounting and credit policies to those of MBI.
Goodwill is considered non-deductible and a lower tax rate is
used on the conforming charges since some portion of those will
be non-deductible. The balance sheet impacts of goodwill
amortization, lost interest income and the conforming charges are
ignored due to immateriality.

<F3> In connection with the proposed acquisitions, MBI may repurchase
up to 1,503,000 shares of MBI Common Stock in the open market.
Assumed price is $45.00 per share.

<F4> Purchase entry of Peoples Bank with assumed consideration of
$14,466,000, consisting of 326,000 shares at $44.375 per share,
the closing price for MBI Common Stock on December 19, 1995 (the
date of the execution of the Reorganization Agreement).

<F5> Elimination of MBI's investment in Peoples Bank.

<F6> Purchase entry of TODAY'S with assumed consideration consisting of
1,177,000 shares at $45.50 per share, plus $34,285,000 in cash.
The closing price for MBI Common Stock on March 20, 1996 (the date
of the execution of the definitive merger agreement between MBI
and TODAY'S) was $45.50.

<F7> Elimination of MBI's investment in TODAY'S.

<F8> The pro forma excess of cost over fair value of net assets
acquired was $6,000,000 and $40,700,000 as of December 31, 1995
for People's and TODAY'S, respectively.

- 46 -
<PAGE> 56

INFORMATION REGARDING PEOPLES BANKSHARES AND PEOPLES BANK
---------------------------------------------------------

BUSINESS

GENERAL. Peoples Bankshares was organized in October 1973 and
is a one-bank holding company registered with the Federal Reserve Board under
the BHCA. Peoples Bankshares currently owns 88.88% of the issued and
outstanding shares of capital stock of Peoples Bank, a Kansas state-chartered
bank founded in 1909 which operates from five locations in eastern Kansas.
As of March 31, 1996, on a consolidated basis, Peoples Bankshares had assets
of $94 million, deposits of $76 million, net loans of $52 million and
stockholders' equity of $8 million.

Peoples Bank is a full-service community bank that provides a
full complement of banking services to its customers, who are primarily
individuals and small businesses in Shawnee County, Kansas. Peoples Bank
accepts demand, savings and time deposits, makes commercial, agricultural,
consumer and real estate loans and provides other customary commercial
banking services.

COMPETITION. The activities in which Peoples Bank engages are
highly competitive and the communities in which it provides services are also
served by other banks. Competition among these financial institutions is
based upon interest rates offered on deposit accounts, interest rates charged
on loans, other credit and service charges, the convenience of banking
facilities and the quality of services rendered. Peoples Bank believes that
it has successfully competed in its marketplace by providing superior service
to its customers. Additional competition for depositors' funds may come from
a variety of sources, including United States government securities, private
issues of debt obligations, mutual funds and suppliers of other investment
alternatives.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following is an analysis of the consolidated financial
condition and the consolidated results of operations of Peoples Bankshares
and Peoples Bank as of and for the three months ended March 31, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993. The analysis should be
read in conjunction with the consolidated financial statements, notes to
consolidated financial statements and financial data presented elsewhere in
this Joint Proxy Statement/Prospectus. Peoples Bankshares' principal asset
is its subsidiary, Peoples Bank. Peoples Bankshares also owned Citizens
State Bank, located in Osage City, Kansas, until July 31, 1994. The analysis
of the consolidated financial condition of Peoples Bankshares for purposes of
comparison between years includes its investment in Citizens as if it were an
unconsolidated subsidiary. Accordingly, the average investment in Citizens
is included in Other Assets in the average balance sheets as of December 31,
1994 and 1993.

On July 31, 1994, Citizens had total assets of $31,263,000 and
total stockholders' equity of $2,977,000. On that date, Peoples Bankshares,
sold its 91.6% interest in Citizens, resulting in a gain of $1,241,000. For
purposes of this analysis, net income of Peoples Bankshares includes its
equity in the earnings of Citizens in 1994 and 1993 of $183,000 and $347,000,
respectively, as well as its gain on the sale of Citizens in 1994 ($734,000
net of tax). Accordingly, the ratios of return on average equity, return on
average assets and average equity to average assets of Peoples Bankshares
include its average investment in Citizens and the additional equity and
earnings resulting from that investment in 1994 and 1993.

- 47 -
<PAGE> 57

Except as discussed above, the following financial schedules and
related narrative do not address the financial condition and the results of
operations of Citizens, but focus on the changes in financial condition and
results of operations of Peoples Bank.

March 31, 1996 and 1995

RESULTS OF OPERATIONS

NET INCOME. Net income for the three months ended March 31,
1996 was $104,000, or $1.07 per share, compared to a loss of $37,000, or $.38
per share, for the three months ended March 31, 1995. The increase in net
income was primarily a result of increased net interest income of $103,000,
increased noninterest income of $34,000 and decreased noninterest expense of
$78,000, which was somewhat offset by an $82,000 increase in income tax
expense.

NET INTEREST INCOME. Net interest income increased $103,000,
or 12.6%, from $815,000 for the three-month period ended March 31, 1995 to
$918,000 for the same period in 1996. Interest income increased $269,000 and
interest expense increased $166,000 for the three months ended March 31,
1995. The increase in interest income was primarily attributable to an
increase in average deposits (offset somewhat by reduced other borrowings).
An overall rise in the level of interest rates in the economy also
contributed to the increased net interest income.

PROVISION FOR LOAN LOSSES. There was no provision for loan
losses for the three months ended March 31, 1996, compared to $15,000 for the
three months ended March 31, 1995. The provision for loan losses is
established based upon management's estimate of the allowance for loan losses
required to absorb losses inherent in existing loans and commitments to
extend credit.

NONINTEREST INCOME. For the three months ended March 31,
1996, deposit service charge income remained stable and other noninterest
income increased $18,000, as compared to the three months ended March 31,
1995. This increase included a $20,000 gain resulting from the sale of loans
in the secondary market during 1996. There were no gains or losses on sales
of investment securities for the three months ended March 31, 1996, compared
to losses of $14,000 on sales of investment securities during the three
months ended March 31, 1995.

OTHER EXPENSES. Compensation and benefits decreased $124,000,
or 20.1%, during the three months ended March 31, 1996, as compared to the
same period in 1995. This decrease was primarily due to the higher than
normal bonuses paid to Peoples Bankshares employees during the three months
ended March 31, 1995. Occupancy expense decreased $10,000, or 8.4%, during
the three months ended March 31, 1996, as compared to March 31, 1995. The
decrease was primarily due to a decrease in depreciation expense of $6,000.
Other operating expenses increased $56,000 or 28.6%. Issues related to the
pending sale of Peoples Bank led to increased legal, accounting and other
expenses of $60,000 during the first quarter of 1996. Also, expenses related
to converting the data processing system and purchasing supplies to allow
Peoples Bank to provide a check imaging system totaled approximately $32,000.
The FDIC insurance assessment, which has been reduced since the Bank
Insurance Fund became fully funded, decreased $35,000, which partially offset
the specific increases noted.

INCOME TAXES. Income tax expense increased $82,000 for the
three months ended March 31, 1996 compared to 1995 due to the increased
taxable income of $230,000.

- 48 -
<PAGE> 58

December 31, 1995, 1994 and 1993

RESULTS OF OPERATIONS

NET INCOME. Net income of Peoples Bankshares for 1995 was
$683,000, or $7.01 per share, compared to $1,439,000, or $14.77 per share, in
1994 and $738,000, or $7.56 per share, in 1993. Net income of Peoples
Bankshares' includes its equity in the earnings of Citizens in 1994 and 1993
of $183,000 and $347,000, respectively, as well as its gain on the sale of
Citizens of $734,000, net of tax, in 1994.

Net income of Peoples Bank for 1995 was $1,163,000, or $51.69 per
share, compared to $800,000, or $35.56 per share, in 1994 and $689,000, or
$30.62 per share, in 1993. Net income increased $363,000 from 1994 to 1995.
The increase in net income from 1993 to 1994 was $111,000. The primary
sources of these increases were the asset growth and increased interest rate
spread.

The following are analyses and comments regarding net interest
income, noninterest income and expense and income taxes for the years ended
December 31, 1995, 1994 and 1993. These comparisons provide additional
details of the increases in net income and include a discussion of the
changes between these periods. As noted above, the following financial
schedules and related narrative do not address the financial condition and
results of operations of Citizens, which was sold on July 31, 1994.

NET INTEREST INCOME. The following schedule provides a summary
concerning net interest income, average balances and the related
interest rates/yields for the past three years. Impaired/nonaccrual loans are
included in the interest-earning assets and interest income on such loans is
recorded when received. Interest income on loans includes loan fees of
$244,000, $266,000 and $243,000 in 1995, 1994 and 1993, respectively.

Interest-earning assets includes tax exempt investments and the
related income is presented on a tax-equivalent basis assuming a tax rate of
34%. The amount of the tax-equivalent adjustment was $84,000, $93,000 and
$96,000 for the years ended December 31, 1995, 1994 and 1993, respectively.

- 49 -
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------
1995 1994
---------------------------------------------- ---------------------------------------------
PERCENT OF INTEREST AVERAGE PERCENT OF INTEREST AVERAGE
AVERAGE TOTAL INCOME/ YIELD/ AVERAGE TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE
-------- ---------- -------- ------- ------- ---------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans. . . . . . . . . . . . . $ 51,804 56.96% $ 5,025 9.70% $ 47,241 54.21% $ 4,147 8.78%
Taxable securities . . . . . . 29,578 32.53 1,868 6.32 28,900 33.16 1,352 4.68
Nontaxable securities. . . . . 2,824 3.11 247 8.75 3,228 3.70 273 8.46
Restricted equity securities . 518 .57 31 5.98 404 .46 23 5.69
Interest-bearing deposits
with other banks. . . . . . 26 .03 2 7.69 14 .02 -- --
Federal funds sold . . . . . . 424 .47 25 5.90 402 .46 15 3.73
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-earning assets 85,174 93.67 7,198 8.45 80,189 92.01 5,810 7.25

Noninterest-bearing assets:
Cash and due from banks. . . . 2,807 3.09 2,672 3.07
Premises and equipment . . . . 2,037 2.24 2,054 2.36
Accrued interest receivable. . 1,002 1.10 830 .95
Deferred tax asset . . . . . . 157 .17 215 .25
Other assets . . . . . . . . . 87 .10 1,396 1.59
Intangibles. . . . . . . . . . 364 .40 445 .51
Allowance for loan losses. . . (699) (.77) (649) (.74)
-------- ------ -------- ------
Total assets . . . . . . . . $ 90,929 100.00% $ 87,152 100.00%
======== ====== ======== ======

Interest-bearing liabilities:
NOW accounts . . . . . . . . . $ 7,214 7.93% $ 146 2.02% $ 7,140 8.19% $ 144 2.02%
Savings accounts . . . . . . . 5,399 5.94 126 2.33 5,555 6.37 125 2.25
Money market accounts. . . . . 7,841 8.62 254 3.24 8,520 9.78 225 2.64
Time deposits and individual
retirement accounts . . . . 39,353 43.28 2,254 5.73 33,563 38.51 1,421 4.23
Short-term borrowings. . . . . 13,241 14.56 732 5.53 14,580 16.73 613 4.20
FHLB long-term debt. . . . . . -- -- -- -- 417 .48 30 7.19
Notes payable. . . . . . . . . -- -- -- -- 1,550 1.78 108 6.97
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-bearing
liabilities . . . . . . . . 73,048 80.33 3,512 4.81 71,325 81.84 2,666 3.74

Noninterest-bearing liabilities:
Demand deposits. . . . . . . . 9,113 10.02 8,469 9.72
Accrued interest payable . . . 344 .38 326 .37
Accrued income tax payable . . 322 .36 210 .24
Other liabilities. . . . . . . 69 .08 49 .06
-------- ------ -------- ------
Total liabilities. . . . . . 82,896 91.17 80,379 92.23

Minority interest. . . . . . . . 829 .91 743 .85

Stockholders' equity . . . . . . 7,204 7.92 6,030 6.92
-------- ------ -------- ------
Total liabilities and
stockholders' equity. . . . $ 90,929 100.00% $ 87,152 100.00%
======== ====== ======== ======

Net interest income. . . . . . . $ 3,686 $ 3,144
======= =======
Interest rate spread . . . . . . 3.64% 3.51%
==== ====
Net interest margin. . . . . . . 4.33% 3.92%
==== ====

<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1993
----------------------------------------------
PERCENT OF INTEREST AVERAGE
AVERAGE TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE
-------- ---------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C>

Interest-earning assets:
Loans $ 40,705 48.97% $ 3,601 8.85%
Taxable securities 29,472 35.45 1,561 5.30
Nontaxable securities 3,451 4.15 283 8.20
Restricted equity securities 253 .30 18 7.11
Interest-bearing deposits
with other banks 9 .01 -- --
Federal funds sold 1,271 1.53 44 3.46
-------- ------ ------- -----
Total interest-earning assets 75,161 90.41 5,507 7.33

Noninterest-bearing assets:
Cash and due from banks 2,660 3.20
Premises and equipment 1,456 1.75
Accrued interest receivable 883 1.06
Deferred tax asset 113 .14
Other assets 2,873 3.46
Intangibles 577 .69
Allowance for loan losses (588) (.71)
-------- ------
Total assets $ 83,135 100.00%
======== ======

Interest-bearing liabilities:
NOW accounts $ 5,998 7.21% $ 140 2.33%
Savings accounts 4,830 5.81 132 2.73
Money market accounts 8,427 10.14 239 2.84
Time deposits and individual
retirement accounts 34,432 41.42 1,491 4.33
Short-term borrowings 12,131 14.59 400 3.30
FHLB long-term debt 1,000 1.20 74 7.40
Notes payable 3,176 3.82 185 5.82
-------- ------ ------- -----
Total interest-bearing
liabilities 69,994 84.19 2,661 3.80

Noninterest-bearing liabilities:
Demand deposits 6,560 7.89
Accrued interest payable 422 .51
Accrued income tax payable 93 .11
Other liabilities 268 .32
-------- ------
Total liabilities 77,337 93.02

Minority interest 703 .85

Stockholders' equity 5,095 6.13
-------- ------
Total liabilities and
stockholders' equity $ 83,135 100.00%
======== ======

Net interest income $ 2,846
=======
Interest rate spread 3.53%
====
Net interest margin 3.79%
====

</TABLE>

- 50 -
<PAGE> 60
In summary, the above tables indicate the following trends:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1995 1994 1993
------- ------- -------
(dollars in thousands)

<S> <C> <C> <C>
Average earning assets. . . . . . . . . . . . . $85,174 $80,189 $75,161
Increase from prior year . . . . . . . . . 4,985 5,028
Average interest-bearing liabilities. . . . . . 73,048 71,325 69,994
Increase from prior year . . . . . . . . . 1,723 1,331
Fully taxable equivalent net interest income. . 3,686 3,144 2,846
Increase from prior year . . . . . . . . . 542 298
Net interest margin (net interest income
divided by average earning assets) . . . . 4.33% 3.92% 3.79%
</TABLE>

The increases in average earning assets and interest-bearing
liabilities were mainly a result of normal growth and an improving economy.
The improvement in net interest margin illustrates the benefits of a rising
interest rate environment nationally and in Peoples Bankshares' primary
market. Peoples Bankshares' loan and investment portfolio are fairly
short-term which allows them to benefit quickly when interest rates are
rising.

Net interest income is affected by the volume and rate of both
interest-earning assets and interest-bearing liabilities. The following
table depicts the dollar effect and rate changes for the different categories
of interest-earning assets and interest-bearing liabilities and the resultant
change in interest income and interest expense. Nonperforming loans are
included with loans in the table.

<TABLE>
<CAPTION>
1995 COMPARED TO 1994 COMPARED TO
1994 INCREASE 1993 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
------------------------------- -------------------------------
VOLUME RATE<F1> COMBINED VOLUME RATE<F1> COMBINED
------ -------- -------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans . . . . . . . . . . . . . . . . $ 401 $ 477 $ 878 $ 578 $ (32) $ 546
Taxable securities. . . . . . . . . . 32 484 516 (30) (179) (209)
Nontaxable securities . . . . . . . . (34) 8 (26) (18) 8 (10)
Restricted equity securities. . . . . 6 2 8 11 (6) 5
Interest-bearing deposits
with other banks. . . . . . . . . . 1 1 2 -- -- --
Federal funds sold. . . . . . . . . . 1 9 10 (30) 1 (29)
----- ----- ------ ----- ----- -----

Total interest earning assets. . . . . 407 981 1,388 511 (208) 303
----- ----- ------ ----- ----- -----

Interest paid on:

NOW accounts. . . . . . . . . . . . . 1 1 2 27 (23) 4
Savings accounts. . . . . . . . . . . (4) 5 1 20 (27) (7)
Money market deposits . . . . . . . . (18) 47 29 3 (17) (14)
Time deposits and individual
retirement accounts . . . . . . . . 245 588 833 (38) (32) (70)
Short-term borrowings . . . . . . . . (56) 175 119 81 132 213
FHLB long-term debt . . . . . . . . . (30) -- (30) (43) (1) (44)
Notes payable . . . . . . . . . . . . (108) -- (108) (95) 18 (77)
----- ----- ------ ----- ----- -----

Total interest-bearing liabilities . . 30 816 846 (45) 50 5
----- ----- ------ ----- ----- -----

Net interest income. . . . . . . $ 377 $ 165 $ 542 $ 556 $(258) $ 298
===== ===== ====== ===== ===== =====

<FN>
- ---------------
<F1> Changes in interest income and interest expense due to both rate and volume are included in rate
variances.
</TABLE>

- 51 -
<PAGE> 61
During 1995, average interest-earning assets increased
$4,985,000. This increase in volume accounted for increased interest income
of $407,000. Of this total, $401,000 can be attributed to increased loan
volume of $4,563,000. Taxable securities increased $678,000, while
nontaxable securities decreased $404,000. Restricted equity securities
increased by $114,000, and the combined Federal funds sold and
interest-bearing deposits in other banks increased by $34,000. These
increases in the volume of average assets were largely due to Peoples
Bankshares' effort to expand its construction real estate loan portfolio
causing interest income to increase by $407,000, while changes in interest
rates on the average volume of interest-earning assets increased interest
income $981,000. The increase in interest income associated with higher
interest rates reflects the general increase in the level of rates during
1995. The combined effect of the volume and rate changes associated with
interest-earning assets increased interest income $1,388,000.

Average interest-bearing liabilities increased $1,723,000 during
1995. Average deposits increased $5,029,000 as a result of Peoples
Bankshares' effort to increase its deposit base by offering higher interest
rates on certificates of deposits and demand deposits with no service
charges. Because of the increase in deposits, Peoples Bankshares had less
need for borrowings to fund asset growth. Therefore, short-term borrowings,
FHLB long-term debt and notes payable combined decreased by $3,306,000. The
changes in the volume of deposits led to a $224,000 overall net increase in
interest expense while the decrease in borrowings resulted in a decreased
interest expense of $194,000. The rising interest rate environment caused an
increase in interest expense of $816,000, creating an overall increase in
interest expense of $846,000 in 1995 as compared to 1994.

The combined or net effect of changes in rate and volume on
interest-earning assets and interest-bearing liabilities in 1995 resulted in
increased net interest income of $542,000.

During 1994, average interest-earning assets increased $5,028,000
and average interest-bearing liabilities increased $1,331,000, resulting in a
net increase of $298,000 in net interest income. The most significant change
in average assets was an increase in loans of $6,536,000, which was somewhat
offset by a decrease in combined federal funds sold and interest-bearing
deposits with other banks of $864,000 and a decrease in taxable and
nontaxable securities of $795,000. These changes in the mix of average
assets and the overall increase in balances resulted in $511,000 in
additional interest income; however, reduced yields in all categories, as
experienced in the industry, decreased interest income $208,000 for a net
overall increase of $303,000.

Average interest-bearing deposits increased $1,091,000, while
overall borrowings increased $240,000. Because interest rates on deposits
were very low, customers tended not to invest in long-term instruments.
Therefore, deposits generally moved from longer term time deposits to shorter
term, less expensive, demand accounts. In total, volume changes in average
interest-bearing liabilities caused a net decrease in expense of $45,000.
Increasing rates on Peoples Bankshares' short-term borrowings and notes
payable more than offset the effect of declining rates on deposits, resulting
in an increase in interest expense of $50,000 due to rate changes. Overall,
interest expense increased by $5,000 during 1994.

The major influence on the net interest margin or net interest
income was the growth in earning assets during both 1995 and 1994 and the
increasing interest rate environment experienced in 1995. The increase in
interest income of $1,388,000, or 24%, in 1995 was primarily due to the
increased yields on loan and investment portfolios. Interest expense
increased as interest rates increased on deposits and borrowings used to fund
the asset growth. The increase in interest income of $303,000, or 6%, in
1994 was primarily due to growth in the loan portfolio. Overall, interest
expense remained relatively stable during 1994.

- 52 -
<PAGE> 62
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN
LOSSES. The provision for loan losses results in an allowance against
which loan losses are charged as those losses become evident. Management
evaluates the appropriate level of the allowance for loan losses on a
quarterly basis. The analyses take into consideration the results of an
internal analysis, the purpose of which is to determine the level of credit
risk within the portfolio and to ensure proper adherence to underwriting and
documentation standards. A specific portion of the allowance is allocated to
those loans which appear to represent a higher than normal exposure to risk.
In addition, estimates are made for potential losses on loans not
specifically reviewed, based on historical loan loss experience and other
factors and trends.

Provisions for loan losses of $45,000, $68,000 and $120,000 were
recorded by Peoples Bank in 1995, 1994 and 1993, respectively, based on
management's evaluation.

Factors that influenced management's determination that a
provision for loan losses was appropriate included (i) an evaluation of each
nonperforming, classified and potential problem loan to ascertain an estimate
of loss exposure based upon circumstances then known to management,
(ii) current economic conditions and outlook and (iii) an overall review of
the loan portfolio in light of past loan loss experience. Net charge-offs
(loan losses charged against the allowance for loan losses less recoveries of
prior charge-offs) for 1995, 1994 and 1993 were $5,000, $16,000 and $17,000,
respectively.

NONINTEREST INCOME. A significant portion of a banking
institution's earnings are typically generated through noninterest income
from fees and service charges. The following tables outline the components
of this income source for the years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
YEAR ENDED CHANGE CHANGE
DECEMBER 31 1995/1994 1994/1993
---------------------------- ------------------ -----------------
1995 1994 1993 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
(dollars in thousands)

<S> <C> <C> <C> <C> <C> <C> <C>
Service charges. . . . . $452 $432 $393 $20 4.63% $39 9.92%
Other operating
income. . . . . . . 143 120 149 23 19.17 (29) (19.46)
---- ---- ---- --- ------ ---- -------
Subtotal. . . . . . . 595 552 542 43 7.79 10 1.85

Securities gains
(losses). . . . . . (14) (8) 5 (6) (75.00) (13) (260.00)
---- --- -- --- ---

Total noninterest
income. . . . . . . $581 $544 $547 $37 6.80% $(3) (5.48)%
---- ---- ---- --- ------ --- -------
</TABLE>

As noted above, noninterest income increased each year due to
increased service charges. The growth in service charges was due to the
growth in deposit accounts, which provided a majority of this income. The
growth in other operating income was primarily due to increased gains on the
sale of mortgage loans in the secondary market in 1995.

- 53 -
<PAGE> 63
OTHER EXPENSES. The following tables outline the components
of expenses for the years ended December 31, 1995, 1994 and 1994:

<TABLE>
<CAPTION>
YEAR ENDED CHANGE CHANGE
DECEMBER 31 1995/1994 1994/1993
------------------------------ ------------------- --------------------
1995 1994 1993 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Compensation and employee benefits . . . . . . $1,626 $1,374 $1,279 $252 18.34% $ 95 7.43%
Occupancy expense. . . . . . . . . . . . . . . 494 406 399 88 21.67 7 1.75
FDIC assessment. . . . . . . . . . . . . . . . 75 137 137 (62) (45.26) -- --
Other expenses . . . . . . . . . . . . . . . . 684 691 665 (7) (1.01) 26 3.91
------ ------ ------ ---- ------ ------- ----
Total noninterest expense $2,879 $2,608 $2,480 $271 10.39% $ 128 5.16%
====== ====== ====== ==== ====== ======= ====
</TABLE>

Noninterest expense increased in 1995 due largely to an increase
in compensation expense. The increase in compensation expense during 1995
was due to an increase in bonuses for Peoples Bankshares' employees of
$205,000 from 1994 to 1995 and due to normal salary and benefits increases.
The increase from 1993 to 1994 was primarily due to the opening of an
additional branch location in Topeka in the fall of 1993.

Occupancy expense remained flat from 1993 to 1994 and increased
by $88,000 in 1995. Peoples Bank had accrued additional real estate taxes in
years prior to 1994 for the potential payment of real estate taxes on a
problem loan because Peoples Bank considered it possible that it would be
required to initiate foreclosure proceedings and pay the tax liability. In
1994, the financial condition of the borrower improved and the Bank was able
to reverse the accrued real estate taxes resulting in real estate tax expense
of $(15,000) for 1994 as compared to an expense of $54,000 for 1995, a net
change of $69,000. Without the reversal of the accrued real estate taxes on
the problem loan, real estate taxes would have been $52,000 in 1994 and
$39,000 in 1993. Real estate taxes increased in 1994 due to the addition of
a branch bank.

The decrease in the FDIC assessment from 1994 to 1995 relates to
the reduction in assessment rates as determined by the FDIC once the Bank
Insurance Fund became fully funded in 1995.

INCOME TAXES. Peoples Bankshares files a consolidated
federal income tax return with Peoples Bank. Peoples Bank makes federal
income tax payments to Peoples Bankshares based on the taxable income of
Peoples Bank on a stand-alone basis. Deferred income taxes are provided on
certain transactions which are reported for financial reporting purposes in
different periods than for income tax purposes.

- 54 -
<PAGE> 64
A reconciliation of expected income tax expense, computed by
applying the effective federal statutory rate of 34% to income before the
provision for income taxes, follows:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1995 1994 1993
------ ------ ------
(dollars in thousands)

<S> <C> <C> <C>
Federal income taxes at statutory rate. . . . $428 $312 $237
Less effect of tax exempt income. . . . . . . (53) (59) (61)
State taxes, net of Federal income
tax benefit . . . . . . . . . . . . . . . . 71 51 43
Other, net. . . . . . . . . . . . . . . . . . 1 4 10
---- ---- ----
Total provision for income taxes. . . . . . $447 $308 $229
==== ==== ====
</TABLE>

Peoples Bankshares adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, during 1993. The effect of
such adoption was not material to the consolidated financial condition or
consolidated results of operations.

INVESTMENTS. Peoples Bankshares' holdings of short-term
investments and scheduled maturities of investment securities serve as a
source of liquidity to meet depositor and borrower fund requirements, in
addition to constituting a significant element of total interest income.
Federal funds sold had outstanding balances of $900,000 and $1,200,000 at
December 31, 1995 and 1994, respectively. Investment securities at
December 31, 1995 of $37,364,000 increased $8,019,000 as compared to
investment securities at December 31, 1994 of $29,345,000. This increase in
the balance of investment securities was due primarily to the growth in total
assets experienced by Peoples Bank, which was invested principally in
mortgage-backed securities. Management invested excess funds primarily in
collateral mortgage obligations because they provided a short duration (less
than three years) with a slightly higher yield than was available in U.S.
Treasuries or agencies.

- 55 -
<PAGE> 65
SECURITIES PORTFOLIO. The following table presents the
composition of investments at the dates indicated:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------------
1995 1994 1993
----------------------- ---------------------- -----------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
AMOUNT SECURITIES AMOUNT SECURITIES AMOUNT SECURITIES
-------- ---------- -------- ---------- -------- ----------
(dollars in thousands)

<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity:

U.S. Treasuries and agencies . . . . . . . . $ -- --% $ 8,698 29.65% $ 6,105 17.55%

Obligations of states and
political subdivisions. . . . . . . . . . -- -- 2,865 9.76 3,575 10.27

Mortgage-backed securities . . . . . . . . . -- -- 5,362 18.27 7,266 20.88
------- ------ ------- ------ ------- ------

Total investments held-to-maturity . . . . . -- -- 16,925 57.68 16,946 48.70
------- ------ ------- ------ ------- ------

Available-for-sale:

U.S. Treasuries and agencies . . . . . . . . 22,294 59.67 11,783 40.15 15,083 43.35

Obligations of states and political
subdivisions. . . . . . . . . . . . . . . 3,321 8.89 -- -- -- --

Mortgage-backed securities . . . . . . . . . 11,222 30.03 118 .40 2,512 7.22

Restricted equity securities . . . . . . . . 527 1.41 519 1.77 253 .73
------- ------ ------- ------ ------- ------

Total investments available for sale . . . . 37,364 100.00 12,420 42.32 17,848 51.30
------- ------ ------- ------ ------- ------

Total investments. . . . . . . . . . . . . . $37,364 100.00% $29,345 100.00% $34,794 100.00%
======= ====== ======= ====== ======= ======
</TABLE>

The fair market value of total investment securities was
$37,364,000, $29,248,000 and $35,223,000 at December 31, 1995, 1994 and 1993,
respectively.

On December 31, 1993, Peoples Bankshares adopted Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS 115"). Restricted equity securities are not
included in the SFAS 115 classifications due to the lack of a published
market value and certain restrictions that limit their marketability. Such
securities are included in the securities totals at cost and labeled as "All
other equity securities" for reporting on the Call Report beginning in
December 31, 1993.

As of December 31, 1995, there were no investment securities of
any issuer, other than securities of the U.S. Government and U.S. Government
Agencies and corporations, which exceeded 10% of stockholders' equity.

- 56 -
<PAGE> 66
INVESTMENT SECURITIES-MATURITIES AND YIELDS. The
following table shows the components and yields for the various forms of debt
securities as of December 31, 1995:

<TABLE>
<CAPTION>
WITHIN OVER 1-5 OVER 5-10 OVER 10
ONE YEAR YEARS YEARS YEARS
------------------- ------------------- ------------------ ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ -----
(dollars in thousands)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries and agencies . . . . . . $6,065 6.53% $16,229 6.13% $ -- --% $ -- --%
Obligations of states and other
political subdivisions<F1>. . . . . . 325 8.30 2,303 8.59 693 9.48 -- --

Mortgage-backed securities<F2> . . . . . -- -- 3,772 6.26 303 9.07 7,147 6.53
------ ---- ------- ---- ---- ---- ------ ----

$6,390 6.62% $22,304 6.41% $996 9.36% $7,147 6.53%
====== ==== ======== ==== ==== ==== ====== ====

<FN>
- ----------------------

<F1> Yield presented on a tax-equivalent basis assuming a tax rate of 34%.

<F2> Expected maturities will differ from contractual maturities due to normal amortization and because borrowers may have the
right to call or prepay obligations with or without call or prepayment penalties. The table above does not take into
consideration the effects of scheduled repayments or the effects of possible prepayments.
</TABLE>

Restricted equity securities of $527,000 held at December 31,
1995 are not included in this table as an equity security has no stated
maturity.

LOANS. The loan portfolio constitutes the major earning
asset of most bank holding companies and typically offers the best
alternative for obtaining the maximum interest spread above the cost of
funds. The overall economic strength of any bank holding company generally
parallels the quality and yield of its loan portfolio. Peoples Bankshares'
total loans outstanding on the dates indicated are presented in the following
table:

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------
1995 1994 1993
------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
(dollars in thousands)

<S> <C> <C> <C> <C> <C> <C>
Agricultural . . . . . . . . . . . . . . . . $ 6,052 11.41% $ 6,184 12.84% $ 6,130 14.57%
Commercial
and industrial. . . . . . . . . . . . . . 11,937 22.51 9,870 20.50 10,288 24.46
Real estate
Construction. . . . . . . . . . . . . . . 5,906 11.14 4,111 8.54 2,836 6.74
Agricultural. . . . . . . . . . . . . . . 1,970 3.71 2,365 4.91 2,110 5.02
Commercial. . . . . . . . . . . . . . . . 5,745 10.83 5,419 11.25 4,682 11.13
Residential . . . . . . . . . . . . . . . 15,497 29.22 14,973 31.10 11,223 26.68
Consumer . . . . . . . . . . . . . . . . . . 5,356 10.10 4,587 9.53 4,023 9.56
Other. . . . . . . . . . . . . . . . . . . . 575 1.08 643 1.33 772 1.84
------- ------ ------- ------ ------- ------
$53,038 100.00% $48,152 100.00% $42,064 100.00%
======= ====== ======= ====== ======= ======
</TABLE>

The loan portfolio experienced an increase of $4,886,000, or
10.1%, from December 31, 1994 to December 31, 1995, primarily in real estate
and commercial loans. An increase of $6,088,000, or 14.5%, from 1993 to 1994
was experienced primarily in real estate loans, due to a strong local real
estate sector. A portion of the increase in real estate loans was due to the
opening of an additional Peoples Bank branch location in North Topeka in the
fall of 1993. This branch positioned Peoples Bank closer to the areas in
Topeka with the largest growth of new real estate activity. To take
advantage of this opportunity, Peoples Bankshares concentrated on increasing
its construction real estate portfolio during 1994.

- 57 -
<PAGE> 67
MATURITY CLASSES. The following tables set forth the maturity
composition and interest sensitivity of total loans at December 31, 1995:

<TABLE>
<CAPTION>
AGRICULTURAL,
COMMERCIAL REAL REAL
AND ESTATE ESTATE
INDUSTRIAL CONSTRUCTION OTHER CONSUMER OTHER TOTAL
------------- ------------ ------ -------- ----- -----
(in thousands)

<S> <C> <C> <C> <C> <C> <C>
In one year or less. . . . . . . . . . . . . $10,107 $5,827 $ 3,661 $ 550 $316 $20,461
After one through
five years. . . . . . . . . . . . . . . . 5,105 79 4,994 4,243 52 14,473
After five years . . . . . . . . . . . . . . 2,777 -- 14,557 563 207 18,104
------- ------ ------- ------ ---- -------

$17,989 $5,906 $23,212 $5,356 $575 $53,038
======= ====== ======= ====== ==== =======
</TABLE>

<TABLE>
<CAPTION>
INTEREST SENSITIVITY
FIXED RATE VARIABLE RATE
---------- -------------
(in thousands)

<S> <C> <C>
In one year or less. . . . . . . . . . $12,350 $ 8,111
After one through five years . . . . . 9,119 5,354
After five years . . . . . . . . . . . 7,112 10,992
------- -------

Total Loans $28,581 $24,457
======= =======

<FN>
- -------------------
<F1> Certain variable rate loans have reached a floor or ceiling interest
rate level and can no longer adjust. These loans are treated as fixed
rate loans as required by the Consolidated Reports of Condition and
Income.
</TABLE>

NONPERFORMING ASSETS. Nonperforming assets are defined as
impaired loans, nonaccrual loans, loans delinquent ninety or more days,
restructured loans and foreclosed assets. Such assets do not necessarily
represent future losses to Peoples Bankshares since underlying collateral can
be sold and the financial condition of the borrowers may improve. The
following table sets forth the detail of nonperforming assets. Peoples
Bankshares had no restructured loans at the following dates.

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1995 1994 1993
---- ---- ----
(dollars in thousands)

<S> <C> <C> <C>
Impaired loans . . . . . . . . . . . . . $118 $ -- $ --
Nonaccrual loans . . . . . . . . . . . . -- 169 222
Loans past due 90 days or more . . . . . 4 6 21
---- ---- ----
Total nonperforming loans. . . . . . $122 $175 $243
Foreclosed property. . . . . . . . . . . -- -- 38
---- ---- ----
Total nonperforming assets . . . . . $122 $175 $281
==== ==== ====
</TABLE>

Effective January 1, 1995, Peoples Bankshares implemented
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) 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
(restructured loans). Specifically, a loan is considered impaired when it is
probable that a creditor will be unable to collect all amounts due - both
principal and interest - according to

- 58 -
<PAGE> 68
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 to 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. Peoples
Bankshares has elected to continue to use its existing nonaccrual methods for
recognizing interest on impaired loans. Peoples Bankshares 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 time payments are applied to interest income until such time as the
foregone interest is recovered, or until such time as an improvement in the
condition of the loan has occurred which would warrant the resumption of
interest accruals.

Peoples Bankshares' policy is to discontinue accruing interest on
loans when principal or interest is due and remains unpaid for ninety days or
more, unless the loan is well secured and in the process of collection.
Peoples Bankshares would have recorded additional interest income of
approximately $11,000, $13,000 and $14,000 for 1995, 1994 and 1993,
respectively, if contractual interest on these loans had been recognized. No
interest was actually collected in 1995, 1994 or 1993.

At December 31, 1995, 1994 and 1993, there were no significant
commitments to lend additional funds to borrowers whose loans were considered
nonperforming.

The loan portfolio does not include any loans to foreign
countries or highly leveraged transaction loans. Approximately 40% of the
loans at Peoples Bankshares on December 31, 1995 were residential real estate
loans. Commercial loans to individuals and businesses in the local lending
area represented 33% of the loans. The remaining 27% consisted largely of
agricultural and consumer lending. Peoples Bankshares has adopted policies
that require security for loans, including liens on residential mortgage
loans and certain of the other loans secured by real estate. In addition,
policies and procedures are in place to assess the creditworthiness of
borrowers for all loans and commitments. Borrowers' abilities to honor their
loan contracts can be largely dependent upon weather conditions and economic
conditions within their market areas and on a national level.

Management attributes the lack of significant nonperforming
assets to a relatively stable economy in its primary market, strong efforts
in the credit review of potential borrowers and close monitoring of potential
problem loans.

- 59 -
<PAGE> 69
The following table sets forth the activity for loan losses and
selected financial ratios for the dates indicated:

<TABLE>
<CAPTION>
December 31
-----------------------------------------
1995 1994 1993
---- ---- ----
(dollars in thousands)

<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . $673 $621 $518
---- ---- ----
Loans charged off:

Agricultural. . . . . . . . . . . . . . . . -- -- --

Commercial and industrial . . . . . . . . . -- -- 4
Residential real estate-mortgage. . . . . . 5 12 6
Consumer. . . . . . . . . . . . . . . . . . 3 4 9
---- ---- ----
Total charge-offs. . . . . . . . . . . . . . . 8 16 19
---- ---- ----

Recoveries:
Agricultural. . . . . . . . . . . . . . . . -- -- --
Commercial and industrial . . . . . . . . . -- -- --
Residential real estate-mortgage. . . . . . 3 -- --
Consumer. . . . . . . . . . . . . . . . . . -- -- 2
---- ---- ----
Total recoveries . . . . . . . . . . . . . . . 3 -- 2
---- ---- ----

Net loans recovered (charged off). . . . . . (5) (16) (17)
Provision for loan losses. . . . . . . . . . . 45 68 120
---- ---- ----

Balance at end of period . . . . . . . . . . . $713 $673 $621
==== ==== ====
Net loan charge-offs
to average loans . . . . . . . . . . . . . . .01% .03% .04%
Allowance to total loans . . . . . . . . . . . 1.34 1.40 1.48
Allowance to nonperforming loans . . . . . . . 584 385 256
</TABLE>

The allowance for loan losses is not allocated to specific
categories of loans. However, based on Peoples Bankshares' review of
remaining collateral and/or financial condition of identified loans with
characteristically more than a normal degree of risk, historical loan loss
percentages, and economic conditions, management believes the allowance for
loan losses at December 31, 1995 is adequate to cover losses inherent in the
portfolio.

DEPOSITS. The deposit base provides the major funding source
for interest-earning assets of most bank holding companies. Peoples
Bankshares' deposits have increased steadily during the period from
December 31, 1993 to December 31, 1995. Generally, demand, savings and
certificates of deposit less than $100,000 are recognized as the core base of
deposits, while certificates of deposit of $100,000 or more and public funds
are more interest rate sensitive and, thus, are not considered part of the
core deposit base. Because of these factors, management views the growth in
deposits other than certificates of deposit of $100,000 or more as more
stable growth.

- 60 -
<PAGE> 70

The following table indicates the mix and average levels of
deposits and the average interest rates for each category of deposits for the
three months ended March 31, 1996 and the years ended December 31, 1995, 1994
and 1993:

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
------------------ -----------------------------------------------------------------
1996 1995 1994 1993
------------------ ------------------ ----------------- ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- ------- ------- -------
(dollars in thousands)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand and other
noninterest bearing. . . . . . . . . $ 9,027 n/a% $ 9,113 n/a% $ 8,469 n/a% $ 6,560 n/a%

NOW accounts . . . . . . . . . . . . . 7,919 2.02 7,214 2.02 7,140 2.02 5,998 2.33

Savings accounts . . . . . . . . . . . 5,259 2.28 5,399 2.33 5,555 2.25 4,830 2.73

Money market deposit accounts. . . . . 11,376 3.73 7,841 3.24 8,520 2.64 8,427 2.84

Certificates of deposit including
individual retirement accounts . . . 42,388 5.84 39,353 5.73 33,563 4.23 34,432 4.33
------- ---- ------- ---- ------- ---- ------- ----

Total deposits. . . . . . . . . . . $75,969 4.19% $68,920 4.03% $63,247 3.03% $60,247 3.32%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>

AMOUNT AND MATURITIES OF TIME DEPOSITS OF $100,000
OR MORE. The following table sets forth the amount and maturities of time
deposits of $100,000 or more at December 31, 1995:

<TABLE>
<CAPTION>
DECEMBER 31 PERCENT OF
1995 TOTAL
---------- ----------
(dollars in thousands)

<S> <C> <C>
Three months or less. . . . . . . . . . . $ 305 7.43%
Over three through six months . . . . . . 912 22.21
Over six through twelve months. . . . . . 2,251 54.82
Over twelve months. . . . . . . . . . . . 638 15.54
------ ------
Total . . . . . . . . . . . . . . . . $4,106 100.00%
====== ======
</TABLE>

SHORT-TERM BORROWINGS. Amounts and interest rates related
to short-term borrowings at the dates indicated were as follows:

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
-------- -------------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
(dollars in thousands)

<S> <C> <C> <C> <C>
Federal funds purchased and securities sold
under agreements to repurchase:
Outstanding balance at period-end . . . . . . . $ 8,261 $10,188 $10,448 $12,355
Average interest rate at period-end . . . . . . 5.01% 4.84% 5.52% 3.11%
Average outstanding during the period . . . . . $ 9,889 $12,002 $13,459 $12,131
Year-to-date average interest rate. . . . . . . 4.81% 5.46% 4.09% 3.30%
Highest outstanding balance at any month-end. . $13,066 $14,343 $16,294 $19,128

Federal Home Loan Bank advances:
Outstanding balance at period-end . . . . . . . $ 400 $ 3,950 $ 2,000 $ --
Average interest rate at period-end . . . . . . 5.90% 6.15% 6.65% --%
Average outstanding during the period . . . . . $ 345 $ 1,239 $ 1,121 $ --
Year-to-date average interest rate. . . . . . . 5.82% 6.21% 5.53% --%
Highest outstanding balance at any month-end. . $ 400 $ 3,950 $ 3,150 $ --
</TABLE>

- 61 -
<PAGE> 71

RETURN ON EQUITY AND ASSETS. The following tables compare net
income as a percent of average assets and average equity for the dates
indicated:

<TABLE>
<CAPTION>
RETURN ON AVERAGE ASSETS RETURN ON AVERAGE EQUITY
------------------------------------------ -------------------------------------------
MARCH 31 DECEMBER 31 MARCH 31 DECEMBER 31
-------- ---------------------------- -------- -----------------------------
1996 1995 1994 1993 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income . . . . . . . . . .43% .75% 1.43% .67% 5.21% 9.48% 23.86% 14.48%
</TABLE>

As discussed previously, these ratios include the financial
condition and results of operations of Peoples Bankshares investment in
Citizens for 1994 and 1993.

During the three months ended March 31, 1996 and the years ended
December 31, 1995, 1994 and 1993, no dividends were declared by Peoples
Bankshares.

LIQUIDITY AND INTEREST RATE SENSITIVITY. Liquidity is
the measure of Peoples Bankshares' ability to meet its customers' present and
future deposit withdrawals or increased loan demand without unduly penalizing
earnings. Interest rate sensitivity involves the relationship between rate
sensitive assets and liabilities and is an indication of the probable effects
of interest rate fluctuations on Peoples Bankshares' net interest income.
Peoples Bankshares manages both liquidity and interest sensitivity through a
GAP analysis report prepared monthly.

Liquidity is provided for Peoples Bankshares by projecting credit
demand and other financial needs and then maintaining sufficient cash and
assets readily convertible into cash to meet these projected requirements.
Peoples Bankshares provided for its liquidity needs through core deposits,
maturing loans and scheduled maturities of investments in securities, and by
maintaining adequate balances in Federal funds sold. Other sources of
liquidity include federal funds purchased and other short-term borrowings.
At December 31, 1995, cash and cash equivalents amounted to $3,710,000, or
3.79%, of total assets. This is a decrease of $271,000 from December 31,
1994, when cash and cash equivalents totaled $3,981,000, or 4.65%, of total
assets. This level of cash and cash equivalents is considered to be adequate
in view of projected liquidity needs.

Peoples Bankshares' liquidity is generally provided by dividends
received from Peoples Bank. These funds are available for the overhead
expenses and the payment of dividends to stockholders. Dividends paid by
Peoples Bank during 1995, 1994 and 1993 were $225,000, $350,000 and $350,000,
of which 88.88% was received by Peoples Bankshares.

Interest rate-sensitive assets and liabilities are those with
yields or rates subject to change within a future time period due to maturity
or changes in market rates. An ongoing objective of Peoples Bankshares'
asset/liability management program is to match rate-adjustable assets and
liabilities at similar maturity horizons, so that changes in interest rates
will not result in wide fluctuations in net interest income. The rate
sensitivity position is managed by matching funds acquired having a specific
maturity with loans, securities or other liquid assets with similar
maturities.

At December 31, 1995, $32,303,000, or 60.9%, of the loan
portfolio matured or repriced in one year or less. In addition, investment
securities maturing or repricing in one year or less of $13,806,000, Federal
funds sold of $900,000 and interest-bearing deposits of $75,000 bring total
rate-sensitive assets maturing or repricing within one year to $47,084,000,
or 51.9%, of total

- 62 -
<PAGE> 72
interest-earning assets. Rate sensitive liabilities consist of interest-
bearing demand deposits, savings deposits, and time deposits maturing or
repricing within one year of $56,135,000 and short-term borrowings of
$14,138,000, bringing total rate-sensitive liabilities maturing or repricing
within one year to $70,273,000, or 89.5%, of interest-bearing liabilities.
This represented a position which management believed appropriate, given the
decreasing interest rate environment expected at December 31, 1995.

CAPITAL. The strength of its capital position determines
the ability of a financial institution to take advantage of growth
opportunities and handle unforeseen financial difficulties. Peoples
Bankshares' stockholders' equity at December 31, 1995 was $8,060,000, an
increase of $1,170,000, or 17%, from the December 31, 1994 total of
$6,890,000. Stockholders' equity includes Peoples Bankshares' equity in
Peoples Bank's unrealized gain (loss) on investment securities available for
sale of $369,000 and $(118,000) at December 31, 1995 and 1994, respectively.
The average equity to average assets ratios for the years ended December 31,
1995, 1994 and 1993, respectively, were 7.92%, 6.92% and 6.13%. As
discussed previously, this ratio includes the financial condition of Peoples
Bankshares' investment in Citizens for 1994 and 1993.

At March 31, 1996, stockholders' equity was $7,999,000, which
includes Peoples Bankshares' equity in Peoples Bank's unrealized gain on
investment securities available-for-sale of $204,000. The average equity to
average assets ratio at March 31, 1996 was 8.35%.

Peoples Bankshares is subject to the issuance of capital adequacy
guidelines by its regulators, all of which have issued similar guidelines for
the measurement of capital adequacy. One measure is the leverage capital
ratio, which equals the ratio of ending total capital less intangible assets
to average total assets on a quarterly basis from the latest Consolidated
Reports of Income and Condition ("Call Report") less intangible assets. The
guidelines also include a definition of capital and provide a framework for
calculating risk-weighted assets by assigning assets and off-balance-sheet
instruments to broad risk categories. The risk-based capital standards
establish a minimum ratio of total capital to risk-weighted assets with a
minimum of 4% when using Tier 1 capital and a minimum of 8% when including
total capital. Tier 1 capital is the sum of the core capital elements (common
stockholders' equity less intangible assets and excluding any unrealized
gains or losses on available-for-sale securities). Total capital includes the
allowance for loan losses limited to a maximum of 1.25% of risk-weighted
assets.

- 63 -
<PAGE> 73

As the following table indicates, Peoples Bankshares exceeded the
minimum risk-based and leverage ratios at the date indicated:

<TABLE>
<CAPTION>
DECEMBER 31 MINIMUM
1995 LEVELS
----------- -------
(dollars in thousands)

<S> <C> <C>
Capital Components:
Tier 1 capital . . . . . . . . . $ 7,367 n/a
Total capital. . . . . . . . . . 8,068 n/a

Assets:
Risk-weighted assets and
off-balance-sheet instruments. $56,073 n/a

Capital ratios
Leverage . . . . . . . . . . . . 7.65% 3.00%
Tier 1 risk-based capital. . . . 13.14 4.00
Total risk-based capital . . . . 14.39 8.00
</TABLE>

- 64 -
<PAGE> 74

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PEOPLES
BANKSHARES

The following table sets forth as of the Record Date the number
of shares of Peoples Bankshares Common Stock beneficially owned and the
percentage of ownership of outstanding shares of Peoples Bankshares Common
Stock by (a) each director of Peoples Bankshares, (b) each person who is
known by Peoples Bankshares to own beneficially 5% or more of such stock and
(c) all directors and executive officers of Peoples Bankshares as a group:

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER ADDRESS OWNED CLASS
- ------------------------ ------- ------------ ----------

<S> <C> <C> <C>
Ronald D. Lutz . . . . . . . . . 1935 S.W. Indian Woods Lane
Topeka, Kansas 66611 40,004 41%

Joyce M. Lutz. . . . . . . . . . 1935 S.W. Indian Woods Lane
Topeka, Kansas 66611 40,004 41

Michael W. Lutz. . . . . . . . . 6142 S.W. 38th Terrace
Topeka, Kansas 66610 6,952 <F1> 7

Craig E. Lutz. . . . . . . . . . 3835 S.W. Stonybrook Drive
Topeka, Kansas 66610 5,020 <F2> 5

Laurie L. Carney . . . . . . . . 2415 N. Vinegate Court
Wichita, Kansas 67226 5,475 <F3> 6

Directors and Executive Officers 97,455 <F1><F2><F3> 100
as a Group (five persons)

<FN>
- ------------------------------
<F1> Five thousand (5,000) of these shares are held by Bank IV Kansas, N.A., Trustee, 534
Kansas Avenue, P.O. Box 88, Topeka, Kansas 66601, pursuant to the Ronald D. and Joyce M.
Lutz Irrevocable Trust for the Benefit of the Lutz Children ("the Trust"). The terms of
the Trust provide that Michael W. Lutz holds sole voting power for the shares so held.

<F2> Five thousand (5,000) of these shares are held by Bank IV Kansas, N.A., Trustee, 534
Kansas Avenue, P.O. Box 88, Topeka, Kansas 66601, pursuant to the Ronald D. and Joyce M.
Lutz Irrevocable Trust for the Benefit of the Lutz Children ("the Trust"). The terms of
the Trust provide that Craig E. Lutz holds sole voting power for the shares so held.

<F3> Five thousand (5,000) of these shares are held by Bank IV Kansas, N.A., Trustee, 534
Kansas Avenue, P.O. Box 88, Topeka, Kansas 66601, pursuant to the Ronald D. and Joyce M.
Lutz Irrevocable Trust for the Benefit of the Lutz Children ("the Trust"). The terms of
the Trust provide that Laurie L. Carney holds sole voting power for the shares so held.
</TABLE>

For purposes of the above table, a person is deemed to be a
beneficial owner of shares of Peoples Bankshares Common Stock if the person
has or shares the power to vote or to dispose of such shares. Unless
otherwise indicated in the footnotes, each person has sole voting and
investment power with respect to shares shown in the table as beneficially
owned by such person and disclaims beneficial ownership in shares described
in the footnotes as being "held by" other persons.

- 65 -
<PAGE> 75

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PEOPLES BANK

The following table sets forth as of the Record Date the number
of shares of Peoples Bank Common Stock beneficially owned and the percentage
of ownership of outstanding shares of Peoples Bank Common Stock by (a) each
director of Peoples Bank, (b) each person who is known by Peoples Bank to own
beneficially 5% or more of such stock and (c) all directors and executive
officers of Peoples Bank as a group:

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER ADDRESS OWNED CLASS
- ------------------------ ------- ------------ ----------

<S> <C> <C> <C>
Peoples State Bankshares, Inc. . 1080 S.W. Wanamaker
Topeka, Kansas 66604 19,997 89%

Dennis Hatfield. . . . . . . . . P.O. Box 434
Rossville, Kansas 66533 100 <F*>

James F. Stallbaumer . . . . . . P.O. Box 446
Rossville, Kansas 66533 100 <F*>

Wilbur E. Levering . . . . . . . 2018 S.W. Urish Road
Topeka, Kansas 66615 75 <F*>

Richard K. Fieger. . . . . . . . 7922 S.W. Huntoon
Topeka, Kansas 66615 5 <F*>

Ronald J. Francis. . . . . . . . 38 Peppertree Lane
Topeka, Kansas 66611 5 <F*>

Ronald D. Lutz . . . . . . . . . 1935 S.W. Indian Woods Lane
Topeka, Kansas 66611 -- --

Joyce M. Lutz. . . . . . . . . . 1935 S.W. Indian Woods Lane
Topeka, Kansas 66611 -- --

Michael W. Lutz. . . . . . . . . 6142 S.W. 38th Terrace
Topeka, Kansas 66610 -- --

Craig E. Lutz. . . . . . . . . . 3835 S.W. Stonybrook Drive
Topeka, Kansas 66610 -- --

Directors and Executive Officers
as a Group (nine persons) 285 1

<FN>
- ------------------------------------

<F*> Less than 1 percent.
</TABLE>

For purposes of the above table, a person is deemed to be a
beneficial owner of shares of Peoples Bank Common Stock if the person has or
shares the power to vote or to dispose of such shares. Unless otherwise
indicated in the footnotes, each person has sole voting and investment power
with respect to shares shown in the table as beneficially owned by such
person and disclaims beneficial ownership in shares described in the
footnotes as being "held by" other persons.

- 66 -
<PAGE> 76

INFORMATION REGARDING MBI COMMON STOCK
--------------------------------------

DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS

GENERAL. MBI has authorized 5,000,000 shares of MBI Preferred
Stock, no par value, and 100,000,000 shares of MBI Common Stock, $5.00 par
value. At March 31, 1996, MBI had no shares of MBI Preferred Stock issued
and outstanding and 63,124,053 shares of MBI Common Stock outstanding. Under
Missouri law, MBI's Board of Directors may generally approve the issuance of
authorized shares of Preferred Stock and Common Stock without shareholder
approval.

MBI's Board of Directors is also authorized to fix the number of
shares and determine the designation of any series of Preferred Stock and to
determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any series of MBI Preferred Stock. Except for the
designation and reservation of Series A Junior Preferred Stock pursuant to
MBI's Preferred Share Purchase Rights Plan described below, MBI's Board of
Directors has not acted to designate or issue any shares of MBI Preferred
Stock. The existence of a substantial number of unissued and unreserved
shares of MBI Common Stock and undesignated shares of MBI Preferred Stock may
enable the Board of Directors to issue shares to such persons and in such
manner as may be deemed to have an anti-takeover effect.

The following summary of the terms of MBI's capital stock does
not purport to be complete and is qualified in its entirety by reference to
the applicable provisions of MBI's Restated Articles of Incorporation and
By-Laws and Missouri law.

DIVIDENDS. The holders of MBI Common Stock are entitled to
share ratably in dividends when, as and if declared by the Board of Directors
from funds legally available therefor, after full cumulative dividends have
been paid or declared, and funds sufficient for the payment thereof set
apart, on all series of MBI Preferred Stock ranking superior as to dividends
to MBI Common Stock.

The Board of Directors of MBI intends to maintain its present
policy of paying quarterly cash dividends on MBI Common Stock, when justified
by the financial condition of MBI and its subsidiaries. The declaration and
amount of future dividends will depend on circumstances existing at the time,
including MBI's earnings, financial condition and capital requirements as
well as regulatory limitations, note and indenture provisions and such other
factors as the Board of Directors may deem relevant. The payment of
dividends to MBI by subsidiary banks is subject to extensive regulation by
various state and federal regulatory agencies. See "SUPERVISION AND
REGULATION."

VOTING RIGHTS. Each holder of MBI Common Stock has one vote
for each share held on matters presented for consideration by the
shareholders, except that, in the election of directors, each shareholder has
cumulative voting rights which entitle such shareholder to the number of
votes which equals the number of shares held by the shareholder multiplied by
the number of directors to be elected. All such votes may be cast for one
candidate for election as a director or may be distributed among two or more
candidates.

PREEMPTIVE RIGHTS. The holders of MBI Common Stock have no
preemptive right to acquire any additional unissued shares or treasury shares
of MBI.

LIQUIDATION RIGHTS. In the event of liquidation, dissolution
or winding up of MBI, whether voluntary or involuntary, the holders of MBI
Common Stock will be entitled to share ratably in any of its assets or funds
that are available for distribution to its shareholders after the
satisfaction of its

- 67 -
<PAGE> 77

liabilities (or after adequate provision is made therefor) and after
preferences on any outstanding MBI Preferred Stock.

ASSESSMENT AND REDEMPTION. Shares of MBI Common Stock are
and will be, when issued, fully paid and nonassessable. Such shares do not
have any redemption provisions.

PREFERRED SHARE PURCHASE RIGHTS PLAN. One preferred share
purchase right (a "Right") is attached to each share of MBI Common Stock.
The Rights trade automatically with shares of MBI Common Stock, and become
exercisable and will trade separately from the MBI Common Stock on the tenth
day after public announcement that a person or group has acquired, or has the
right to acquire, beneficial ownership of 20% or more of the outstanding
shares of MBI Common Stock, or upon commencement or announcement of intent to
make a tender offer for 20% or more of the outstanding shares of MBI Common
Stock, in either case without prior written consent of the Board. When
exercisable, each Right will entitle the holder to buy 1/100 of a share of
MBI Series A Junior Participating Preferred Stock at an exercise price of
$100.00 per Right. In the event a person or group acquires beneficial
ownership of 20% or more of MBI Common Stock, holders of Rights (other than
the acquiring person or group) may purchase MBI Common Stock having a market
value of twice the then current exercise price of each Right. If MBI is
acquired by any person or group after the Rights become exercisable, each
Right will entitle its holder to purchase stock of the acquiring company
having a market value of twice the current exercise price of each Right. The
Rights are designed to protect the interests of MBI and its shareholders
against coercive takeover tactics. The purpose of the Rights is to encourage
potential acquirors to negotiate with MBI's Board of Directors prior to
attempting a takeover and to give the Board leverage in negotiating on behalf
of all shareholders the terms of any proposed takeover. The Rights may deter
certain takeover proposals. The Rights, which can be redeemed by MBI's Board
of Directors in certain circumstances, expire by their terms on June 3, 1998.

CLASSIFICATION OF BOARD OF DIRECTORS. The Board of
Directors of MBI is divided into three classes, and the directors are
elected by classes to three-year terms, so that one of the three classes of
the directors of MBI will be elected at each annual meeting of the
shareholders. While this provision promotes stability and continuity of the
Board of Directors, classification of the Board of Directors may also have
the effect of decreasing the number of directors that could otherwise be
elected at each annual meeting of shareholders by a person who obtains a
controlling interest in the MBI Common Stock and thereby could impede a
change in control of MBI. Because fewer directors will be elected at each
annual meeting, such classification also will reduce the effectiveness of
cumulative voting as a means of establishing or increasing minority
representation on the Board of Directors.

OTHER MATTERS. MBI's Restated Articles of Incorporation and
By-Laws also contain provisions which: (i) require the affirmative vote of
holders of at least 75% of the voting power of all of the shares of
outstanding capital stock of MBI entitled to vote in the election of
directors to remove a director or directors without cause; (ii) require the
affirmative vote of the holders of at least 75% of the voting power of all
shares of the outstanding capital stock of MBI to approve certain "business
combinations" with "interested parties" unless at least two-thirds of the
Board of Directors first approves such business combinations; and
(iii) require an affirmative vote of at least 75% of the voting power of all
shares of the outstanding capital stock of MBI for the amendment, alteration,
change or repeal of any of the above provisions unless at least two-thirds of
the Board of Directors first approves such an amendment, alteration, change
or repeal. Such provisions may be deemed to have an anti-takeover effect.

- 68 -
<PAGE> 78

RESTRICTIONS ON RESALE OF MBI COMMON STOCK BY AFFILIATES

Under Rule 145 of the Securities Act of 1933 (the "Securities
Act"), certain persons who receive MBI Common Stock pursuant to the
Acquisition and who are deemed to be "affiliates" of Peoples Bankshares or
Peoples Bank will be limited in their right to resell the stock so received.
The term "affiliate" is defined to include any person who, directly or
indirectly, controls, or is controlled by, or is under common control with
Peoples Bankshares or Peoples Bank at the time the Acquisition is submitted
to a vote of the stockholders of Peoples Bankshares or Peoples Bank. Each
affiliate of Peoples Bankshares or Peoples Bank (generally any director or
executive officer or a stockholder of Peoples Bankshares or Peoples Bank who
beneficially owns a substantial number of outstanding shares of Peoples
Bankshares or Peoples Bank Common Stock) who desires to resell the MBI Common
Stock received in the Acquisition must sell such stock either pursuant to an
effective Registration Statement or in accordance with an applicable
exemption, such as the applicable provisions of Rule 145(d) under the
Securities Act.

Rule 145(d) provides that persons deemed to be affiliates may
resell their stock received in the Acquisition pursuant to certain of the
requirements of Rule 144 under the Securities Act if such stock is sold
within the first two years after the receipt thereof. After two years if
such person is not an affiliate of MBI and if MBI is current with respect to
its required public filings, a former affiliate of Peoples Bankshares or
Peoples Bank may freely resell the stock received in the Acquisition without
limitation. After three years from the issuance of the stock, if such person
is not an affiliate of MBI at the time of sale and for at least three months
prior to such sale, such person may freely resell such stock, without
limitation, regardless of the status of MBI's required public filings. The
shares of MBI Common Stock to be received by affiliates of Peoples Bankshares
or Peoples Bank in the Acquisition will be legended as to the restrictions
imposed upon resale of such stock.

COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF MBI AND THE RIGHTS OF
STOCKHOLDERS OF PEOPLES BANKSHARES AND PEOPLES BANK

MBI is incorporated under the laws of the State of Missouri.
Peoples Bankshares and Peoples Bank are incorporated and chartered,
respectively, under the laws of the State of Kansas. The rights of the
shareholders of MBI are governed by its Restated Articles of Incorporation
and By-Laws and The General and Business Corporation Law of Missouri (the
"Missouri Act"). The rights of the stockholders of Peoples Bankshares are
governed by its Articles of Incorporation, its By-Laws and the Kansas
Corporation Code. The rights of the stockholders of Peoples Bank are
governed by its Restated Articles of Incorporation, its By-Laws and the
Kansas Banking Code. The rights of Peoples Bank and Peoples Bankshares
stockholders who receive shares of MBI Common Stock in the Acquisition will
thereafter be governed by MBI's Restated Articles of Incorporation and
By-Laws and by the Missouri Act. The material rights of the MBI
shareholders, and, where applicable, the differences between the rights of
MBI shareholders and the rights of Peoples Bankshares or Peoples Bank
stockholders, are summarized below.

PREFERRED SHARE PURCHASE RIGHTS PLAN. As described above
under "- Preferred Share Purchase Rights Plan," MBI Common Stock has attached
Rights, which may deter certain takeover proposals. Neither Peoples
Bankshares nor Peoples Bank has a rights plan.

SUPERMAJORITY PROVISIONS. MBI's Restated Articles of
Incorporation and By-Laws contain provisions requiring a supermajority vote
of the shareholders of MBI to approve certain proposals. Under both MBI's
Restated Articles and By-Laws, removal by the shareholders of the entire
Board of Directors or any individual director from office without cause
requires the affirmative vote of not less than 75% of the total votes
entitled to be voted at a meeting of shareholders called for the election of
directors.

- 69 -
<PAGE> 79

Amendment by the shareholders of MBI's Restated Articles or By-Laws relating
to (i) the number or qualification of directors; (ii) the classification of
the Board of Directors; (iii) the filling of vacancies on the Board of
Directors; or (iv) the removal of directors, requires the affirmative vote of
not less than 75% of the total votes of MBI's then outstanding shares of
capital stock entitled to vote, voting together as a single class, unless such
amendment has previously been expressly approved by at least two-thirds of the
Board of Directors. The Restated Articles of MBI additionally provide that,
in addition to any shareholder vote required under the Missouri Act, the
affirmative vote of the holders of not less than 75% of the total votes to
which all of the then outstanding shares of capital stock of MBI are entitled,
voting together as a single class (the "Voting Stock"), shall be required for
the approval of any Business Combination. A "Business Combination" is defined
generally to include sales, exchanges, leases, transfers or other dispositions
of assets, mergers or consolidations, issuances of securities, liquidations or
dissolutions of MBI, reclassifications of securities or recapitalizations of
MBI, involving MBI on the one hand, and an Interested Shareholder or an
affiliate of an Interested Shareholder on the other hand. An "Interested
Shareholder" is defined generally to include any person, firm, corporation or
other entity which is the beneficial owner of 5% or more of the voting power
of the outstanding Voting Stock. If, however, at least two-thirds of the
Board of Directors of MBI approve the Business Combination, such Business
Combination shall require only the vote of shareholders as provided by
Missouri law or otherwise. The amendment of the provisions of MBI's Restated
Articles relating to the approval of Business Combinations requires the
affirmative vote of the holders of at least 75% of the Voting Stock unless
such amendment has previously been approved by at least two-thirds of the
Board of Directors. To the extent that a potential acquiror's strategy depends
on the passage of proposals which require a supermajority vote of MBI's
shareholders, such provisions requiring a supermajority vote may have the
effect of discouraging takeover attempts that do not have Board approval by
making passage of such proposals more difficult

Under Peoples Bankshares' Articles of Incorporation, a
supermajority vote is required to approve any settlement between Peoples
Bankshares and its stockholders in the event of receivership or dissolution.
A supermajority vote of Peoples Bankshares' stockholders is not required as
to any other item. Neither Peoples Bank's Restated Articles nor its By-Laws
require a supermajority vote as to any item.

VOTING FOR DIRECTORS. MBI's By-Laws provide for cumulative
voting in the election of directors. Cumulative voting entitles each
shareholder to cast an aggregate number of votes equal to the number of
voting shares held, multiplied by the number of directors to be elected.
Each shareholder may cast all such votes for one nominee or distribute them
among two or more nominees, thus permitting holders of less than a majority
of the outstanding shares of voting stock to achieve board representation.
Both Peoples Bankshares' and Peoples Bank's By-Laws also provide for
cumulative voting.

CLASSIFIED BOARD. As described under "- Classification of
Board of Directors," the Board of Directors of MBI is divided into three
classes of directors, with each class being elected to a staggered three-year
term. By reducing the number of directors to be elected in any given year,
the existence of a classified Board diminishes the benefits of the cumulative
voting rights to minority shareholders. Neither Peoples Bankshares Articles
of Incorporation or By-Laws nor Peoples Bank's Restated Articles of
Incorporation or By-Laws provide for classified Boards of Directors.

ANTI-TAKEOVER STATUTES. The Missouri Act contains certain
provisions applicable to Missouri corporations such as MBI which may be
deemed to have an anti-takeover effect. Such provisions include Missouri's
business combination statute and the control share acquisition statute.

The Missouri business combination statute protects domestic
corporations after hostile takeovers by prohibiting certain transactions once
an acquiror has gained control. The statute restricts

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<PAGE> 80

certain "Business Combinations" between a corporation and an "Interested
Shareholder" or affiliates of the Interested Shareholder for a period of five
years unless certain conditions are met. A "Business Combination" includes a
merger or consolidation, certain sales, leases, exchanges, pledges and similar
dispositions of corporate assets or stock and certain reclassifications and
recapitalizations. An "Interested Shareholder" includes any person or entity
which beneficially owns or controls 20% or more of the outstanding voting
shares of the corporation.

During the initial five-year restricted period, no Business
Combination may occur unless such Business Combination or the transaction in
which an Interested Shareholder becomes "interested" is approved by the Board
of Directors of the corporation. Business Combinations may occur during such
five-year period if: (i) prior to the stock acquisition by the Interested
Shareholder, the Board of Directors approves the transaction in which the
Interested Shareholder became an Interested Shareholder or approves the
Business Combination in question; (ii) the holders of a majority of the
outstanding voting stock, other than stock owned by the Interested
Shareholder, approve the Business Combination; or (iii) the Business
Combination satisfies certain detailed fairness and procedural requirements.

The Missouri Act exempts from its provisions: (i) corporations
not having a class of voting stock registered under Section 12 of the
Exchange Act; (ii) corporations which adopt provisions in their articles of
incorporation or bylaws expressly electing not to be covered by the statute;
and (iii) certain circumstances in which a shareholder inadvertently becomes
an Interested Shareholder. Neither MBI's Restated Articles of Incorporation
and By-Laws nor Security Bank's Articles of Incorporation and By-Laws "opt
out" of the Missouri business combination statute.

The Missouri Act also contains a "Control Share Acquisition
Statute" which restricts the voting power of any "Acquiring Person" who
acquires "Control Shares," shares which have the voting power to exercise or
direct the exercise of: (i) one-fifth to one-third (ii) one-third to a
majority or (iii) a majority of the outstanding stock of the corporation,
when added to all shares of the same corporation owned or controlled by the
same person. In order to acquire the same voting rights as were accorded the
Control Shares prior to the Control Share Acquisition, an Acquiring Person
must comply with certain disclosure requirements and obtain the approval of
both: (i) a majority of the outstanding voting shares and (ii) a majority of
the outstanding voting shares excluding Interested Shares. Interested Shares
are defined as shares owned by either the Acquiring Person or directors who
are also employees of the corporation or officers of the corporation.
Shareholders are given dissenters' rights with respect to any vote on a
Control Share Acquisition and may demand payment of the fair value of their
shares.

A number of acquisitions of shares are deemed not to constitute
Control Share Acquisitions, including good faith gifts, transfers pursuant to
wills, purchases pursuant to an issuance of shares by the corporation,
mergers involving the corporation which satisfy the other requirements of the
Missouri Act, transactions with a person who owned a majority of the voting
power of the corporation within the prior year, or purchases from a person
who has previously satisfied the provisions of the Control Share Acquisition
Statute, so long as the transaction does not result in the purchasing party
having voting power after the purchase in a percentage range (such ranges are
as set forth in the immediately preceding paragraph) beyond the range for
which the selling party previously satisfied the provisions of the statute.
Additionally, a corporation may exempt itself from application of the statute
by inserting a provision in its articles of incorporation or bylaws expressly
electing not to be covered by the statute. MBI's Restated Articles of
Incorporation and By-Laws do not "opt out" of the Control Share Acquisition
Statute. Neither the Kansas Corporation Code nor the Kansas Banking Code
contain similar anti-takeover statutes.

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<PAGE> 81

DISSENTERS' RIGHTS. Under Section 351.455 of the Missouri
Act, a shareholder of any corporation which is a party to a merger or
consolidation, or which sells all or substantially all of its assets, has the
right to dissent from such corporate action and to demand payment of the
value of such shares. Under Section 17-6712 of the Kansas Corporation Code,
stockholders of Peoples Bank are entitled to dissenters' rights upon the
consolidation or merger of Peoples Bank which are similar but not identical
to those under the Missouri Act. Specifically, under Section 17-6712, a
corporation must send notice of a consummation of merger or consolidation
within ten days of the consummation to all dissenters who have timely filed a
written objection. In addition, several of the time periods during which
dissenters must act to preserve their rights under Section 17-6712 are more
lengthy than under the Missouri Act. The Kansas Corporation Code does not
provide dissenters' rights to a stockholder of a corporation that sells all
or substantially all of its assets. Therefore, the stockholders of Peoples
Bankshares are not entitled to dissenters' rights in the Exchange.

SHAREHOLDERS' RIGHT TO INSPECT. Under Section 351.215 of
the Missouri Act, any MBI shareholder may inspect the corporation's books and
records for any reasonable and proper purpose. Such inspection may be made at
all proper times, subject to regulations as may be prescribed by the By-laws
of MBI. Under Section 9-805 of the Kansas Banking Code, any Peoples Bank
stockholder may inspect the books and records of Peoples Bank during the
business hours of Peoples Bank. Under Section 17-6510 of the Kansas
Corporation Code, any Peoples Bankshares stockholder, in person or by
attorney or other agent if accompanied by a power of attorney or similar
authorization, upon written demand under oath stating the purpose thereof,
may inspect for any proper purpose Peoples Bankshares' books and records and
make copies or extracts therefrom during the usual hours of business.

SIZE OF BOARD OF DIRECTORS. As permitted under the Missouri
Act, the number of directors on the Board of Directors of MBI is set forth in
MBI's By-Laws, which provide that the number of directors may be fixed from
time to time at not less than twelve nor more than twenty-four by an
amendment of the By-Laws or by a resolution of the Board of Directors, in
either case, adopted by the vote or consent of at least two-thirds of the
number of directors then authorized under the By-Laws. MBI's Board of
Directors currently has twelve members. The supermajority vote required for
the amendment of MBI's By-Laws regarding a change in the number of directors
may have the effect of making it more difficult to force an immediate change
in the composition of a majority of the Board of Directors and may be deemed
to have an anti-takeover effect. Peoples Bankshares' Articles of
Incorporation provide that the number of directors on the Board of Directors
shall be not less than one nor more than eight. Currently, Peoples
Bankshares has five directors. Peoples Bank's By-Laws provide that the
number of directors on the Board of Directors shall be determined by the
stockholders at each annual meeting of Peoples Bank, but shall not be fewer
than five nor more than twenty-five. Currently, Peoples Bank has nine
directors.

SUPERVISION AND REGULATION
--------------------------

GENERAL

As a bank holding company, MBI is subject to regulation under the
BHCA and its examination and reporting requirements. Under the BHCA, a bank
holding company may not directly or indirectly acquire the ownership or
control of more than 5% of the voting shares or substantially all of the
assets of any company, including a bank or savings and loan association,
without the prior approval of the Federal Reserve Board. In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.

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<PAGE> 82

As a savings and loan holding company, MBI is also subject to
regulatory oversight by the Office of Thrift Supervision (the "OTS"). As
such, MBI is required to register and file reports with the OTS and is
subject to regulation by the OTS. In addition, the OTS has enforcement
authority over MBI which permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to its subsidiary savings
association.

MBI and its subsidiaries are subject to supervision and
examination by applicable federal and state banking agencies. The earnings
of MBI's subsidiaries, and therefore the earnings of MBI, are affected by
general economic conditions, management policies and the legislative and
governmental actions of various regulatory authorities, including the Federal
Reserve Board, the OTS, the FDIC, the Office of the Comptroller of the
Currency (the "Comptroller") and various state financial institution
regulatory agencies. In addition, there are numerous governmental
requirements and regulations that affect the activities of MBI and its
subsidiaries.

CERTAIN TRANSACTIONS WITH AFFILIATES

There are various legal restrictions on the extent to which a
bank holding company and certain of its nonbank subsidiaries can borrow or
otherwise obtain credit from its bank subsidiaries. In general, these
restrictions require that any such extensions of credit must be on
non-preferential terms and secured by designated amounts of specified
collateral and be limited, as to any one of the holding company or such
nonbank subsidiaries, to 10% of the lending bank's capital stock and surplus,
and as to the holding company and all such nonbank subsidiaries in the
aggregate, to 20% of such capital stock and surplus.

PAYMENT OF DIVIDENDS

MBI is a legal entity separate and distinct from its wholly owned
financial institutions and other subsidiaries. The principal source of
MBI's revenues is dividends from its financial institution subsidiaries.
Various federal and state statutory provisions limit the amount of dividends
the affiliate financial institutions can pay to MBI without regulatory
approval. The approval of the appropriate federal or state bank regulatory
agencies is required for any dividend if the total of all dividends declared
by the bank in any calendar year would exceed the total of the institutions
net profits, as defined by regulatory agencies, for such year combined with
its retained net profits for the preceding two years. In addition, a
national bank or a state member bank may not pay a dividend in an amount
greater than its net profits then on hand. The payment of dividends by any
financial institution subsidiary may also be affected by other factors, such
as the maintenance of adequate capital.

CAPITAL ADEQUACY

The Federal Reserve Board has issued standards for measuring
capital adequacy for bank holding companies. These standards are designed to
provide risk-responsive capital guidelines and to incorporate a consistent
framework for use by financial institutions operating in major international
financial markets. The banking regulators have issued standards for banks
that are similar to, but not identical with, the standards for bank holding
companies.

In general, the risk-related standards require financial
institutions and financial institution holding companies to maintain capital
levels based on "risk adjusted" assets, so that categories of assets with
potentially higher credit risk will require more capital backing than
categories with lower credit risk. In addition, financial institutions and
financial institution holding companies are required to maintain capital to
support off-balance sheet activities such as loan commitments.

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<PAGE> 83

FDIC INSURANCE ASSESSMENTS

The subsidiary depository institutions of MBI are subject to FDIC
deposit insurance assessments. The FDIC has adopted a risk-based premium
schedule. Each financial institution is assigned to one of three capital
groups--well capitalized, adequately capitalized or undercapitalized--and
further assigned to one of three subgroups within a capital group, on the
basis of supervisory evaluations by the institution's primary federal and, if
applicable, state supervisors, and on the basis of other information relevant
to the institution's financial condition and the risk posed to the applicable
insurance fund. The actual assessment rate applicable to a particular
institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC. See "- FIRREA and
FDICIA."

The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), adopted in August 1989 to provide for the resolution of
insolvent savings associations, required the FDIC to establish separate
deposit insurance funds -- the Bank Insurance Fund ("BIF") for banks and the
Savings Association Insurance Fund ("SAIF") for savings associations. FIRREA
also required the FDIC to set deposit insurance assessments at such levels as
would cause BIF and SAIF to reach their "designated reserve ratios" of 1.25
percent of the deposits insured by them within a reasonable period of time.
Due to low costs of resolving bank insolvencies in the last few years, BIF
reached its designated reserve ratio in May 1995. As a result, effective
January 1, 1996, the FDIC eliminated deposit insurance assessments (except
for the minimum $2,000 payment required by law) for banks that are well
capitalized and well managed and reduced the deposit insurance assessments
for all other banks.

The balance in SAIF is not expected to reach the designated
reserve ratio until about the year 2002, as FIRREA provides that a
significant portion of the costs of resolving past insolvencies of savings
associations must be paid from this source. Currently, SAIF-member
institutions pay deposit insurance premiums based on a schedule of from $.23
to $.31 per $100.00 of deposits. Accordingly, it is likely that the SAIF
rates will be substantially higher than the BIF rates in the future. MBI,
which has acquired substantial amounts of SAIF-insured deposits during the
years from 1989 to the present, is required to pay SAIF deposit insurance
premiums on these SAIF-insured deposits. Bills have recently been proposed by
the U. S. Congress to recapitalize the SAIF through a one-time special
assessment of approximately 85 basis points on the amount of deposits held by
the institution. If such special assessment occurs, it is expected that the
deposit premiums paid by SAIF-member institutions would be reduced to
approximately $.04 for every $100.00 of deposits and would have the effect of
immediately reducing the capital of SAIF-member institutions by the amount of
the fee. MBI cannot predict whether the special assessment proposal will be
enacted, or, if enacted, the amount of any one-time fee, or whether ongoing
SAIF premiums will be reduced to a level equal to that of BIF premiums. If
the one-time assessment is not enacted, it is presently expected that the
SAIF deposit premiums will continue at their present rate.

PROPOSALS TO OVERHAUL THE SAVINGS ASSOCIATION INDUSTRY

Proposals recently have been introduced in the U.S. Congress
that, if adopted, would overhaul the savings association industry. The most
significant of these proposals would recapitalize the SAIF through a one-time
special assessment (see "- FDIC Insurance Assessments"), spread the Financing
Corp., or FICO, Bond obligation across the BIF and SAIF, merge the
Comptroller and the OTS, abolish the federal savings association charter,
require federal thrifts to convert to commercial banks and merge the SAIF and
the BIF. MBI cannot predict whether these or any other legislative proposals
will be enacted, or, if enacted, the final form of the law.

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<PAGE> 84

SUPPORT OF SUBSIDIARY BANKS

Under Federal Reserve Board policy, MBI is expected to act as a
source of financial strength to each subsidiary bank and to commit resources
to support each of the subsidiaries in circumstances where it might not
choose to do so absent such a policy. This support may be required at times
when MBI may not find itself able to provide it. In addition, any capital
loans by MBI to any of its subsidiaries would also be subordinate in right of
payment to deposits and certain other indebtedness of such subsidiary.

Consistent with this policy regarding bank holding companies
serving as a source of financial strength for their subsidiary banks, the
Federal Reserve Board has stated that, as a matter of prudent banking, a bank
holding company generally should not maintain a rate of cash dividends unless
its net income available to common shareholders has been sufficient to fully
fund the dividends and the prospective rate of earnings retention appears
consistent with the bank holding company's capital needs, asset quality and
overall financial condition.

FIRREA AND FDICIA

FIRREA contains a cross-guarantee provision which could result in
insured depository institutions owned by MBI being assessed for losses
incurred by the FDIC in connection with assistance provided to, or the
failure of, any other insured depository institution owned by MBI. Under
FIRREA, failure to meet the capital guidelines could subject a banking
institution to a variety of enforcement remedies available to federal
regulatory authorities, including the termination of deposit insurance by the
FDIC.

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") made extensive changes to the federal banking laws. FDICIA
instituted certain changes to the supervisory process, including provisions
that mandate certain regulatory agency actions against undercapitalized
institutions within specified time limits. FDICIA contains various other
provisions that may affect the operations of banks and savings institutions.

The prompt corrective action provision of FDICIA requires the
federal banking regulators to assign each insured institution to one of five
capital categories ("well capitalized," "adequately capitalized" or one of
three "undercapitalized" categories) and to take progressively more
restrictive actions based on the capital categorization, as specified below.
Under FDICIA, capital requirements would include a leverage limit, a
risk-based capital requirement and any other measure of capital deemed
appropriate by the federal banking regulators for measuring the capital
adequacy of an insured depository institution. All institutions, regardless
of their capital levels, are restricted from making any capital distribution
or paying any management fees that would cause the institution to fail to
satisfy the minimum levels for any relevant capital measure.

The FDIC and the Federal Reserve Board adopted capital-related
regulations under FDICIA. Under those regulations, a bank will be well
capitalized if it: (i) had a risk-based capital ratio of 10% or greater;
(ii) had a ratio of Tier 1 capital to risk-adjusted assets of 6% or greater;
(iii) had a ratio of Tier 1 capital to adjusted total assets of 5% or
greater; and (iv) was not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure. An association will be
adequately capitalized if it was not "well capitalized" and: (i) had a
risk-based capital ratio of 8% or greater; (ii) had a ratio of Tier 1 capital
to risk-adjusted assets of 4% or greater; and (iii) had a ratio of Tier 1
capital to adjusted total assets of 4% or greater (except that certain
associations rated "Composite 1" under the federal banking agencies' CAMEL
rating

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<PAGE> 85

system may be adequately capitalized if their ratios of core capital to
adjusted total assets were 3% or greater).

FDICIA also makes extensive changes in existing rules regarding
audits, examinations and accounting. It generally requires annual on-site,
full scope examinations by each bank's primary federal regulator. It also
imposes new responsibilities on management, the independent audit committee
and outside accountants to develop or approve reports regarding the
effectiveness of internal controls, legal compliance and off-balance sheet
liabilities and assets.

DEPOSITOR PREFERENCE STATUTE

Legislation enacted in August 1993 provides a preference for
deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution, in the liquidation or
other resolution of such an institution by any receiver. Such obligations
would be afforded priority over other general unsecured claims against such
an institution, including federal funds and letters of credit, as well as any
obligation to shareholders of such an institution in their capacity as such.

THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION

In September 1994, legislation was enacted that is expected to
have a significant effect in restructuring the banking industry in the United
States. The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Riegle-Neal") facilitates the interstate expansion and consolidation
of banking organizations by permitting (i) bank holding companies that are
adequately capitalized and managed, one year after enactment of the
legislation, to acquire banks located in states outside their home states
regardless of whether such acquisitions are authorized under the law of the
host state, (ii) the interstate merger of banks after June 1, 1997, subject
to the right of individual states to "opt in" or to "opt out" of this
authority before that date, (iii) banks to establish new branches on an
interstate basis provided that such action is specifically authorized by the
law of the host state, (iv) foreign banks to establish, with approval of the
regulators in the United States, branches outside their home states to the
same extent that national or state banks located in the home state would be
authorized to do so, and (v) banks to receive deposits, renew time deposits,
close loans, service loans and receive payments on loans and other
obligations as agent for any bank or thrift affiliate, whether the affiliate
is located in the same state or a different state. One effect of Riegle-Neal
will be to permit MBI to acquire banks located in any state and to permit
bank holding companies located in any state to acquire banks and bank holding
companies in Missouri. Overall, Riegle-Neal is likely to have the effects of
increasing competition and promoting geographic diversification in the
banking industry.

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------

KPMG Peat Marwick LLP served as MBI's independent accountants for
the year ended December 31, 1995 and continues to serve in such capacity.
Services provided in connection with the audit function included examination
of the annual consolidated financial statements, review and consultation
regarding filings with the Securities and Exchange Commission and other
regulatory authorities and consultation on financial accounting and reporting
matters.

GRA, Thompson, White & Co., P.C. served as Peoples Bankshares'
and Peoples Bank's independent accountants for the year ended December 31,
1995 and continues to serve in such capacity. Services provided in
connection with the audit function included examination of the annual
consolidated

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<PAGE> 86

financial statements, review and consultation regarding filings with
regulatory authorities and consultation on financial accounting and
reporting matters.

LEGAL MATTERS
-------------

Certain legal matters will be passed upon for MBI by Thompson
Coburn, St. Louis, Missouri and for Peoples Bankshares and Peoples Bank by
Stinson, Mag & Fizzell, P.C., Kansas City, Missouri.

EXPERTS
-------

The consolidated financial statements of MBI as of December 31,
1995, 1994 and 1993, and for each of the years in the three-year period ended
December 31, 1995, incorporated by reference in MBI's Annual Report on Form
10-K, and the supplemental consolidated financial statements of MBI as of
December 31, 1995, 1994 and 1993, and for each of the years in the three-year
period ended December 31, 1995, contained in MBI's Current Report on Form 8-K
dated March 11, 1996, have been incorporated by reference herein in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, which reports are also incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Peoples Bankshares and
the financial statements of Peoples Bank as of and for the year ended
December 31, 1995 included herein have been audited by GRA, Thompson, White,
& Co., P.C., independent certified public accountants, as indicated in their
report with respect thereto and are included herein in reliance and upon the
authority of said firm as experts in accounting and auditing.

OTHER MATTERS
-------------

The Boards of Directors of Peoples Bankshares and Peoples Bank,
at the date hereof, are not aware of any business to be presented at the
Special Meetings other than that referred to in the notices of the Special
Meetings and discussed herein. If any other matter should properly come
before either Special Meeting, the persons named as proxies will have
discretionary authority to vote the shares represented by proxies in
accordance with their discretion and judgment as to the best interests of
Peoples Bankshares or Peoples Bank.

SHAREHOLDER PROPOSALS
---------------------

If the Acquisition is approved, the other conditions to the
Acquisition are satisfied and the Acquisition is consummated, Peoples
Bankshares and the other stockholders of Peoples Bank will become
shareholders of MBI at the Effective Time. Shareholders of MBI may submit to
MBI proposals for formal consideration at the 1997 Annual Meeting of
Shareholders of MBI and inclusion in MBI's proxy statement for such meeting.
All such proposals must be received in writing by Jon W. Bilstrom, General
Counsel and Secretary, at Mercantile Bancorporation Inc., P.O. Box 524,
St. Louis, Missouri 63166-0524 by November 22, 1996.

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<PAGE> 87

FINANCIAL STATEMENTS

INDEX
-----
Page
----

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------

INDEPENDENT AUDITORS' REPORT F-1

CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1996 (UNAUDITED) AND
DECEMBER 31, 1995 AND DECEMBER 31, 1994 (UNAUDITED) F-2

CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND 1995 (UNAUDITED) AND FOR THE YEARS
ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
AND 1993 (UNAUDITED) F-3

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY FOR THE THREE MONTHS ENDED MARCH 31,
1996 (UNAUDITED) AND FOR THE YEARS ENDED
DECEMBER 31, 1995 AND DECEMBER 31,
1994 AND 1993 (UNAUDITED) F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED) AND FOR THE YEARS ENDED
DECEMBER 31, 1995 AND DECEMBER 31, 1994 AND 1993
(UNAUDITED) F-5 to F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 to F-20

CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1995 F-21

CONSOLIDATING STATEMENT OF EARNINGS FOR THE YEAR
ENDED DECEMBER 31, 1995 F-22

PEOPLES STATE BANK FINANCIAL STATEMENTS
- ---------------------------------------

INDEPENDENT AUDITORS' REPORT F-23

BALANCE SHEETS AS OF MARCH 31, 1996 (UNAUDITED),
DECEMBER 31, 1995 AND DECEMBER 31, 1994 (UNAUDITED) F-24

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<PAGE> 88

STATEMENTS OF EARNINGS FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND FOR
THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1994 AND 1993 (UNAUDITED) F-25

STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1994 AND 1993 (UNAUDITED) F-26

STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND FOR
THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1994 AND 1993 (UNAUDITED) F-27 to F-28

NOTES TO FINANCIAL STATEMENTS F-29 to F-41

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<PAGE> 89
[Letterhead of GRA, Thompson, White & Co., P.C.]

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Peoples State Bankshares, Inc.
Topeka, Kansas

We have audited the accompanying consolidated balance sheet of Peoples State
Bankshares, Inc. and subsidiary as of December 31, 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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
that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Peoples
State Bankshares, Inc. and subsidiary as of December 31, 1995 and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information
included in Schedules 1 and 2 is presented for purposes of additional
analysis of the consolidated financial statements rather than to present the
financial position, results of operations and cash flows of the individual
entities. The consolidating information has been subjected to the auditing
procedures applied in the audit of the consolidated financial statements
and, in our opinion, is fairly presented in all material respects in
relation to the consolidated financial statements taken as a whole.

/s/ GRA, Thompson, White & Co., P.C.

Merriam, Kansas
March 27, 1996

F-1
<PAGE> 90

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<CAPTION>
MARCH 31, DECEMBER 31,
------------- ----------------------------
1996 1995 1994
------------- ------------- -------------
( unaudited ) ( unaudited )
Assets (In thousands)
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . $ 2,612 $ 3,710 $ 3,981
Interest bearing deposits. . . . . . . . . . . . . . 23 75 10
Federal funds sold . . . . . . . . . . . . . . . . . - 900 1,200
Available-for-sale securities. . . . . . . . . . . . 36,222 36,837 11,901
Held-to-maturity securities. . . . . . . . . . . . . - - 16,925
Restricted equity securities . . . . . . . . . . . . 535 527 519
Loans receivable, net. . . . . . . . . . . . . . . . 51,625 52,325 47,479
Premises and equipment . . . . . . . . . . . . . . . 1,938 1,970 2,081
Accrued interest receivable. . . . . . . . . . . . . 995 1,132 864
Core deposit intangible. . . . . . . . . . . . . . . 304 324 405
Deferred tax asset . . . . . . . . . . . . . . . . . - - 246
Other assets . . . . . . . . . . . . . . . . . . . . 52 60 45
------------- ------------ -------------
$ 94,306 $ 97,860 $ 85,656
============= ============ =============
Liabilities and Stockholders' Equity
Liabilities
Deposits . . . . . . . . . . . . . . . . . . . . . $ 76,285 $ 74,130 $ 64,836
Other borrowings . . . . . . . . . . . . . . . . . 8,661 14,138 12,448
Accrued interest payable . . . . . . . . . . . . . 342 420 239
Deferred tax liability . . . . . . . . . . . . . . 5 129 -
Other liabilities. . . . . . . . . . . . . . . . . 110 38 464
------------- ------------ -------------
Total liabilities . . . . . . . . . . . . . . . 85,403 88,855 77,987
------------- ------------ -------------

Commitments and contingencies

Minority interest. . . . . . . . . . . . . . . . . . 904 945 779
------------- ------------ -------------

Stockholders' equity
Common stock, $1 par value; 100,000 shares
authorized, 97,455 shares issued and outstanding 100 100 100
Additional paid-in capital . . . . . . . . . . . . 107 107 107
Retained earnings. . . . . . . . . . . . . . . . . 7,763 7,659 6,976
Net unrealized gain (loss) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . 204 369 (118)
------------- ------------ -------------
8,174 8,235 7,065

Less treasury stock, 2,545 shares, at cost . . . . 175 175 175
------------- ------------ -------------

Total stockholders' equity. . . . . . . . . . . 7,999 8,060 6,890
------------- ------------ -------------
$ 94,306 $ 97,860 $ 85,656
============= ============ =============

The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

F-2
<PAGE> 91

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS

Net interest income . . . . . . . . 918 815 3,602 3,733 3,951

PROVISION FOR LOAN LOSSES. . . . . . . . - 15 45 97 144
------------ ------------ ------------ ------------ ------------

Net interest income after
provision for loan losses. . . . . 918 800 3,557 3,636 3,807
------------ ------------ ------------ ------------ ------------

OTHER INCOME
Service charges. . . . . . . . . . . . 106 104 452 532 560
Net securities losses. . . . . . . . . - (14) (14) (3) (1)
Gain on sale of subsidiary . . . . . . - - - 1,241 -
Other. . . . . . . . . . . . . . . . . 40 22 143 116 149
------------ ------------ ------------ ------------ ------------
146 112 581 1,886 708
------------ ------------ ------------ ------------ ------------
OTHER EXPENSES
Salaries and employee benefits . . . . 493 617 1,626 1,592 1,643
Occupancy. . . . . . . . . . . . . . . 109 119 494 474 521
Data processing. . . . . . . . . . . . 32 32 137 118 112
Federal deposit insurance premium. . . 1 36 75 170 194
Amortization of deposit purchase
premium. . . . . . . . . . . . . . . 20 20 81 81 81
Other. . . . . . . . . . . . . . . . . 199 108 466 651 734
------------ ------------ ------------ ------------ ------------
854 932 2,879 3,086 3,285
------------ ------------ ------------ ------------ ------------

Earnings before income taxes and
minority interest . . . . . . . . 210 (20) 1,259 2,436 1,230

INCOME TAX EXPENSE . . . . . . . . . . . 75 (7) 447 891 383
------------ ------------ ------------ ------------ ------------

Earnings before minority interest. 135 (13) 812 1,545 847

MINORITY INTEREST. . . . . . . . . . . . (31) (24) (129) (106) (109)
------------ ------------ ------------ ------------ ------------

NET EARNINGS . . . . . . . . . . . . . . $ 104 $ (37) $ 683 $ 1,439 $ 738
============ ============ ============ ============ ============

The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

F-3
<PAGE> 92

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON
ADDITIONAL AVAILABLE-
COMMON PAID-IN RETAINED FOR-SALE TREASURY
STOCK CAPITAL EARNINGS SECURITIES STOCK TOTAL
---------- ----------- ---------- ------------ ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992
(UNAUDITED). . . . . . . . . . . $ 100 $ 107 $ 4,799 $ - $ (51) $ 4,955

Net earnings . . . . . . . . . . . - - 738 - - 738

Purchase of 1,820
Shares, at cost. . . . . . . . . - - - - (124) (124)

Initial adoption of
SFAS No. 115 . . . . . . . . . . - - - 39 - 39
---------- ---------- ---------- ----------- --------- ----------
BALANCE AT
DECEMBER 31, 1993
(UNAUDITED). . . . . . . . . . . 100 107 5,537 39 (175) 5,608

Net earnings . . . . . . . . . . . - - 1,439 - - 1,439

Net change . . . . . . . . . . . . - - - (157) - (157)
---------- ---------- ---------- ----------- --------- ----------
BALANCE AT
DECEMBER 31, 1994
(UNAUDITED). . . . . . . . . . . 100 107 6,976 (118) (175) 6,890

Net earnings . . . . . . . . . . . - - 683 - - 683

Net change . . . . . . . . . . . . - - - 487 - 487
---------- ---------- ---------- ----------- --------- ----------

BALANCE AT
DECEMBER 31, 1995. . . . . . . . $ 100 $ 107 $ 7,659 $ 369 $ (175) $ 8,060

Net earnings . . . . . . . . . . . - - 104 - 104

Net change . . . . . . . . . . . . - - - (165) - (165)
---------- ---------- ---------- ----------- --------- ----------

BALANCE AT
MARCH 31, 1996
(UNAUDITED). . . . . . . . . . . $ 100 $ 107 $ 7,763 $ 204 $ (175) $ 7,999
========== ========== ========== =========== ========= ==========

The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

F-4
<PAGE> 93

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------------- ------------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES (In thousands)
<S> <C> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 104 $ (37) $ 683 $ 1,439 $ 738
Adjustments to reconcile net earnings to net cash. . .
provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . - 15 45 97 144
Gain on sale of subsidiary bank - - - (1,241) -
Net charge-offs and losses on other real estate owned - - - 23 17
Gains on sales of available-for-sale securities . . - - - (8) (8)
Losses on sales of available-for-sale securities. . - 14 14 11 11
Amortization of premiums on securities. . . . . . . 7 7 36 137 182
Accretion of discounts on securities. . . . . . . . (29) (3) (23) (25) (25)
Depreciation and amortization expense . . . . . . . 39 45 185 196 202
Amortization of deposit purchase premium. . . . . . 20 20 81 81 81
Gains on sales of loans . . . . . . . . . . . . . . (20) - (45) - -
Proceeds from loans sold. . . . . . . . . . . . . . 1,476 - 4,343 - -
Originations of loans sold. . . . . . . . . . . . . (1,456) - 4,298 - -
Change in:
Accrued interest receivable. . . . . . . . . . . . 137 (34) (268) (48) 60
Other assets . . . . . . . . . . . . . . . . . . . 8 (48) (15) 72 (119)
Accrued interest payable . . . . . . . . . . . . . (78) 23 181 (129) (110)
Other liabilities. . . . . . . . . . . . . . . . . 72 (393) (426) 318 (74)
Deferred taxes . . . . . . . . . . . . . . . . . . - 1 9 - (52)
Minority interest. . . . . . . . . . . . . . . . . (20) (1) 105 47 50
---------- ----------- ---------- ----------- -----------
Net cash provided (used) by operating activities. 260 (391) 607 970 1,097
---------- ----------- ---------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Loans receivable originated, net of principal
collections. . . . . . . . . . . . . . . . . . . . . 700 (2,092) (4,894) (7,143) (3,130)
Proceeds from maturities of held-tomaturity securities - 945 3,764 4,850 8,032
Proceeds from sales and maturities of available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . 2,278 2,983 9,977 12,953 234
Purchases of held-to-maturity securities . . . . . . . - (1,998) (6,129) (3,693) (18,622)
Purchases of available-for-sale securities . . . . . . (1,951) (999) (14,736) (6,017) (990)
Purchase of restricted equity securities . . . . . . . (8) - (8) (266) 15
Net change in securities purchased under an agreement
to resell. . . . . . . . . . . . . . . . . . . . . . - - - - 7,766
Net additions to premises and equipment. . . . . . . . (7) (27) (74) (223) (1,297)
Proceeds from sales of other real estate owned . . . . - - - 15 1
Recoveries of loans previously charged off . . . . . . - - 3 - 11
Net change in Federal funds sold . . . . . . . . . . . 900 1,100 300 (2,100) 1,300
Net change in interest bearing deposits. . . . . . . . 52 (12) (65) - (10)
Proceeds from sale of subsidiary bank,
including taxes paid . . . . . . . . . . . . . . . . - - - 3,989 -
---------- ----------- ---------- ----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES,
CARRIED FORWARD. . . . . . . . . . . . . . . . . . . . $ 1,964 $ (100) $ (11,862) $ 2,365 $ (6,690)
---------- ----------- ---------- ----------- -----------
</TABLE>

F-5
<PAGE> 94

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

Net cash provided (used) by operating and
investing activities . . . . . . . . . . . . . . 2,224 (491) (11,255) 3,335 (5,593)
---------- ----------- ---------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in non-interest bearing and interest
bearing demand and savings accounts. . . . . . . . . 2,778 (1,983) 960 (6,969) 3,024
Net change in time deposits. . . . . . . . . . . . . . (623) 1,667 8,334 12,076 3,574
Increase (decrease) in other borrowings. . . . . . . . (5,477) (343) 1,690 (5,305) 3,597
Purchase of treasury stock . . . . . . . . . . . . . . - - - - (124)
---------- ----------- ---------- ----------- -----------

Net cash provided (used) by financing activities. (3,322) (659) 10,984 (198) 2,923
---------- ----------- ---------- ----------- -----------

(Decrease) increase in cash and cash
equivalents. . . . . . . . . . . . . . . . . . (1,098) (1,150) (271) 3,137 (2,670)

Cash and equivalents sold during the period. . . . . . . - - - (2,073) -

Cash and cash equivalents, beginning of period . . . . . 3,710 3,981 3,981 2,897 5,567
---------- ----------- ---------- ----------- -----------

Cash and cash equivalents, end of period . . . . . . . . $ 2,612 $ 2,831 $ 3,710 $ 3,981 $ 2,897
========== =========== ========== =========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for interest . . . . . . . $ 997 $ 730 $ 3,331 $ 3,323 $ 3,609
========== =========== ========== =========== ===========

Cash paid during the period for income taxes . . . . . $ - $ - $ 877 $ 433 $ 628
========== =========== ========== =========== ===========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES

Designation of investment securities as available-for-
sale at adoption of SFAS No. 115,
at amortized cost . . . . . . . . . . . . . . . . . $ - $ - $ - $ - $ 16,693
========== =========== ========== =========== ===========

Transfer of available-for-sale securities to held-to-
maturity at amortized cost, net . . . . . . . . . . $ - $ - $ 19,290 $ - $ -
========== =========== ========== =========== ===========

The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

F-6
<PAGE> 95
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 (AUDITED), 1994 AND 1993 (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Peoples State Bankshares,
Inc. and subsidiary are in accordance with generally accepted
accounting principles and conform to general practices within the
banking industry. The more significant of the principles used in
preparing the consolidated financial statements are briefly described
below.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Peoples
State Bankshares, Inc. (Bankshares) and its subsidiary, Peoples State
Bank, Topeka, Kansas (Bank). Bankshares owns 88.88% of the
outstanding common stock of the Bank. All significant intercompany
transactions have been eliminated. During 1994 and 1993, the
consolidated financial statements also included the accounts of
Citizens State Bank, Osage City, Kansas (Citizens) which was sold by
Bankshares on July 31, 1994. The results of operations through this
date are included in the accompanying consolidated financial
statements.

NATURE OF OPERATIONS

The Bank operates under a state bank charter and provides full banking
services, excluding trust services. As a state-regulated bank, the
Bank is subject to regulation by the Kansas Banking Department and the
Federal Deposit Insurance Corporation (FDIC). The area served by
Peoples State Bank is Shawnee County, Kansas and services are provided
at three locations in Topeka and at branches in Silver Lake and
Rossville, Kansas.

ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.

INVESTMENT SECURITIES

Effective December 31, 1993, Bankshares adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain
----------------------
Investments in Debt and Equity Securities, which requires that
-----------------------------------------
investments be classified in three categories and accounted for as
follows: held-to-maturity securities reported at amortized cost;
trading securities reported at fair value with unrealized gains and
losses included in earnings; and available-for-sale securities
reported at fair value with unrealized gains and losses shown as a
separate component of stockholders' equity.

Restricted equity securities are reported at cost which equals the
estimated fair value.

Gains and losses on sales of securities are determined on a specific
identification method.

F-7
<PAGE> 96
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS RECEIVABLE

Loans receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or pay-off are reported
at their outstanding principal adjusted for any charge-offs, the
allowance for loan losses, and any deferred fees or costs on
originated loans and unamortized premiums or discounts on purchased
loans.

Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield on loans with
maturities in excess of one year.

On January 1, 1995, SFAS No. 114, Accounting by Creditors for
---------------------------
Impairment of a Loan, and SFAS No. 118, Accounting by Creditors for
-------------------- ---------------------------
Impairment of Loan-Income Recognition and Disclosure, became
----------------------------------------------------
effective. SFAS No. 114 requires that impaired loans be measured
based on the present value of expected future cash flows discounted at
the loan's effective interest rate or at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent. SFAS No. 118 amends SFAS No. 114 to allow a creditor to
use existing methods for recognizing interest income on an impaired
loan if those methods are more conservative than methods required by
SFAS No. 114.

Interest income on installment loans is recognized over the terms of
the loans by the interest method. Interest income on all other loans
is credited to operations based on the principal amount outstanding.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes the collectibility
of the principal is unlikely. The allowance is an amount management
believes will be adequate to absorb probable losses on existing loans
that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions and
trends that may affect the borrowers' ability to pay.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are
computed using the straight-line and accelerated methods based on the
estimated useful lives of the related assets.

F-8
<PAGE> 97
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

Provisions for income taxes are based on taxes payable or refundable
for the current year (after exclusion of non-taxable income such as
interest on state and municipal securities) and deferred taxes on
temporary differences between the amount of taxable and pretax
financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which
the deferred tax assets and liabilities are expected to be realized or
settled as prescribed in SFAS No. 109, Accounting for Income Taxes.
---------------------------
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.

Bankshares and its subsidiary file a consolidated Federal income tax
return. The parent company is reimbursed from its subsidiary for any
current income tax benefits derived.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, Bankshares
considers cash on hand and amounts due from banks to be cash and cash
equivalents.

F-9
<PAGE> 98
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

2. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investments in debt
securities were as follows (in thousands):

$ 36,145 $ 726 $ (34) $ 36,837
========= ========== ========== =========

HELD-TO-MATURITY
AT DECEMBER 31, 1994 (UNAUDITED)
U.S. Treasury and agency
securities. . . . . . . . . . . . . . . $ 8,698 $ - $ (50) $ 8,648
Obligations of states and
political subdivisions. . . . . . . . . 2,865 38 (3) 2,900
Mortgage-backed securities. . . . . . . . 5,362 52 (134) 5,280
--------- ---------- ---------- ---------

$ 16,925 $ 90 $ (187) $ 16,828
========= ========== ========== =========

AVAILABLE-FOR-SALE
AT DECEMBER 31, 1994 (UNAUDITED)
U.S. Treasury and agency
securities. . . . . . . . . . . . . . . $ 12,003 $ - $ (220) $ 11,783
Mortgage-backed securities. . . . . . . . 119 - (1) 118
--------- ---------- ---------- ---------

$ 12,122 $ - $ (221) $ 11,901
========= ========== ========== =========
</TABLE>

During December 1995, investment securities with a carrying amount of
approximately $19,290,000 and fair value of approximately $19,724,000
were transferred from held-to-maturity to available-for-sale with the
unrealized gain of approximately $434,000 being included with the
unrealized gains on securities that continue to be classified as
available-for-sale. These transfers were made as part of a one-time
reassessment of the appropriateness of the classifications of all
securities as allowed by generally accepted accounting principles.

F-10
<PAGE> 99

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

2. INVESTMENT SECURITIES (CONTINUED)

The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties (in thousands).

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------
<S> <C> <C>
Due in one year or less . . . . . . . . . $ 6,322 $ 6,390
Due after one year through five years . . 18,156 18,532
Due after five years through ten years. . 667 693
--------- ---------
25,145 25,615

Mortgage-backed securities. . . . . . . . 11,000 11,222
--------- ---------

$ 36,145 $ 36,837
========= =========
</TABLE>

At December 31, 1995, investment securities with a carrying value of
approximately $33,215,000 were pledged to secure public deposits and
for other purposes.

3. LOANS RECEIVABLE

Loans receivable are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
---------- ----------
(unaudited)
<S> <C> <C>
Real estate . . . . . . . . . . . . . . $ 29,118 $ 26,868
Commercial. . . . . . . . . . . . . . . 11,937 9,870
Agricultural. . . . . . . . . . . . . . 6,052 6,184
Consumer. . . . . . . . . . . . . . . . 5,356 4,587
Other . . . . . . . . . . . . . . . . . 575 643
---------- ----------
53,038 48,152

Allowance for loan losses . . . . . . . (713) (673)
---------- ----------

$ 52,325 $ 47,479
========== ==========
</TABLE>

F-11
<PAGE> 100
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3. LOANS RECEIVABLE (CONTINUED)

Changes in the allowance for loan losses are as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C>
Balance, beginning of year. . . . . . . . $ 673 $ 808 $ 733
Provision for loan losses . . . . . . . . 45 97 144
Charge-offs, net of recoveries. . . . . . (5) (40) (69)
Balance of subsidiary sold. . . . . . . . - (192) -
-------- -------- --------

Balance, end of year. . . . . . . . . . . $ 713 $ 673 $ 808
======== ======== ========
</TABLE>

One impaired loan totaling approximately $118,000 and $131,000 at
December 31, 1995 and 1994, respectively, has been recognized in
conformity with SFAS No. 114 as amended by SFAS No. 118. The related
allowance for this impaired loan at December 31, 1995 totaled
approximately $18,000. There was no interest income recognized on
this impaired loan during 1995.

4. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
-------- --------
(unaudited)
<S> <C> <C>
Land, buildings and improvements. . . . . . $ 1,882 $ 1,834
Furniture, fixtures and equipment . . . . . 899 918
Leasehold improvements. . . . . . . . . . . 461 435
-------- --------

3,242 3,187

Accumulated depreciation and amortization . (1,272) (1,106)
-------- --------

$ 1,970 $ 2,081
======== ========
</TABLE>

F-12
<PAGE> 101

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. DEPOSITS

Deposits are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
-------- --------
(unaudited)
<S> <C> <C>
Demand
Noninterest-bearing . . . . . . . . . $ 9,679 $ 9,150
-------- --------
Interest-bearing
NOW . . . . . . . . . . . . . . . . . 7,315 7,628
Money market. . . . . . . . . . . . . 9,032 8,070
-------- --------

16,347 15,698
-------- --------

Savings . . . . . . . . . . . . . . . . . 5,290 5,508
Time. . . . . . . . . . . . . . . . . . . 42,814 34,480
-------- --------

$ 74,130 $ 64,836
======== ========
</TABLE>

Time deposits include certificates of deposit of $100,000 and over
totaling approximately $4,106,000 and $3,554,000 at December 31, 1995
and 1994, respectively.

At December 31, 1995, the approximate scheduled maturities of
certificates of deposit are as follows (in thousands):

<TABLE>
<S> <C>
1996 . . . . . . . . . $ 31,926
1997 . . . . . . . . . 7,968
1998 . . . . . . . . . 1,270
1999 . . . . . . . . . 1,319
2000 and thereafter. . 331
--------

$ 42,814
========
</TABLE>

In January 1990, the Bank acquired approximately $60,000,000 of
deposits for a purchase price of $810,000. The purchase price was
identified as a core deposit intangible asset and is being amortized
using the straight-line method over a period of ten years, which was
determined to be the average life of the acquired deposits.

F-13
<PAGE> 102
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

6. OTHER BORROWINGS

Other borrowings are summarized as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------------------
1996 1995 1994
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Securities sold under repurchase agreements . . . . . . $ 8,261 $ 10,188 $ 10,448
Federal Home Loan Bank line of credit advances. . . . . 400 3,950 2,000
----------- ----------- -----------

$ 8,661 $ 14,138 $ 12,448
=========== =========== ===========
</TABLE>

The weighted average interest rate on repurchase agreements was 4.84%
and 5.52% at December 31, 1995 and 1994, respectively. The maturities
ranged from daily to 365 days at December 31, 1995 and 1994. At
December 31, 1995, the agreements were secured by investment
securities with carrying and estimated fair values of approximately
$21,418,000. At December 31, 1994, the agreements were secured by
available-for-sale securities with carrying and estimated fair values
of approximately $10,908,000, and held-to-maturity securities with
carrying values of approximately $9,009,000 and estimated fair values
of $8,913,000.

On May 26, 1994, the Bank entered into an annually renewable agreement
with the Federal Home Loan Bank of Topeka (FHLB) for a $5,000,000 line
of credit which replaced the term note previously in place. Advances
drawn on the line of credit bear an adjustable rate of interest which
reprices daily (6.15% at December 31, 1995). The line of credit is
secured by one to four family mortgage loans with a carrying value of
approximately $13,281,000 and matures May 24, 1996.

7. INCOME TAXES

Income tax expense (benefit) is summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 CURRENT DEFERRED TOTAL
--------- ---------- -------
<S> <C> <C> <C>
Federal . . . . . . . . . . . . . . . . $ 332 $ 8 $ 340
State . . . . . . . . . . . . . . . . . 106 1 107
--------- ---------- -------
$ 438 $ 9 $ 447
========= ========== =======
1994 (UNAUDITED)
Federal . . . . . . . . . . . . . . . . $ 709 $ 10 $ 719
State . . . . . . . . . . . . . . . . . 170 2 172
--------- ---------- -------
$ 879 $ 12 $ 891
========= ========== =======
1993 (UNAUDITED)
Federal . . . . . . . . . . . . . . . . $ 298 $ (13) $ 285
State . . . . . . . . . . . . . . . . . 97 1 98
--------- ---------- -------
$ 395 $ (12) $ 383
========= ========== =======

</TABLE>

F-14
<PAGE> 103
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. INCOME TAXES (CONTINUED)

The provision for Federal income tax expense differs from that
computed by applying the Federal statutory rate of 34% as indicated in
the following analysis (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Expected Federal income tax
expense . . . . . . . . . . . . . . . . $ 428 34.0 $ 828 34.0 $ 418 34.0
Municipal and disallowed
interest. . . . . . . . . . . . . . . . (53) (4.2) (86) (3.5) (111) (9.0)
State taxes, net of Federal
income tax benefit. . . . . . . . . . . 71 5.7 114 4.7 65 5.3
Other, net. . . . . . . . . . . . . . . . 1 - 35 1.4 11 0.8
-------- ----- -------- ----- -------- -----
$ 447 35.5 $ 891 36.6 $ 383 31.1
======== ===== ======== ===== ======== =====

</TABLE>

The tax effects of each type of significant item that gave rise to
deferred taxes at December 31, 1995 and 1994 were (in thousands):

<TABLE>
<CAPTION>
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Net unrealized (gain) loss on available-for-sale securities . . . . . $ (277) $ 89
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . 239 223
Premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . (43) (35)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) (31)
----------- -----------

Net deferred tax (liability) asset. . . . . . . . . . . . . . . . . . $ (129) $ 246
=========== ===========
</TABLE>

8. PROFIT SHARING AND SAVINGS PLANS

The Bank has a profit sharing plan covering all full-time employees
who satisfy the age and length of service requirements. The Bank's
contributions to the plan are discretionary and are determined
annually by the Board of Directors. The Bank's contributions were
$30,000, $25,000 and $35,000 for the years ended December 31,
1995,1994 and 1993, respectively.

In addition, the Bank has established a pre-tax savings plan under
Section 401(k) of the Internal Revenue Code. Under the plan, eligible
employees are able to contribute up to the lesser of 15% of their
compensation or $9,500. The Bank matches 50% of all employees'
contributions up to 3% of their annual salary. The Bank's
contributions were approximately $12,000, $12,000 and $11,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

F-15
<PAGE> 104
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Financial instruments which represent off-balance sheet credit risk
consist of open commitments to extend credit. Open commitments to
extend credit amounted to approximately $9,773,000 and $9,144,000 at
December 31, 1995 and 1994, respectively. Such agreements require the
Bank to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses. Since many of
the commitments are expected to expire without being fully drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit worthiness on
a case-by-case basis. The amount of collateral obtained (if deemed
necessary by the Bank upon extension of credit) is based on
management's credit evaluation of the customer. Collateral held
varies, but may include real property, accounts receivable, inventory
and property, plant and equipment.

10. CONCENTRATION OF CREDIT RISK

The Bank grants commercial, residential and rental real estate loans
to customers in the Shawnee County, Kansas area. Although the Bank
has a diversified loan portfolio, a substantial portion of the Bank's
debtors' ability to honor their contracts is dependent upon the real
estate economic sector. Collateral normally consists of real
property.

At December 31, 1995, the Bank's cash and due from banks included
commercial bank deposit accounts aggregating approximately $122,000 in
excess of the FDIC insured limit of $100,000 per institution.

11. RELATED PARTY MATTERS

The Bank leases one of its branch locations from Rossville Insurance
Agency, Inc., which is affiliated by common ownership interests with
Bankshares. This operating lease renews annually with terms, which
approximate the fair market rental value, of $2,700 each month or
$32,400 each year. The Bank subleases a portion of the branch
facility back to the lessor.

The Bank makes loans and loan commitments to employees, officers,
directors and stockholders in the normal course of business under
substantially the same terms as it does to others. An analysis of the
activity with respect to such loans and loan commitments is as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------------
(unaudited)
<S> <C> <C>
Balance, beginning of year. . . . . . . . . $1,440 $1,231
New loans and loan commitments. . . . . . . 1,131 1,028
Repayments and expirations. . . . . . . . . (928) (819)
-------- -------------
Balance, end of year. . . . . . . . . . . . $1,643 $1,440
======== =============
</TABLE>

F-16
<PAGE> 105

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. RELATED PARTY MATTERS (CONTINUED)

At December 31, 1995, Bankshares held a note receivable from major
shareholders, Ronald and Joyce Lutz, with a current balance of
$225,000. This note has an interest rate of 8.5% and matured January
31, 1996. The note was renewed for another year on January 25, 1996.
This note is included with "other" loans in note 3.

12. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on Bankshares' consolidated
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of its
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

As of December 31, 1995, the most recent notification from the FDIC
and the Kansas Department of Banking categorized the Bank as
adequately capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that
notification that management believes have changed the institution's
category.

To be categorized as well capitalized under prompt corrective action
provisions, the Bank must maintain total risk-based capital ratios of
10.0%, Tier I risk based capital ratios of 6.0% and Tier I leverage
capital ratios of 5.0%. Quantitive measures established by regulation
to ensure capital adequacy also requires the Bank to maintain minimum
capital ratios of total and Tier I risk-based capital (as defined by
regulation) of 8% and 4%, respectively; and a Tier I leverage capital
(as defined) of 4%. The Bank's actual ratios at December 31, 1995 were
13.3% and 14.5%, respectively. The Bank's leverage ratio at December
31, 1995 was 8.05%.

The Bank, as a state-regulated bank, is subject to certain dividend
restrictions as set forth by the Kansas Banking Department. Under
such restrictions, the Bank may not, without prior approval, declare
dividends in excess of the sum of the current year's earnings (as
defined) plus the retained earnings (as defined) from the prior two
years.

F-17
<PAGE> 106

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No.
107, Disclosures about Fair Value of Financial Instruments. The
-----------------------------------------------------
estimated fair value amounts have been determined by Bankshares and
the Bank using available market information and valuation methodologies.
However, considerable judgment is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that could
be realized in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material impact on
the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:

CASH, DUE FROM BANKS AND FEDERAL FUNDS SOLD

For cash, due from banks and Federal funds sold, the current carrying
amount is a reasonable estimate of fair value.

INTEREST BEARING DEPOSITS

The current carrying amount of interest bearing deposits is a reasonable
estimate of fair market value.

INVESTMENT SECURITIES

An estimate of the fair value for investment securities, including
mortgage-backed securities, is made utilizing quoted market data for
publicly traded securities, where available. A third-party pricing
service that specializes in "matrix pricing" and modeling techniques
provides estimated fair values for securities not actively traded.

LOANS

For certain homogenous categories of loans, such as some Small
Business Administration guaranteed loans, student loans, residential
mortgages, consumer loans, and commercial loans, fair value is
estimated using quoted market prices for similar loans or securities
backed by similar loans, adjusted for differences in loan characteristics.
The fair value of other types of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities. For loans which mature or reprice within one year, the current
carrying amount is a reasonable estimate of fair value. As of December 31,
1995, approximately 78% of the Bank's loan portfolio matured or repriced
within one year.

DEPOSITS

The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered
for deposits of similar remaining maturities.

F-18
<PAGE> 107

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

OTHER BORROWINGS

For securities sold under agreement to repurchase, the current
carrying amount is a reasonable estimate of fair value. The FHLB line
of credit advances bear a variable rate of interest which reprices
daily, therefore, the current carrying amount approximates fair value.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of
the counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The estimated fair value of letters of credit is
based on the fees currently charged for similar agreements. These
instruments were determined to have no positive or negative market
value adjustments and are not listed in the following table.

The estimated fair value of Bankshare's financial instruments is as
follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
CARRYING FAIR
AMOUNT VALUE
---------- -------
<S> <C> <C>
Financial assets:
Cash and cash equivalents . . . . . . . . $ 3,710 $ 3,710
Federal funds sold. . . . . . . . . . . . 900 900
Interest bearing deposits . . . . . . . . 75 75
Investment securities (note 2). . . . . . 37,364 37,364
Loans (note 3). . . . . . . . . . . . . . 52,325 51,877

Financial liabilities:
Deposits (note 5) . . . . . . . . . . . . 74,130 74,161
Other borrowings (note 6) . . . . . . . . 14,138 14,138

</TABLE>

The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995 and 1994.
Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of the financial
statements since that date and, therefore, current estimates of fair
value may differ significantly from the amounts presented herein.

F-19
<PAGE> 108

PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

14. PENDING TRANSACTION

On December 19, 1995, Bankshares and the Bank adopted a resolution to
enter into a reorganization agreement with Ameribanc, Inc. (Ameribanc)
and Mercantile Bancorporation Inc. (Mercantile). Ameribanc is a
wholly-owned subsidiary of Mercantile. The reorganization agreement
calls for (i) Bankshares to exchange its share (88.88%) of the Bank's
$100 par value common stock for shares of Mercantile's $5 par value
common stock and (ii) the Bank to merge with a wholly-owned subsidiary
of Ameribanc, whereby the remaining shares (11.12%) of the Bank's
common stock will be converted into the right to receive shares of
Mercantile common stock. Mercantile will issue a total of 325,843
shares of its stock on the closing date. The reorganization
agreement includes various conditions which, among other things, impose
certain limitations on Bankshares and the Bank related to dividends or
distributions to stockholders, lending activities and investment
decisions. The reorganization is contingent upon approval of various
regulatory agencies and the stockholders of Bankshares and the Bank.
If approved, the reorganization is expected to be consummated in the
third quarter of 1996.

15. UNAUDITED FINANCIAL STATEMENTS

The consolidated balance sheets for December 31, 1994 and March 31,
1996, and the statements of earnings, stockholders' equity and cash
flows for the years ended December 31, 1993 and 1994 and the three
months ended March 31, 1995 and 1996 are unaudited. In the opinion of
management, all adjustments necessary for the fair presentation of the
financial position and results of operations for the unaudited periods
have been made.

F-20
<PAGE> 109

<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATING BALANCE SHEET SCHEDULE 1
DECEMBER 31, 1995
<CAPTION>
PEOPLES STATE PEOPLES STATE
BANKSHARES, INC. BANK ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS

Cash and due from banks . . . . . . $ 12 $ 3,710 $ (12) $ 3,710
Interest bearing deposits . . . . . 227 75 (227) 75
Federal funds sold. . . . . . . . . - 900 900
Investment securities . . . . . . . - 36,837 - 36,837
Restricted equity securities. . . . - 527 - 527
Loans receivable, net . . . . . . . 225 52,100 - 52,325
Premises and equipment. . . . . . . 57 1,913 - 1,970
Accrued interest receivable . . . . 7 1,125 - 1,132
Investment in subsidiary. . . . . . 7,517 - (7,517) -
Core deposit intangible . . . . . . - 324 - 324
Other assets. . . . . . . . . . . . 5 55 - 60
---------------- ------------- ------------ ------------
$ 8,050 $ 97,566 $ (7,756) $ 97,860
================ ============= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Deposits. . . . . . . . . . . . . $ - $ 74,369 $ (239) $ 74,130
Other borrowings. . . . . . . . . - 14,138 - 14,138
Accrued interest payable. . . . . - 420 - 420
Deferred tax liability. . . . . . - 129 - 129
Other liabilities . . . . . . . . (10) 48 - 38
---------------- ------------- ------------ ------------
Total liabilities . . . . . . . (10) 89,104 (239) 88,855
---------------- ------------- ------------ ------------
Minority interest . . . . . . . . . - - 945 945
---------------- ------------- ------------ ------------
Stockholders' equity:
Common stock. . . . . . . . . . . 100 2,250 (2,250) 100
Additional paid-in capital. . . . 107 2,250 (2,250) 107
Retained earnings . . . . . . . . 7,659 3,547 (3,547) 7,659
Net unrealized gain on
available-for-sale
securities. . . . . . . . . . . 369 415 (415) 369
---------------- ------------- ------------ ------------
8,235 8,462 (8,462) 8,235

Less treasury stock . . . . . . . 175 - - 175
---------------- ------------- ------------ ------------
Total stockholders' equity. . . 8,060 8,462 (8,462) 8,060
---------------- ------------- ------------ ------------
$ 8,050 $ 97,566 $ (7,756) $ 97,860
================ ============= ============ ============
</TABLE>

See Accompanying Independent Auditors' Report.

F-21
<PAGE> 110
<TABLE>
PEOPLES STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF EARNINGS SCHEDULE 2
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
PEOPLES STATE PEOPLES STATE
BANKSHARES, INC. BANK ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees. . . . . . $ 20 $ 5,005 $ - $ 5,025
Investments. . . . . . . . . . . 8 2,054 - 2,062
Federal funds sold and . . . . .
interest bearing deposits . . . 5 27 (5) 27
---------------- ------------- ------------ ------------
33 7,086 (5) 7,114
---------------- ------------- ------------ ------------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . - 2,785 (5) 2,780
Other borrowings . . . . . . . . - 732 - 732
---------------- ------------- ------------ ------------
- 3,517 (5) 3,512
---------------- ------------- ------------ ------------

Net interest income. . . . . . 33 3,569 - 3,602

PROVISION FOR LOAN LOSSES. . . . . - 45 - 45
---------------- ------------- ------------ ------------

Net interest income after
provision for loan loss. . . . 33 3,524 - 3,557
---------------- ------------- ------------ ------------
OTHER INCOME
Service charges. . . . . . . . . - 452 - 452
Net securities losses. . . . . . - (14) - (14)
Equity in earnings of subsidiary 1,034 - (1,034) -
Other. . . . . . . . . . . . . . - 143 - 143
---------------- ------------- ------------ ------------

1,034 581 (1,034) 581
---------------- ------------- ------------ ------------
OTHER EXPENSE
Salaries and employee benefits . 478 1,148 - 1,626
Occupancy. . . . . . . . . . . . 55 439 - 494
Data processing. . . . . . . . . - 137 - 137
Federal deposit insurance
premium. . . . . . . . . . . . - 75 - 75
Amortization of deposit
purchase premium . . . . . . . - 81 - 81
Other. . . . . . . . . . . . . . 32 434 - 466
---------------- ------------- ------------ ------------
565 2,314 - 2,879
---------------- ------------- ------------ ------------
Earnings before income taxes
and minority interest . . . . 502 1,791 (1,034) 1,259

INCOME TAX (BENEFIT) EXPENSE . . . (181) 628 - 447
---------------- ------------- ------------ ------------

Earnings before minority
interest . . . . . . . . . . 683 1,163 (1,034) 812

MINORITY INTEREST. . . . . . . . . - - (129) (129)
---------------- ------------- ------------ ------------

NET EARNINGS . . . . . . . . . . . $ 683 $ 1,163 $ (1,163) $ 683
================ ============= ============ ============

See Accompanying Independent Auditors' Report.
</TABLE>

F-22
<PAGE> 111

[letterhead of GRA, Thompson, White & Co., P.C.]

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Peoples State Bank
Topeka, Kansas

We have audited the accompanying balance sheet of Peoples State Bank as of
December 31, 1995 and the related statements of earnings, stockholders'
equity and cash flows for the year then ended. These financial statements
are the responsibility of management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Peoples State Bank as of
December 31, 1995 and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.

Merriam, Kansas
March 27, 1996

/s/ GRA, Thompson, White & Co., P.C.

F-23
<PAGE> 112

<TABLE>
PEOPLES STATE BANK
BALANCE SHEETS
<CAPTION>

MARCH 31, DECEMBER 31,
----------- --------------------------
1996 1995 1994
----------- ----------- -----------
ASSETS (unaudited) (unaudited)
(In thousands)
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . . $ 2,612 $ 3,710 $ 3,981
Interest bearing deposits. . . . . . . . . . . . . . . 23 75 10
Federal funds sold . . . . . . . . . . . . . . . . . . - 900 1,200
Available-for-sale securities. . . . . . . . . . . . . 36,222 36,837 11,901
Held-to-maturity securities. . . . . . . . . . . . . . - - 16,145
Restricted equity securities . . . . . . . . . . . . . 535 527 519
Loans receivable, net. . . . . . . . . . . . . . . . . 51,365 52,100 47,279
Premises and equipment . . . . . . . . . . . . . . . . 1,885 1,913 2,009
Accrued interest receivable. . . . . . . . . . . . . . 992 1,125 847
Core deposit intangible. . . . . . . . . . . . . . . . 304 324 405
Deferred tax asset . . . . . . . . . . . . . . . . . . - - 246
Other assets . . . . . . . . . . . . . . . . . . . . . 47 55 40
----------- ----------- -----------

$ 93,985 $ 97,566 $ 84,582
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits . . . . . . . . . . . . . . . . . . . . . . $ 76,684 $ 74,369 $ 64,846
Other borrowings . . . . . . . . . . . . . . . . . . 8,661 14,138 12,448
Accrued interest payable . . . . . . . . . . . . . . 342 420 239
Deferred tax liability . . . . . . . . . . . . . . . 5 129 -
Other liabilities. . . . . . . . . . . . . . . . . . 191 48 73
----------- ----------- -----------

Total liabilities . . . . . . . . . . . . . . . . 85,883 89,104 77,606
----------- ----------- -----------

Commitments and contingencies

Stockholders' equity
Common stock, $100 par value; 22,500
shares authorized, issued and outstanding. . . . . 2,250 2,250 2,250
Additional paid-in capital . . . . . . . . . . . . . 2,250 2,250 2,250
Retained earnings. . . . . . . . . . . . . . . . . . 3,373 3,547 2,609
Net unrealized gain (loss) on available-
for-sale securities . . . . . . . . . . . . . . . 229 415 (133)
----------- ----------- -----------

Total stockholders' equity. . . . . . . . . . . . 8,102 8,462 6,976
----------- ----------- -----------

$ 93,985 $ 97,566 $ 84,582
=========== =========== ===========

The accompanying notes are an integral part of these financial statements
</TABLE>

F-24
<PAGE> 113
<TABLE>
PEOPLES STATE BANK
STATEMENTS OF EARNINGS
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------------- -----------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
INTEREST INCOME (In thousands)
<S> <C> <C> <C> <C> <C>
Loans, including fees. . . . . . . . $ 1,238 $ 1,114 $ 5,005 $ 4,142 $ 3,601
Investments. . . . . . . . . . . . . 586 441 2,054 1,543 1,766
Federal funds sold and interest
bearing deposits . . . . . . . . . 8 2 27 15 44
----------- ----------- ----------- ----------- -----------
1,832 1,557 7,086 5,700 5,411
----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . 799 558 2,785 1,915 2,002
Other borrowings . . . . . . . . . . 124 195 732 643 474
----------- ----------- ----------- ----------- -----------
923 753 3,517 2,558 2,476
----------- ----------- ----------- ----------- -----------

Net interest income . . . . . . . 909 804 3,569 3,142 2,935

PROVISION FOR LOAN LOSSES. . . . . . . - 15 45 68 120
----------- ----------- ----------- ----------- -----------

Net interest income after
provision for loan losses. . . . 909 789 3,524 3,074 2,815
----------- ----------- ----------- ----------- -----------

OTHER INCOME
Service charges. . . . . . . . . . . 106 104 452 432 393
Net securities gains (losses). . . . - (14) (14) (8) 5
Other. . . . . . . . . . . . . . . . 40 22 143 78 77
----------- ----------- ----------- ----------- -----------
146 112 581 502 475
----------- ----------- ----------- ----------- -----------

OTHER EXPENSES
Salaries and employee benefits . . . 293 286 1,148 1,101 1,018
Occupancy. . . . . . . . . . . . . . 96 103 439 358 353
Data processing. . . . . . . . . . . 32 32 137 118 112
Federal deposit insurance
premium. . . . . . . . . . . . . . 1 36 75 137 137
Management fees. . . . . . . . . . . - - - 120 120
Amortization of deposit purchase
premium. . . . . . . . . . . . . . 20 20 81 81 81
Other. . . . . . . . . . . . . . . . 191 101 434 457 438
----------- ----------- ----------- ----------- -----------
633 578 2,314 2,372 2,259
----------- ----------- ----------- ----------- -----------

Earnings before income taxes. . . 422 323 1,791 1,204 1,031

INCOME TAX EXPENSE . . . . . . . . . . 146 110 628 404 342
----------- ----------- ----------- ----------- -----------

NET EARNINGS . . . . . . . . . . . . . $ 276 $ 213 $ 1,163 $ 800 $ 689
=========== =========== =========== =========== ===========

The accompanying notes are an integral part of these financial statements
</TABLE>

F-25
<PAGE> 114

<TABLE>
PEOPLES STATE BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON
ADDITIONAL AVAILABLE-
COMMON PAID-IN RETAINED FOR-SALE
STOCK CAPITAL EARNINGS SECURITIES TOTAL
---------- ---------- ---------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992
(UNAUDITED). . . . . . . . . . . . . $ 2,250 $ 2,250 $ 1,820 $ - $ 6,320

Net earnings . . . . . . . . . . . . . - - 689 - 689

Dividends. . . . . . . . . . . . . . . - - (350) - (350)

Initial adoption of SFAS
No. 115. . . . . . . . . . . . . . . - - - 44 44
---------- ---------- ---------- ----------- ----------
BALANCE AT
DECEMBER 31, 1993
(UNAUDITED). . . . . . . . . . . . . 2,250 2,250 2,159 44 6,703

Net earnings . . . . . . . . . . . . . - - 800 - 800

Dividends. . . . . . . . . . . . . . . - - (350) - (350)

Net change . . . . . . . . . . . . . . - - - (177) (177)
---------- ---------- ---------- ----------- ----------
BALANCE AT
DECEMBER 31, 1994
(UNAUDITED). . . . . . . . . . . . . 2,250 2,250 2,609 (133) 6,976

Net earnings . . . . . . . . . . . . . - - 1,163 - 1,163

Dividends. . . . . . . . . . . . . . . - - (225) - (225)

Net change . . . . . . . . . . . . . . - - - 548 548
---------- ---------- ---------- ----------- ----------
BALANCE AT
DECEMBER 31, 1995. . . . . . . . . . $ 2,250 $ 2,250 $ 3,547 $ 415 $ 8,462

Net earnings . . . . . . . . . . . . . - - 276 - 276

Dividends. . . . . . . . . . . . . . . - - (450) - (450)

Net change . . . . . . . . . . . . . . - - - (186) (186)
---------- ---------- ---------- ----------- ----------

BALANCE AT
MARCH 31, 1996 (UNAUDITED). . . . . . $ 2,250 $ 2,250 $ 3,373 $ 229 $ 8,102
========== ========== ========== =========== ==========

The accompanying notes are an integral part of these financial statements
</TABLE>

F-26
<PAGE> 115

<TABLE>
PEOPLES STATE BANK
STATEMENTS OF CASH FLOWS

<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------------- ------------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES (In thousands)
<S> <C> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . . . . . . . . . . $ 276 $ 213 $ 1,163 $ 800 $ 689
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses. . . . . . . . . . . - 15 45 68 120
Net charge-offs and losses on other
real estate owned. . . . . . . . . . . . . . - - - 23 -
Gains on sales of available-for-sale securities - - - (3) (5)
Losses on sales of available-for-sale securities - 14 14 11 -
Amortization of premiums on securities . . . . 7 7 36 114 122
Accretion of discounts on securities . . . . . (29) (3) (23) (20) (22)
Depreciation and amortization expense. . . . . 35 41 169 157 103
Amortization of deposit purchase premium . . . 20 20 81 81 81
Gains on sales of loans. . . . . . . . . . . . (20) - (45) - -
Proceeds from loans sold . . . . . . . . . . . 1,476 - 4,343 - -
Originations of loans sold . . . . . . . . . . (1,456) - (4,298) - -
Change in:
Accrued interest receivable. . . . . . . . . 133 (50) (278) 12 48
Other assets . . . . . . . . . . . . . . . . 8 (48) (15) 102 (103)
Accrued interest payable . . . . . . . . . . (78) 23 181 31 (65)
Other liabilities. . . . . . . . . . . . . . 143 114 (25) (68) (31)
Deferred taxes . . . . . . . . . . . . . . . - 1 9 (9) (43)
---------- ----------- ---------- ----------- -----------
Net cash provided by operating activities 515 347 1,357 1,299 894
---------- ----------- ---------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Loans receivable originated, net of principal
collections. . . . . . . . . . . . . . . . . . . . 735 (2,118) (4,869) (5,904) (3,480)
Proceeds from maturities of held-tomaturity securities - 165 2,984 3,881 6,668
Proceeds from sales and maturities of available-for-sale
securities . . . . . . . . . . . . . . . . . . . . 2,278 2,983 9,977 11,147 234
Purchases of held-to-maturity securities . . . . . . - (1,998) (6,129) (2,913) (14,234)
Purchases of available-for-sale securities . . . . . (1,951) (999) (14,736) (6,017) (990)
Purchases of restricted equity securities. . . . . . (8) - (8) (266) -
Net change in securities purchased under agreements
to resell. . . . . . . . . . . . . . . . . . . . . - - - - 7,766
Net additions to premises and equipment. . . . . . . (7) (27) (73) (168) (1,255)
Proceeds from sales of other real estate owned . . . - - - 15 41
Recoveries of loans previously charged-off . . . . . - - 3 - 2
Net change in Federal funds sold . . . . . . . . . . 900 1,100 300 (1,200) -
Net change in interest bearing deposits. . . . . . . 52 (12) (65) - (10)
---------- ----------- ---------- ----------- -----------
Net cash provided (used) by investing activities 1,999 (906) (12,616) (1,425) (5,258)
---------- ----------- ---------- ----------- -----------

NET CASH PROVIDED (USED) BY OPERATING AND INVESTING
ACTIVITIES, CARRIED FORWARD. . . . . . . . . . . . . $ 2,514 $ (559) $ (11,259) $ (126) $ (4,364)
---------- ----------- ---------- ----------- -----------
</TABLE>

F-27
<PAGE> 116

<TABLE>
PEOPLES STATE BANK
STATEMENTS OF CASH FLOWS, CONTINUED

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in non-interest and interest bearing
demand and savings accounts. . . . . . . . . . . . 2,938 (1,690) 1,189 2,346 2,755
Net change in time deposits. . . . . . . . . . . . . (623) 1,667 8,334 977 (2,942)
Increase (decrease) in other borrowings. . . . . . . (5,477) (343) 1,690 (907) 3,008
Dividends paid . . . . . . . . . . . . . . . . . . . (450) (225) (225) (350) (350)
---------- ----------- ---------- ----------- -----------

Net cash provided (used) by financing activities (3,612) (591) 10,988 2,066 2,471
---------- ----------- ---------- ----------- -----------

(Decrease) increase in cash and
cash equivalents . . . . . . . . . . . . (1,098) (1,150) (271) 1,940 (1,893)

Cash and cash equivalents, beginning of period . . . . 3,710 3,981 3,981 2,041 3,934
---------- ----------- ---------- ----------- -----------

Cash and cash equivalents, end of period . . . . . . . $ 2,612 $ 2,831 $ 3,710 $ 3,981 $ 2,041
========== =========== ========== =========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION

Cash paid during the period for interest . . . . . . $ 1,001 $ 781 $ 3,336 $ 2,528 $ 2,067
========== =========== ========== =========== ===========

Cash paid during the period for income taxes . . . . $ - $ - $ 657 $ 293 $ 542
========== =========== ========== =========== ===========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES

Designation of investment securities as available-
for-sale at adoption of SFAS No. 115,
at amortized cost . . . . . . . . . . . . . . . . $ - $ - $ - $ - $ 16,693
========== =========== ========== =========== ===========

Transfer of held-to-maturity securities to
available-for-sale at amortized cost, net . . . . $ - $ - $ 19,290 $ - $ -
========== =========== ========== =========== ===========

The accompanying notes are an integral part of these financial statements
</TABLE>

F-28
<PAGE> 117
PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 (AUDITED), 1994 AND 1993 (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Peoples State Bank are in
accordance with generally accepted accounting principles and conform
to general practices within the banking industry. The more
significant of the principles used in preparing the financial
statements are briefly described below.

NATURE OF OPERATIONS

ESTIMATES

INVESTMENT SECURITIES

Effective December 31, 1993, The Bank adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain
----------------------
Investments in Debt and Equity Securities, which requires that
-----------------------------------------
investments be classified in three categories and accounted for as
follows: held-to-maturity securities reported at amortized cost;
trading securities reported at fair value with unrealized gains and
losses included in earnings; and available-for-sale securities
reported at fair value with unrealized gains and losses shown as a
separate component of stockholders' equity.

Restricted equity securities are reported at cost which equals the
estimated fair value.

Gains and losses on sales of securities are determined on a specific
identification method.

LOANS RECEIVABLE

Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield on loans with
maturities in excess of one year.

F-29
<PAGE> 118

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOWANCE FOR LOAN LOSSES

PREMISES AND EQUIPMENT

INCOME TAXES

The Bank files a consolidated Federal income tax return with its
parent. The parent company is reimbursed from its subsidiary for any
current income tax benefits derived.

F-30
<PAGE> 119

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, the Bank considers cash
on hand and amounts due from banks to be cash and cash equivalents.

2. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investments in debt
securities were as follows (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
AT DECEMBER 31, 1995
U.S. Treasury and agency securities . . . . $ 21,912 $ 412 $ (30) $ 22,294
Obligations of states and
political subdivisions. . . . . . . . . . 3,233 92 (4) 3,321
Mortgage-backed securities. . . . . . . . . 11,000 222 - 11,222
--------- ---------- ---------- ---------
$ 36,145 $ 726 $ (34) $ 36,837
========= ========== ========== =========
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
AT DECEMBER 31, 1994 (UNAUDITED)
U.S. Treasury and agency securities . . . . $ 7,918 $ - $ (49) $ 7,869
Obligations of states and
political subdivisions. . . . . . . . . . 2,865 38 (3) 2,900
Mortgage-backed securities. . . . . . . . . 5,362 52 (134) 5,280
--------- ---------- ---------- ---------
$ 16,145 $ 90 $ (186) $ 16,049
========= ========== ========== =========
AVAILABLE-FOR-SALE
AT DECEMBER 31, 1994 (UNAUDITED)
U.S. Treasury and agency securities . . . . $ 12,003 $ - $ (220) $ 11,783
Mortgage-backed securities. . . . . . . . . 119 - (1) 118
--------- ---------- ---------- ---------
$ 12,122 $ - $ (221) $ 11,901
========= ========== ========== =========
</TABLE>

F-31
<PAGE> 120

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. INVESTMENT SECURITIES (CONTINUED)

During December 1995, investment securities with a carrying amount of
$19,290,000 and estimated fair value of approximately $19,724,000 were
transferred from held-to-maturity to available-for-sale with the
unrealized gain of approximately $434,000 being included with the
unrealized gains on securities that continue to be classified as
available-for-sale. These transfers were made as part of a one-time
reassessment of the appropriateness of the classifications of all
securities as allowed by generally accepted accounting principles.
The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties (in thousands):

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
-----------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ----------
<S> <C> <C>
Due in one year or less . . . . . . . . . . $ 6,322 $ 6,390
Due after one year through five years . . . 18,156 18,532
Due after five years through ten years. . . 667 693
--------- ----------
25,145 25,615
Mortgage-backed securities. . . . . . . . . 11,000 11,222
--------- ----------
$ 36,145 $ 36,837
========= ==========
</TABLE>
At December 31, 1995, investment securities with a carrying value of
for other purposes.

F-32
<PAGE> 121

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. LOANS RECEIVABLE

Loans receivable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------- -----------
(unaudited)
<S> <C> <C>
Real estate . . . . . . . . . . . . . . . $ 29,118 $ 26,868
Commercial. . . . . . . . . . . . . . . . 11,937 9,870
Agricultural. . . . . . . . . . . . . . . 6,052 6,184
Consumer. . . . . . . . . . . . . . . . . 5,356 4,587
Other . . . . . . . . . . . . . . . . . . 350 443
---------- -----------
52,813 47,952
Allowance for loan losses . . . . . . . . (713) (673)
---------- -----------
$ 52,100 $ 47,279
========== ===========
</TABLE>

Changes in the allowance for loan losses are as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
(unaudited) (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year. . . . . . . $ 673 $ 621 $ 518
Provision for loan losses . . . . . . . 45 68 120
Charge-offs, net of recoveries. . . . . (5) (16) (17)
----------- ----------- -----------
Balance, end of year. . . . . . . . . . $ 713 $ 673 $ 621
=========== =========== ===========
</TABLE>
One impaired loan totaling approximately $118,000 and $131,000 at December
31, 1995 and 1994, respectively, has been recognized in conformity with
SFAS No. 114 as amended by SFAS No. 118. The related allowance for this
impaired loan at December 31, 1995 totaled approximately $18,000. There
was no interest income recognized on this impaired loan during 1995.

4. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------------ -------------
( unaudited )
<S> <C> <C>
Land, buildings and improvements. . . . . $ 1,752 $ 1,705
Furniture, fixtures and equipment . . . . 899 918
Leasehold improvements. . . . . . . . . . 461 435
------------ -------------
3,112 3,058
Accumulated depreciation and amortization (1,199) (1,049)
------------ -------------
$ 1,913 $ 2,009
============ =============
</TABLE>

F-33
<PAGE> 122

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. DEPOSITS

Deposits are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Demand
Noninterest-bearing . . . . . . . . . $ 9,691 $ 9,160
----------- -----------
Interest-bearing
NOW . . . . . . . . . . . . . . . . . 7,315 7,628
Money market. . . . . . . . . . . . . 9,259 8,070
----------- -----------
16,574 15,698
----------- -----------
Savings . . . . . . . . . . . . . . . . . 5,290 5,508
Time. . . . . . . . . . . . . . . . . . . 42,814 34,480
----------- -----------
$ 74,369 $ 64,846
=========== ===========
</TABLE>

Time deposits include certificates of deposit of $100,000 and over
totaling approximately $4,106,000 and $3,554,000 at December 31, 1995
and 1994, respectively.

At December 31, 1995, the approximate scheduled maturities of
certificates of deposit were as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1996 . . . . . . . . . . $ 31,926
1997 . . . . . . . . . . 7,968
1998 . . . . . . . . . . 1,270
1999 . . . . . . . . . . 1,319
2000 and thereafter. . . 331
----------
$ 42,814
==========
</TABLE>

In January 1990, the Bank acquired approximately $60,000,000 of
deposits for a purchase price of $810,000. This purchase price was
identified as a core deposit intangible asset and is being amortized
using the straight-line method over a period of ten years, which was
determined to be the average life of the acquired deposits.

F-34
<PAGE> 123
PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. OTHER BORROWINGS

Other borrowings are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------------------
1996 1995 1994
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Securities sold under repurchase agreements . . . . . . $ 8,261 $ 10,188 $ 10,448
Federal Home Loan Bank line of credit advances. . . . . 400 3,950 2,000
----------- ----------- -----------
$ 8,661 $ 14,138 $ 12,448
=========== =========== ===========
</TABLE>

On May 26, 1994, the Bank entered into an annually renewable agreement
with the Federal Home Loan Bank of Topeka (FHLB) for a $5,000,000 line
of credit which replaced the term note previously in place. Advances
drawn on this line of credit bear an adjustable rate of interest which
reprices daily (6.15% at December 31, 1995). The line of credit is
secured by one to four family mortgage loans with a carrying value of
approximately $13,281,000 and matures May 24, 1996.

7. INCOME TAXES

Income tax expense (benefit) is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 CURRENT DEFERRED TOTAL
------- -------- ---------
<S> <C> <C> <C>
Federal . . . . . . . . . . . . . . . . . $ 513 $ 8 $ 521
State . . . . . . . . . . . . . . . . . . 106 1 107
------- -------- ---------
$ 619 $ 9 $ 628
======= ======== =========
1994 (UNAUDITED)
Federal . . . . . . . . . . . . . . . . . $ 317 $ 10 $ 327
State . . . . . . . . . . . . . . . . . . 75 2 77
------- -------- ---------
$ 392 $ 12 $ 404
======= ======== =========
1993 (UNAUDITED)
Federal . . . . . . . . . . . . . . . . . $ 289 $ (12) $ 277
State . . . . . . . . . . . . . . . . . . 65 - 65
------- -------- ---------
$ 354 $ (12) $ 342
======= ======== =========
</TABLE>

F-35
<PAGE> 124

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. INCOME TAXES (CONTINUED)

The provision for Federal income tax expense differs from that computed by
applying the Federal statutory rate of 34% as indicated in the following
analysis (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
------ ------- ------ ------- ------ -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Expected Federal income
tax expense . . . . . . . . . $ 609 34.0 $ 409 34.0 $ 351 $ 34.0
Municipal interest. . . . . . . (53) (3.0) (59) (4.9) (61) (5.9)
State taxes, net of
Federal income tax
benefit . . . . . . . . . . . 71 4.0 51 4.2 43 4.2
Other, net. . . . . . . . . . . 1 0.1 3 0.3 9 0.9
------ ------- ------ ------- ------ -------
$ 628 35.1 $ 404 33.6 $ 342 33.2
====== ======= ====== ======= ====== =======
</TABLE>

The tax effects of each type of significant item that gave rise to
deferred taxes at December 31, 1995 and 1994, were (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Net unrealized (gain) loss on available-for-sale securities . $ (277) $ 89
Allowance for loan losses . . . . . . . . . . . . . . . . . . 239 223
Premises and equipment. . . . . . . . . . . . . . . . . . . . (43) (35)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) (31)
----------- -----------
Net deferred tax (liability) asset. . . . . . . . . . . . . . $ (129) $ 246
=========== ===========
</TABLE>

F-36
<PAGE> 125

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

8. PROFIT SHARING AND SAVINGS PLANS

In addition, the Bank has established a pre-tax savings plan under
Section 401(k) of the Internal Revenue Code. Under the plan, eligible
employees are able to contribute up to the lesser of 15% of their
compensation or $9,500. The Bank matches 50% of employees'
contributions up to 3% of their annual salary. The Bank's
contributions were approximately $12,000, $12,000 and $11,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

10. CONCENTRATION OF CREDIT RISK

At December 31, 1995, the Bank's cash and due from banks included
commercial bank deposit accounts aggregating approximately $122,000 in
excess of the FDIC insured limit of $100,000 per institution.

F-37
<PAGE> 126

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. RELATED PARTY MATTERS

During 1994 and 1993, the Bank paid $120,000 each year to Bankshares
for management fees related to the operations of the Bank.

The Bank makes loans and loan commitments to employee, officers,
directors and stockholders in the normal course of business under
substantially the same terms as it does to others. An analysis of the
activity with respect to such loans and loan commitments is as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Balance, beginning of year. . . . . . . . $ 1,440 $ 1,231
New loans and loan commitments. . . . . . 1,131 1,028
Repayments and expirations. . . . . . . . (928) (819)
----------- -----------
Balance, end of year. . . . . . . . . . . $ 1,643 $ 1,440
=========== ===========
</TABLE>

12. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of its assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

To be categorized as well capitalized under prompt corrective action
provisions, the Bank must maintain total risk-based capital ratios of
10.0%, Tier I risk based capital ratios of 6.0% and Tier I leverage
capital ratios of 5.0%. Quantitive measures established by regulation
to ensure capital adequacy also require the Bank to maintain minimum
capital ratios of total and Tier I risk-based capital (as defined by
regulation) of 8% and 4%, respectively; and a Tier I leverage capital
(as defined) of 4%. The Bank's actual risk-based ratios at December
31, 1995 were 13.3% and 14.5%, respectively. The Bank's leverage ratio
at December 31, 1995 was 8.05%.

F-38
<PAGE> 127

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. REGULATORY MATTERS (CONTINUED)

13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No.
107, Disclosures about Fair Value of Financial Instruments. The
-----------------------------------------------------
estimated fair value amounts have been determined by the Bank using
available market information and valuation methodologies. However,
considerable judgment is necessarily required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that
could be realized in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material
impact on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:

CASH, DUE FROM BANKS AND FEDERAL FUNDS SOLD

For cash, due from banks and Federal funds sold, the current carrying
amount is a reasonable estimate of fair value.

INTEREST BEARING DEPOSITS

The current carrying amount of interest bearing deposits is a
reasonable estimate of fair value.

INVESTMENT SECURITIES

LOANS

For certain homogenous categories of loans, such as some Small
Business Administration guaranteed loans, student loans, residential
mortgages, consumer loans, and commercial loans, fair value is
estimated using quoted market prices for similar loans or securities
backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated
by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities. For loans which mature or reprice
within one year, the current carrying amount is a reasonable estimate
of fair value. As of December 31, 1995, approximately 78% of the
Bank's loan portfolio matured or repriced within one year.

F-39
<PAGE> 128

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

DEPOSITS

OTHER BORROWINGS

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

The estimated fair value of the Bank's financial instruments is as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Financial assets:
Cash and cash equivalents . . . . . . . . $ 3,710 $ 3,710
Federal funds sold. . . . . . . . . . . . 900 900
Interest bearing deposits . . . . . . . . 75 75
Investment securities (note 2). . . . . . 37,364 37,364
Loans (note 3). . . . . . . . . . . . . . 52,100 51,652

Financial liabilities:
Deposits (note 5) . . . . . . . . . . . . 74,369 74,400
Other borrowings (note 6) . . . . . . . . 14,138 14,138
</TABLE>

The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of the financial statements
since that date and, therefore, current estimates of fair value may
differ significantly from the amounts presented herein.

F-40
<PAGE> 129

PEOPLES STATE BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED

14. PENDING TRANSACTION

15. UNAUDITED FINANCIAL STATEMENTS

The balance sheets for December 31, 1994 and March 31, 1996 and the
statements of earnings, stockholders' equity and cash flows for the
years ended December 31, 1993 and 1994 and the three months ended
March 31, 1995 and 1996 are unaudited. In the opinion of management,
all adjustments necessary for the fair presentation of the financial
position and results of operations for the unaudited periods have been
made.

F-41
<PAGE> 130

ANNEX A
-------

The following is the text of the statutory dissenters' rights as
set forth in Section 17-6712 of the Kansas Corporation Code:

SEC. 17-6712 PAYMENT FOR "STOCK" OF "STOCKHOLDER" OBJECTING TO MERGER OR
CONSOLIDATION; "STOCKHOLDER," "STOCK" AND "SHARE" DEFINED; NOTICE TO
OBJECTING STOCKHOLDERS; DEMAND FOR PAYMENT; APPRAISAL AND DETERMINATION OF
VALUE BY DISTRICT COURT, WHEN; TAXATION OF COSTS; RIGHTS OF OBJECTING
STOCKHOLDERS; STATUS OF STOCK; SECTION INAPPLICABLE TO CERTAIN SHARES OF
STOCK.

(a) When used in this section, the word "stockholder" means a holder
of record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation.

(b) The corporation surviving or resulting from any merger or
consolidation, within 10 days after the effective date of the merger or
consolidation, shall notify each stockholder of any corporation of this state
so merging or consolidating who objected thereto in writing and whose shares
either were not entitled to vote or were not voted in favor of the merger or
consolidation, and filed such written objection with the corporation before
the taking of the vote on the merger or consolidation, that the merger or
consolidation has become effective. If any such stockholder, within 20 days
after the date of mailing of the notice, shall demand in writing, from the
corporation surviving or resulting from the merger or consolidation, payment
of the value of the stockholder's stock, the surviving or resulting
corporation shall pay to the stockholder, within 30 days after the expiration
of the period of 20 days, the value of the stockholder's stock on the
effective date of the merger or consolidation exclusive of any element of
value arising from the expectation or accomplishment of the merger or
consolidation.

(c) If during a period of 30 days following the period of 20 days
provided for in subsection (b), the corporation and any such stockholder fail
to agree upon the value of such stock, any such stockholder, or the
corporation surviving or resulting from the merger or consolidation, may
demand a determination of the value of the stock of all such stockholders by
an appraiser or appraisers to be appointed by the district court, by filing a
petition with the court within four months after the expiration of the
thirty-day period.

(d) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the corporation, which shall file with the
clerk of such court, within 10 days after such service, a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation. If the petition shall be
filed by the corporation, the petition shall be accompanied by such duly
verified list. The clerk of the court shall give notice of the time and
place fixed for the hearing of such petition by registered or certified mail
to the corporation and to the stockholders shown upon the list at the
addresses therein stated and notice shall also be given by publishing a
notice at least once, at least one week before the day of the hearing, a
newspaper of general circulation in the county in which the court is located.
The court may direct such additional publication of notice as it deems
advisable. The forms of the notices by mail and by publication shall be
approved by the court.

(e) After the hearing of such petition the court shall determine the
stockholders who have complied with the provisions of this section and become
entitled to the valuation of and payment for their

A-1
<PAGE> 131

shares, and shall appoint an appraiser or appraiser to determine such value.
Any such appraiser may examine any of the books and records of the corporation
or corporations the stock of which such appraiser is charged with the duty of
valuing, and such appraiser shall make a determination of the value of the
shares upon such investigation as seems proper to the appraiser. The
appraiser or appraisers shall also afford a reasonable opportunity to the
parties interested to submit to the appraiser pertinent evidence on the value
of the shares. The appraiser or appraisers, also, shall have the powers and
authority conferred upon masters by K.S.A. 60-253, and amendments thereto.

(f) The appraiser or appraisers shall determine the value of the
stock of the stockholders adjudged by the court to be entitled to payment
therefor and shall file a report respecting such value in the office of the
clerk of the court, and notice of the filing of such report shall be given by
the clerk of the court to the parties in interest. Such report shall be
subject to exceptions to be heard before the court both upon the law and
facts. The court by its decree shall determine the value of the stock of the
stockholders entitled to payment therefor and shall direct the payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto by the surviving or resulting corporation.
Upon payment of the judgment of the surviving or resulting corporation, the
clerk of the district court shall surrender to the corporation the
certificates of shares of stock held by the clerk pursuant to subsection (g).
The decree may be enforced as other judgments of the district court may be
enforced, whether such surviving or resulting corporation be a corporation of
this state or of any other state.

(g) At the time of appointing the appraiser or appraisers, the court
shall require the stockholders, who hold certificated shares and who demanded
payment for their shares to submit their certificates of stock to the clerk
of the court, to be held by the clerk pending the appraisal proceedings. If
any stockholder fails to comply with such direction, the court shall dismiss
the proceedings as to such stockholder.

(h) The cost of any such appraisal, including a reasonable fee to and
the reasonable expenses of the appraiser, but exclusive of fees of counsel or
of experts retained by any party, shall be determined by the court and taxed
upon the parties to such appraisal or any of them as appears to be equitable,
except that the cost of giving the notice by publication and by registered or
certified mail hereinabove provided for shall be paid by the corporation.
The court, on application of any party in interest, shall determine the
amount of interest, if any, to be paid upon the value of the stock of the
stockholders entitled thereto.

(i) Any stockholder who has demanded payment of the stockholder's
stock as herein provided shall not thereafter be entitled to vote such for
any purpose or be entitled to the payment of dividends or other distribution
on the stock, except dividends or other distributions payable to stockholders
of record at a date which is prior to the effective date of the merger or
consolidation, unless the appointment of an appraiser or appraisers shall not
be applied for within the time herein provided, or the proceeding be
dismissed as to such stockholder, or unless such stockholder with the written
approval of the corporation shall deliver to the corporation a written
withdrawal of the stockholder's objections to and an acceptance of the merger
or consolidation, in any of which cases the right to such stockholder to
payment for the stockholder's stock shall cease.

(j) The shares of the surviving or resulting corporation into which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.

(k) This section shall not apply to the shares of any class or series
of a class of Stock, which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders at which the agreement of merger or consolidation is to be acted
on, were either

A-2
<PAGE> 132

(1) registered on a national securities exchange, or (2) held of record by not
less than 2,000 stockholders, unless the articles of incorporation of the
corporation issuing such stock shall otherwise provide; nor shall this section
apply to any of the shares of stock of the constituent corporation surviving a
merger, if the merger did not require for its approval the vote of the
stockholders of the surviving corporation, as provided in subsection (f) of
K.S.A. 17-6701 and amendments thereto. This subsection shall not be
applicable to the holders of a class or series of a class of stock of a
constituent corporation if under the terms of a merger of consolidation
pursuant to K.S.A. 17-6701 or 17-6702, and amendments thereto, such holders
are required to accept for such stock anything except (i) stock or stock and
cash in lieu of fractional shares of the corporation surviving or resulting
from such merger or consolidation, or (ii) stock or stock and cash in lieu of
fractional shares of any other corporation, which at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders at which the agreement of merger or consolidation is
to be acted on, were either registered on a national securities exchange or
held of record by not less than 2,000 stockholders, or (iii) a combination of
stock or stock and cash in lieu of fractional shares as set forth in (i) and
(ii) of this subsection.

A-3
<PAGE> 133

PROXY PEOPLES STATE BANKSHARES, INC.
1080 S.W. WANAMAKER ROAD, SUITE A
TOPEKA, KANSAS 66604-3888

FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD --------------, 1996

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned stockholder(s) of PEOPLES STATE BANKSHARES, INC.
("Peoples Bankshares"), does hereby nominate, constitute and appoint
- ---------------------- and ---------------------------, 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
Peoples Bankshares standing in the name of the undersigned on its books at
the close of business on --------------------, 1996 at the Special Meeting
of Stockholders to be held at -----------------, ---------------------,
- -------------------------, -----------------------, on -----, --------------,
1996, at -:-0 -.m. Central Time, and at any adjournments or postponements
thereof, with all the powers the undersigned would possess if personally
present, as follows:

1. A proposal to approve the Agreement and Plan of
Reorganization dated as of December 19, 1995 (the "Reorganization
Agreement"), which provides for (i) the exchange (the "Exchange") of all of
the shares of common stock of Peoples State Bank ("Peoples Bank") owned by
Peoples Bankshares for shares of common stock of Mercantile Bancorporation
Inc. ("MBI"), (ii) the merger (the "Merger") of Mercantile Bank of Shawnee
County, a wholly owned subsidiary of Ameribanc, Inc. ("Ameribanc") in
organization, with and into Peoples Bank, whereby, (x) upon consummation of
the Exchange, each share of Peoples Bank common stock that is beneficially
owned by Peoples Bankshares will be transferred to Ameribanc in exchange for
14.4819 shares of MBI common stock and (y) upon consummation of the Merger,
each outstanding share of Peoples Bank common stock (other than the shares
that have been transferred to Ameribanc pursuant to the Exchange) will be
converted into 14.4819 shares of MBI common stock.

/ / FOR / / AGAINST / / ABSTAIN

2. To consider and vote upon a proposal to permit the Special Meeting
to be adjourned or postponed, in the discretion of the proxies, which
adjournment or postponement would be used for the purpose, among others, of
allowing time for the solicitation of additional votes to approve the
Reorganization Agreement.

/ / FOR / / AGAINST / / ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO
DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" EACH OF
THE PROPOSALS LISTED ABOVE.

Dated: ---------------

------------------------------
Signature of Stockholder

When signing as an attorney, executor, administrator, trustee or guardian,
please give full title. If more than one person holds the power to vote the
same shares, all must sign. All joint owners must sign.

PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.

<PAGE> 134

PROXY PEOPLES STATE BANK
1064 S.W. WANAMAKER ROAD
TOPEKA, KANSAS 66604-3888

FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ------------------, 1996

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned stockholder(s) of PEOPLES STATE BANK ("Peoples
Bank"), does hereby nominate, constitute and appoint --------------------
and ---------------------, 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, $100.00 par value, of Peoples Bank standing in the
name of the undersigned on its books at the close of business on ------------,
1996 at the Special Meeting of Shareholders to be held at ------------------,
- ----------------------, -----------------------, ------------------, on
- --------------------, ------------------, 1996, at -:-0 -.m. Central Time, and
at any adjournments or postponements thereof, with all the powers the
undersigned would possess if personally present, as follows:

1. A proposal to approve the Agreement and Plan of
Reorganization dated as of December 19, 1995 (the "Reorganization
Agreement"), and the related Plan of Merger dated as of ---------------- (the
"Plan of Merger," and, together with the Reorganization Agreement, the
"Acquisition Agreements"), which provide for (i) the exchange (the
"Exchange") of all of the shares of common stock of Peoples State Bank
("Peoples Bank") owned by Peoples Bank for shares of common stock of
Mercantile Bancorporation Inc. ("MBI"), (ii) the merger (the "Merger") of
Mercantile Bank of Shawnee County, a wholly owned subsidiary of Ameribanc,
Inc. ("Ameribanc") in organization, with and into Peoples Bank, whereby, (x)
upon consummation of the Exchange, each share of Peoples Bank common stock
that is beneficially owned by Peoples Bankshares will be transferred to
Ameribanc in exchange for 14.4819 shares of MBI common stock and (y) upon
consummation of the Merger, each outstanding share of Peoples Bank common
stock (other than the shares that have been transferred to Ameribanc pursuant
to the Exchange) will be converted into 14.4819 shares of MBI common stock.

/ / FOR / / AGAINST / / ABSTAIN

Dated: ---------------

------------------------------
Signature of Stockholder

PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.

<PAGE> 135

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS
------------------------------------------

Item 20. Indemnification of Officers and Directors
- ---------------------------------------------------

Sections 351.355(1) and (2) of The General and Business
Corporation Law of the State of Missouri provide that a corporation may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he of she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if
he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful, except that, in the case of an action or
suit by or in the right of the corporation, the corporation may not indemnify
such persons against judgments and fines and no person shall be indemnified
as to any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation, unless and only to the extent that the court in
which the action or suit was brought determines upon application that such
person is fairly and reasonably entitled to indemnity for proper expenses.
Section 351.355(3) provides that, to the extent that a director, officer,
employee or agent of the corporation has been successful in the defense of
any such action, suit or proceeding or any claim, issue or matter therein, he
or shall be indemnified against expenses, including attorneys' fees, actually
and reasonably incurred in connection with such action, suit or proceeding.
Section 351.355(7) provides that a corporation may provide additional
indemnification to any person indemnifiable under subsection (1) or (2),
provided such additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a
shareholder-approved bylaw or agreement, and provided further that no person
shall thereby be indemnified against conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct
or which involved an accounting for profits pursuant to Section 16(b) of the
Securities Exchange Act of 1934.

Article 12 of the Restated Articles of Incorporation of MBI
provides that MBI shall extend to its directors and executive officers the
indemnification specified in subsections (1) and (2) and the additional
indemnification authorized in subsection (7) and that it may extend to other
officers, employees and agents such indemnification and additional
indemnification.

Pursuant to directors' and officers' liability insurance
policies, with total annual limits of $30,000,000, MBI's directors and
officers are insured, subject to the limits, retention, exceptions and other
terms and conditions of such policy, against liability for any actual or
alleged error, misstatement, misleading statement, act or omission, or
neglect or breach of duty by the directors or officers of MBI, individually
or collectively, or any matter claimed against them solely by reason of their
being directors or officers of MBI.

II-1
<PAGE> 136

Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------

A. Exhibits. See Exhibit Index.
---------

B. Financial Statement Schedules. Not Applicable.
-----------------------------

Item 22. Undertakings
- ----------------------

(1) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of MBI pursuant to the foregoing provisions, or
otherwise, MBI 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
MBI of expenses incurred or paid by a director, officer or controlling person
of MBI 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, MBI will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(2) MBI hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of MBI's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) MBI hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.

(4) MBI undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 (Section
230.415 of this chapter), will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offering therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(5) MBI hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.

II-2
<PAGE> 137

(6) MBI 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.

(7) MBI hereby undertakes:

(a) To file during any period in which offers and sales
are being made, a post-effective amendment to this Registration
Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof), which individually
or in the aggregate, represent a fundamental change
in the information set forth in the Registration
Statement;

(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.

(b) That for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.

(c) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.

II-3
<PAGE> 138

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933, MBI
has duly caused this Registration Statement relating to the acquisition of
Peoples State Bank to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, State of Missouri, on May 10,
1996.

MERCANTILE BANCORPORATION INC.

By: /s/ Thomas H. Jacobsen
-------------------------------
Thomas H. Jacobsen
Chairman of the Board, President and
Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned officers and directors of Mercantile
Bancorporation Inc., hereby severally and individually constitute and appoint
Thomas H. Jacobsen and John Q. Arnold, and each of them, the true and lawful
attorneys and agents of each of us to execute in the name, place and stead of
each of us (individually and in any capacity stated below) any and all
amendments to this Registration Statement on Form S-4, registering the
issuance by Mercantile Bancorporation Inc. of shares of its common stock, and
the preferred share purchase rights which trade therewith, in connection with
the acquisition of Peoples State Bank, and all instruments necessary or
advisable in connection therewith and to file the same with the Securities
and Exchange Commission, each of said attorneys and agents to have the power
to act with or without the others and to have full power and authority to do
and perform in the name and on behalf of each of the undersigned every act
whatsoever necessary or advisable to be done in the premises as fully and to
all intents and purposes as any of the undersigned might or could do in
person, and we hereby ratify and confirm our signatures as they may be signed
by our said attorneys and agents or each of them to any and all such
amendments and instruments.

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 date indicated.

Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Thomas H. Jacobsen Chairman of the Board, May 10, 1996
- ------------------------------------ President, Chief Executive
Thomas H. Jacobsen Officer and Director
Principal Executive Officer

/s/ John Q. Arnold Senior Executive Vice President and May 10, 1996
- ------------------------------------ Chief Financial Officer
John Q. Arnold
Principal Financial Officer

/s/ Michael T. Normile Senior Vice President - Finance May 10, 1996
- ------------------------------------ and Control
Michael T. Normile
Principal Accounting Officer

II-4
<PAGE> 139

Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Harry M. Cornell, Jr. Director May 10, 1996
- ------------------------------------
Harry M. Cornell, Jr.

/s/ William A. Hall Director May 10, 1996
- ------------------------------------
William A. Hall

/s/ Thomas A. Hays Director May 10, 1996
- ------------------------------------
Thomas A. Hays

/s/ Frank Lyon, Jr. Director May 10, 1996
- ------------------------------------
Frank Lyon, Jr.

Director
- ------------------------------------
Edward A. Mueller

Director
- ------------------------------------
Robert W. Murray

/s/ Harvey Saligman Director May 10, 1996
- ------------------------------------
Harvey Saligman

/s/ Craig D. Schnuck Director May 10, 1996
- ------------------------------------
Craig D. Schnuck

/s/ Robert L. Stark Director May 10, 1996
- ------------------------------------
Robert L. Stark

/s/ Patrick T. Stokes Director May 10, 1996
- ------------------------------------
Patrick T. Stokes

/s/ John A. Wright Director March 1, 1996
- ------------------------------------
John A. Wright
</TABLE>

II-5
<PAGE> 140

EXHIBIT INDEX

Exhibit
Number Description Page
- ------ ------------ ----

<S> <C> <C>
2.1 Agreement and Plan of Reorganization dated as of
December 19, 1995, by and between MBI and Ameribanc, as
Buyers, and Peoples Bank and Peoples Bankshares, as Sellers.

2.2 Plan of Merger dated as of May 2, 1996, by and between
Mercantile Bank of Shawnee County (in organization) and
Peoples Bank.

2.3 Form of Voting Agreement dated as of December 19, 1995, by
and between MBI and certain stockholders of Peoples
Bankshares.

3.1 MBI's Restated Articles of Incorporation, as amended and
currently in effect, filed as Exhibit 3(i) to MBI's Report
on Form 10-Q for the quarter ended June 30, 1994, are
incorporated herein by reference.

3.2 MBI's By-Laws, as amended and currently in effect, filed as
Exhibit 3.2 to MBI's Report on Form 10-K for the year ended
December 31, 1995, are incorporated herein by reference.

4.1 Form of Indenture Regarding Subordinated Securities between
MBI and The First National Bank of Chicago, Trustee, filed
as Exhibit 4.1 to MBI's Report on Form 8-K dated
September 24, 1992, is incorporated herein by reference.

4.2 Rights Agreement dated as of May 23, 1988 between MBI and
Mercantile Bank, as Rights Agent (including as exhibits
thereto the form of Certificate of Designation, Preferences
and Rights of Series A Junior Participating Preferred Stock
and the form of Right Certificate), filed as Exhibits 1 and
2 to MBI's Registration Statement No. 0-6045 on Form 8-A,
dated May 24, 1988, is incorporated herein by reference.

5.1 Opinion of Thompson Coburn as to the legality of the
securities being registered.

8.1 Opinion of Thompson Coburn regarding certain tax matters in
the Acquisition.

10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan,
as amended, filed as Exhibit 10-3 to MBI's Report on Form
10-K for the year ended December 31, 1989 (File No.
1-11792), is incorporated herein by reference.

10.2 The Mercantile Bancorporation Inc. Executive Incentive
Compensation Plan, filed as Appendix C to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of Shareholders
is incorporated herein by reference.

10.3 The Mercantile Bancorporation Inc. Employee Stock Purchase
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K for
the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.

<PAGE> 141

Exhibit
Number Description Page
- ------ ------------ ----

<S> <C> <C>
10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K for
the year ended December 31, 1990 (File No. 1-11792), is
incorporated herein by reference.

10.5 Amendment Number One to the Mercantile Bancorporation Inc.
1991 Employee Incentive Plan, filed as Exhibit 10-6 to MBI's
Report on Form 10-K for the year ended December 31, 1994, is
incorporated herein by reference.

10.6 The Mercantile Bancorporation Inc. 1994 Stock Incentive
Plan, filed as Appendix B to MBI's definitive Proxy
Statement for the 1994 Annual Meeting of Shareholders, is
incorporated herein by reference.

10.7 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan
for Non-Employee Directors, filed as Appendix E to MBI's
definitive Proxy Statement for the 1994 Annual Meeting of
Shareholders, is incorporated herein by reference.

10.8 The Mercantile Bancorporation Inc. Voluntary Deferred
Compensation Plan, filed as Appendix D to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of Shareholders,
is incorporated herein by reference.

10.9 Form of Employment Agreement for Thomas H. Jacobsen, as
amended, filed as Exhibit 10-8 to MBI's Report on Form 10-K
for the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.

10.10 Form of Change of Control Employment Agreement for John W.
McClure, W. Randolph Adams, John Q. Arnold and Certain Other
Executive Officers, filed as Exhibit 10-10 to MBI's Report
on Form 10-K for the year ended December 31, 1989 (File No.
1-11792), is incorporated herein by reference.

10.11 Amended and Restated Agreement and Plan of Reorganization
dated as of December 2, 1994 by and among MBI and
TCBankshares, Inc., filed as Exhibit 2.1 to MBI's Report on
Form 8-K dated December 21, 1994, is incorporated herein by
reference.

10.12 Agreement and Plan of Reorganization dated August 4, 1995,
by and between MBI and Hawkeye Bancorporation, filed as
Exhibit 2.1 to MBI's Registration Statement No. 33-63609, is
incorporated herein by reference.

10.13 Mercantile Bancorporation Inc. Supplemental Retirement Plan,
filed as Exhibit 10-12 to MBI's Report on Form 10-K for the
year ended December 31, 1992 (File No. 1-11792), is
incorporated herein by reference.

23.1 Consent of KPMG Peat Marwick LLP with regard to the use of
its reports on MBI's financial statements.

<PAGE> 142

Exhibit
Number Description Page
- ------ ------------ ----

<S> <C> <C>
23.2 Consent of GRA, Thompson, White & Co., P.C. with regard to the use
of its reports on Peoples Bankshares and Peoples Bank's financial
statements.

23.3 Consent of Thompson Coburn (included in Exhibit 5.1).

24.1 Power of Attorney (included on signature page).
</TABLE>

<PAGE> 1
Exhibit 2.1

- -------------------------------------------------------------------------------

AGREEMENT AND PLAN OF REORGANIZATION

among

MERCANTILE BANCORPORATION INC.,
a Missouri corporation,

and

AMERIBANC, INC.,
a Missouri corporation, as Buyers,

and

PEOPLES STATE BANK,
a Kansas state bank,

and

PEOPLES STATE BANKSHARES, INC.,
a Kansas corporation, as Sellers

- -------------------------------------------------------------------------------

<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
Recitals 1

ARTICLE I

THE ACQUISITION TRANSACTIONS

1.01 The Acquisition Transactions . . . . . . . . . . . . . . . 1
1.02 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Method of Effecting Merger and Effective Time. . . . . . . 2
1.04 Charter and By-Laws. . . . . . . . . . . . . . . . . . . . 3
1.05 Board of Directors and Officers. . . . . . . . . . . . . . 3
1.06 Additional Actions . . . . . . . . . . . . . . . . . . . . 3
1.07 Conversion of Securities . . . . . . . . . . . . . . . . . 3
1.08 Exchange Procedures. . . . . . . . . . . . . . . . . . . . 4
1.09 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . 5
1.10 No Fractional Shares . . . . . . . . . . . . . . . . . . . 5
1.11 Transfer Restrictions; Closing of Stock Transfer Books . . 5
1.12 Anti-Dilution. . . . . . . . . . . . . . . . . . . . . . . 6
1.13 Reservation of Right to Revise Transaction . . . . . . . . 6

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLERS

2.01 Organization and Authority . . . . . . . . . . . . . . . . 6
2.02 Corporate Authorization; Records . . . . . . . . . . . . . 7
2.03 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 8
2.04 Capitalization of Peoples Bank . . . . . . . . . . . . . . 8
2.05 Financial Statements . . . . . . . . . . . . . . . . . . . 8
2.06 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.07 Title to and Condition of Assets . . . . . . . . . . . . . 9
2.08 Real Property. . . . . . . . . . . . . . . . . . . . . . . 10
2.09 Loans, Commitments and Contracts . . . . . . . . . . . . . 11
2.10 Absence of Defaults. . . . . . . . . . . . . . . . . . . . 13
2.11 Absence of Undisclosed Liabilities . . . . . . . . . . . . 13
2.12 Allowance for Loan and Lease Losses; Non-Performing Assets 14
2.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Material Adverse Change. . . . . . . . . . . . . . . . . . 15
2.15 Litigation and Other Proceedings . . . . . . . . . . . . . 15
2.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . 15
2.17 Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.18 Material Interests of Certain Persons. . . . . . . . . . . 16
2.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 17
2.20 Conduct of Peoples Bankshares' and Peoples Bank's
Businesses to Date . . . . . . . . . . . . . . . . . . . . 18

-i-
<PAGE> 3

2.21 Registration Statement, Etc. . . . . . . . . . . . . . . . 18
2.22 Brokers and Finders; Other Liabilities . . . . . . . . . . 19
2.23 Directors' and Officers' Insurance . . . . . . . . . . . . 19
2.24 Tax and Regulatory Matters . . . . . . . . . . . . . . . . 19
2.25 Interest Rate Risk Management Instruments. . . . . . . . . 19

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE MERCANTILE ENTITIES

3.01 Organization and Authority . . . . . . . . . . . . . . . . 20
3.02 Corporate Authorization. . . . . . . . . . . . . . . . . . 20
3.03 Capitalization of Mercantile . . . . . . . . . . . . . . . 21
3.04 Mercantile Financial Statements. . . . . . . . . . . . . . 21
3.05 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.06 Material Adverse Change. . . . . . . . . . . . . . . . . . 22
3.07 Registration Statement, Proxy Statement, Etc.. . . . . . . 22
3.08 Brokers and Finders. . . . . . . . . . . . . . . . . . . . 22
3.09 Legal Proceedings or Other Adverse Facts . . . . . . . . . 22

ARTICLE IV

CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME

4.01 Conduct of Businesses Prior to the Effective Time. . . . . 23
4.02 Forbearances of Peoples Bankshares and Peoples Bank. . . . 23
4.03 Forbearances of the Mercantile Entities. . . . . . . . . . 25

ARTICLE V

ADDITIONAL AGREEMENTS

5.01 Access and Information; Due Diligence. . . . . . . . . . . 26
5.02 Registration Statement; Regulatory Matters . . . . . . . . 26
5.03 Shareholder Approvals. . . . . . . . . . . . . . . . . . . 27
5.04 Current Information. . . . . . . . . . . . . . . . . . . . 27
5.07 Agreements of Affiliates . . . . . . . . . . . . . . . . . 29
5.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.09 Miscellaneous Agreements and Consents. . . . . . . . . . . 29
5.10 Press Releases . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Indemnification of Peoples Bank's Directors, Officers and
Employees. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 30
5.13 Taxes of Peoples Bankshares. . . . . . . . . . . . . . . . 31
5.14 State Takeover Statutes. . . . . . . . . . . . . . . . . . 31
5.15 Tax Opinion Certificates . . . . . . . . . . . . . . . . . 31
5.16 Escrow Account . . . . . . . . . . . . . . . . . . . . . . 31

-ii-
<PAGE> 4

ARTICLE VI

CONDITIONS

6.01 Conditions to Each Party's Obligation To Effect the
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . 31
6.02 Conditions to Obligations of the Sellers . . . . . . . . . 32
6.03 Conditions to Obligations of the Mercantile Entities . . . 33

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

7.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . 34
7.02 Effect of Termination. . . . . . . . . . . . . . . . . . . 34
7.03 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 35
7.04 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE VIII

GENERAL PROVISIONS

8.01 Non-Survival of Representations; Warranties and Agreements 35
8.02 Indemnification. . . . . . . . . . . . . . . . . . . . . . 35
8.03 No Assignment; Successors and Assigns. . . . . . . . . . . 36
8.04 Severability . . . . . . . . . . . . . . . . . . . . . . . 36
8.05 No Implied Waiver. . . . . . . . . . . . . . . . . . . . . 36
8.06 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.07 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 36
8.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 36
8.09 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 37

Exhibit A Plan of Merger . . . . . . . . . . . . . . . . . . . . . . .
Exhibit B Affiliate Agreement. . . . . . . . . . . . . . . . . . . . .
Exhibit C Tax Certificate. . . . . . . . . . . . . . . . . . . . . . .
Exhibit D Tax Certificate. . . . . . . . . . . . . . . . . . . . . . .
Exhibit E Tax Certificate. . . . . . . . . . . . . . . . . . . . . . .
Exhibit F Tax Certificate. . . . . . . . . . . . . . . . . . . . . . .
Exhibit G Opinion of Mercantile's Counsel. . . . . . . . . . . . . . .
Exhibit H Opinion of Sellers' Counsel. . . . . . . . . . . . . . . . .
</TABLE>

-iii-
<PAGE> 5

AGREEMENT AND PLAN OF REORGANIZATION

This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"),
made and entered into as of December 19, 1995 by and among MERCANTILE
BANCORPORATION INC., a Missouri corporation ("Mercantile"), AMERIBANC, INC.,
a Missouri corporation ("Ameribanc" and, collectively with Mercantile, the
"Mercantile Entities"), PEOPLES STATE BANK, a Kansas state bank ("Peoples
Bank"), and PEOPLES STATE BANKSHARES, INC., a Kansas corporation ("Peoples
Bankshares" and, collectively with Peoples Bank, the "Sellers"), has
reference to the following facts and circumstances:

A. Ameribanc desires to acquire one hundred percent (100%) of
the issued and outstanding shares of common stock of Peoples Bank; and

B. Peoples Bankshares is the beneficial and record owner of
eighty-eight and 88/100 percent (88.88%) of the issued and outstanding shares
of the common stock of Peoples Bank; and

C. Mercantile is the beneficial and record owner of one
hundred percent (100%) of the issued and outstanding shares of the common
stock of Ameribanc, which, in turn, will be the beneficial owner of one
hundred percent (100%) of the issued and outstanding shares of the common
stock of a bank to be organized under the laws of the State of Kansas
("Acquisition Bank"); and

D. Peoples Bankshares has agreed to exchange all shares of
Peoples Bank owned beneficially and of record by Peoples Bankshares to
Ameribanc in consideration of the issuance of shares of Mercantile Common
Stock (as defined in Section 1.01 hereof) by Mercantile to Peoples Bankshares
as described in this Agreement; and

E. The Executive Committee of the Board of Directors of
Mercantile and the respective Boards of Directors of Ameribanc, Acquisition
Bank and Peoples Bank will approve the concurrent merger of Acquisition Bank
with and into Peoples Bank pursuant to the terms of this Agreement, as a
result of which Ameribanc will convert the eleven and 12/100 percent (11.12%)
of the issued and outstanding shares of Peoples Bank not owned by Peoples
Bankshares; and

F. The Mercantile Entities and the Sellers 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 the
representations, warranties and agreements herein contained, the parties
agree as follows:

ARTICLE I
---------

THE ACQUISITION TRANSACTIONS

1.01 The Acquisition Transactions. Subject to the terms and
----------------------------
conditions of this Agreement, Ameribanc and Peoples Bankshares will consummate
an exchange of all shares of Peoples Bank common stock, $100.00 par value (the
"Peoples Bank Common Stock"), owned beneficially and of record by Peoples
Bankshares (the "Exchange") for shares of common stock, $5.00 par value, of
Mercantile with associated "Rights" under the "Rights Agreement" (as those terms
are defined in Section 3.03 hereof) (collectively, the "Mercantile Common
Stock") as set forth in this Agreement. Mercantile hereby undertakes to execute
and deliver or cause to be delivered all shares of Mercantile Common Stock
required to be delivered to Peoples Bankshares pursuant to this Agreement.
Peoples Bankshares shall

<PAGE> 6

liquidate within six months after the Exchange (the "Liquidation") and effect a
liquidating distribution to its shareholders of all shares of Mercantile Common
Stock that are then owned beneficially and of record by Peoples Bankshares.

Simultaneously with the Exchange, and subject to the terms and
conditions of this Agreement, Acquisition Bank will merge with and into
Peoples Bank (the "Merger" and, collectively with the Exchange, the
"Acquisition") under the terms set forth in the related Plan of Merger (the
"Plan of Merger") to be executed prior to the Closing Date by and between
Peoples Bank and Acquisition Bank in substantially the form set forth in
Exhibit A to this Agreement, whereby the shareholders of Peoples Bank (other
- ---------
than Ameribanc or Peoples Bankshares, as the case may be) will receive shares
of Mercantile Common Stock as set forth in this Agreement and the Plan of
Merger. Mercantile hereby undertakes to execute and deliver or cause to be
delivered all shares of Mercantile Common Stock required to be delivered to
the shareholders of Peoples Bank pursuant to this Agreement and the Plan of
Merger.

Peoples Bankshares will receive the number of shares of
Mercantile Common Stock in the Exchange, and the shareholders of Peoples Bank
(other than Ameribanc or Peoples Bankshares, as the case may be) will receive
the number of shares of Mercantile Common Stock in the Merger, that will
equal their respective percentage ownership interests in the outstanding
shares of Peoples Bank Common Stock multiplied by the total number of shares
of Mercantile Common Stock issuable in the Acquisition as set forth in
Section 1.07 of this Agreement (the "Acquisition Consideration").

Upon consummation of the Merger, the separate corporate existence
of Acquisition Bank will cease and Peoples Bank (sometimes hereinafter referred
to as the "Surviving Bank") will be the surviving bank. The Surviving Bank will
continue to do business under the Charter of Peoples Bank.

As soon as practicable following the Merger, Mercantile Bank of
Topeka will be merged with and into the Surviving Bank (the "Topeka Merger").

1.02 Closing. The closing (the "Closing") of the Acquisition,
-------
unless the parties hereto shall otherwise mutually agree, shall take place at
the offices of Mercantile in St. Louis, Missouri, at 10:00 a.m., local time, on
the first Business Day (the "Closing Date") of the month commencing at least
five Business Days following the last to occur of the following events: (a) the
receipt of the requisite approval of the Exchange and the Agreement by the
shareholders of Peoples Bankshares and the Merger, the Agreement and the Plan of
Merger by the shareholders of Peoples Bank as set forth in Section 2.02 of this
Agreement and (b) the approval of the Acquisition by the Federal Deposit
Insurance Corporation (the "FDIC"), the Kansas State Bank Commissioner (the
"Commissioner") and any other bank regulatory agency that may be necessary or
appropriate, and the expiration of any required waiting period. For purposes of
this Agreement, "Business Day" shall mean any day that the offices of the Kansas
Commissioner is open for the receipt of official filings.

1.03 Method of Effecting Merger and Effective Time. On the
---------------------------------------------
Closing Date, the parties hereto will cause the Merger to be consummated by
delivering to the Kansas Commissioner, for filing, copies of resolutions of
the respective shareholders of Acquisition Bank and Peoples Bank approving
the Plan of Merger in such form as required by, and executed and acknowledged
in accordance with, the relevant provisions of Chapters 9 and 17 of the
Kansas Statutes Annotated (the "Kansas Banking Act"). The Merger shall be
effective on the date and at the time (the "Effective Time") that the
authorization of the Kansas Commissioner is filed with the Office of the
Secretary of State of the State of Kansas in accordance with the Kansas
Banking Act.

-2-
<PAGE> 7

1.04 Charter and By-Laws. The Charter and By-Laws of Peoples
-------------------
Bank in effect immediately prior to the Effective Time shall be the Charter and
By-Laws of the Surviving Bank, in each case until amended in accordance with
their respective provisions and applicable law.

1.05 Board of Directors and Officers.
-------------------------------

(a) At the Effective Time, the members of the Board of
Directors of the Surviving Bank and the terms of these directors shall be as
designated by Ameribanc immediately prior to the Effective Time.

(b) The officers of Surviving Bank shall be the persons
designated by Ameribanc immediately prior to the Effective Time, and such
persons will serve in their designated offices, thereafter, until their
respective successors are duly elected and qualified.

1.06 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Bank 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
Bank its right, title or interest in, to, or under any of the rights,
properties or assets of Peoples Bank, or (b) otherwise carry out the purposes
of this Agreement or the Plan of Merger, Peoples Bank and its officers and
directors shall be deemed to have granted to the Surviving Bank 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 Bank and otherwise to carry out the purposes of
this Agreement or the Plan of Merger, and the officers and directors of the
Surviving Bank are authorized in the name of Peoples Bank or otherwise to
take any and all such action.

1.07 Conversion of Securities.
------------------------

(a) At the Effective Time, Mercantile will issue 325,843
shares of Mercantile Common Stock as Acquisition Consideration in the Exchange
and the Merger. Peoples Bankshares and each of the other shareholders of
Peoples Bank at the Effective Time (other than Ameribanc) will be entitled to
receive the number of shares of Mercantile Common Stock issuable as the
Acquisition Consideration that is determined by multiplying such Acquisition
Consideration by such shareholders' respective percentage ownership interests in
Peoples Bank.

(b) At the Effective Time, Peoples Bankshares, by virtue of
the Exchange and without any other action on the part of the Mercantile
Entities or Peoples Bankshares, will be entitled to receive its percentage
interest of the Acquisition Consideration as determined in Section 1.07(a)
hereof, upon delivery at Closing of the certificates evidencing its shares of
Peoples Bank Common Stock. Also, at the Effective Time, by virtue of the
Merger and without any action on the part of the Mercantile Entities, Peoples
Bank or any Peoples Bank shareholder, each share of Peoples Bank Common Stock
issued and outstanding at the Effective Time (other than any shares held by
Ameribanc (other than in a fiduciary capacity or as a result of debts
previously contracted), which shall be cancelled, and other than any
"Dissenting Shares" (as defined in Section 1.09 hereof)), shall cease to be
outstanding and shall be converted into and become the right to receive his
or her percentage interest of the Acquisition Consideration as determined in
Section 1.07(a) hereof.

-3-
<PAGE> 8

1.08 Exchange Procedures.
-------------------

(a) Prior to the Closing Date, Mercantile shall appoint
KeyCorp Shareholder Services, Inc., or such other bank or trust company
selected by Mercantile and reasonably acceptable to the Sellers, as the
exchange agent (the "Exchange Agent") to effect the exchange of certificates
evidencing shares of Peoples Bank Common Stock for shares of Mercantile
Common Stock issuable as Acquisition Consideration to each person entitled to
receive such Acquisition Consideration. At the Effective Time, Mercantile
shall have granted the Exchange Agent the requisite power and authority to
effect for and on behalf of Mercantile the issuance of the number of shares
of Mercantile Common Stock issuable as Acquisition Consideration.

(b) The certificates evidencing shares of Peoples Bank
Common Stock owned beneficially and of record by Peoples Bankshares on the
Closing Date, and such other documentation as shall be reasonably required by
Mercantile to effect the Exchange, shall be delivered by Peoples Bankshares
at Closing to the Exchange Agent in exchange for the number of full shares of
Mercantile Common Stock for which the shares of Peoples Bank Common Stock
evidenced by the certificate or certificates surrendered have been exchanged
pursuant to this Agreement. For all other shareholders of Peoples Bank, the
Exchange Agent shall mail, as soon as practicable following the Effective
Time, to each such holder of record of Peoples Bank as of the Closing Date a
notice of consummation of the Merger and a form of letter of transmittal,
pursuant to which each such shareholder shall transmit the certificate or
certificates formerly representing shares of the Peoples Bank Common Stock.
As soon as practicable after surrender of such certificate to the Exchange
Agent with a properly completed letter of transmittal, the Exchange Agent
will promptly mail by first-class mail to such shareholder a certificate or
certificates representing the number of full shares of Mercantile Common
Stock into which the shares of Peoples Bank Common Stock evidenced by the
certificate or certificates surrendered shall have been converted pursuant to
this Agreement and the Plan of Merger.

(c) The Exchange Agent shall accept such certificates
upon compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance with
customary exchange practices. Each outstanding certificate that, prior to
the Effective Time, represented Peoples Bank Common Stock shall, except as
otherwise provided in this Agreement, until duly surrendered to the Exchange
Agent be deemed to evidence ownership of the number of shares of Mercantile
Common Stock into which such Peoples Bank Common Stock shall have been
converted in the Merger. After the Effective Time, there shall be no further
transfer on the records of Peoples Bank of certificates representing shares
of capital stock of Peoples Bank, and if such certificates are presented to
Peoples Bank for transfer, they shall be cancelled against delivery of the
Acquisition Consideration provided therefor in this Agreement and the Plan of
Merger. If the record date for any dividend or other distribution in respect
of Mercantile Common Stock, including any redemption by Mercantile of the
Rights associated therewith, shall occur on or after the Closing Date, the
former holders of Peoples Bank Common Stock shall be entitled thereto, but no
dividends declared or other distributions in respect of Mercantile Common
Stock issuable as Acquisition Consideration will be remitted to any person
entitled to receive Mercantile Common Stock under this Agreement until such
person surrenders the certificate or certificates representing Peoples Bank
Common Stock, at which time such dividends or other distributions shall be
remitted to such person, without interest and less any amounts in respect of
taxes that may have been imposed thereon and which are required to be
withheld by the Exchange Agent or Mercantile. Neither the Exchange Agent,
Mercantile nor Peoples Bank shall be liable to any holder of Peoples Bank
Common Stock for any of the Acquisition Consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to shares of Mercantile Common Stock held by it as
Acquisition Consideration from time to time hereunder.

-4-
<PAGE> 9

(d) No transfer taxes shall be payable by Peoples
Bankshares or by any of the other shareholders of Peoples Bank in respect of
the issuance of certificates for Mercantile Common Stock as Acquisition
Consideration, and no expenses shall be imposed on Peoples Bankshares or on
any of the other shareholders of Peoples Bank in connection with the exchange
or conversion at the Effective Time of shares of Peoples Bank Common Stock
into shares of Mercantile Common Stock pursuant to the Acquisition as
contemplated by this Agreement and the delivery of such shares to the former
holder of Peoples Bank Common Stock entitled thereto, except that (i) if any
certificate for shares of Mercantile Common Stock is to be issued in a name
other than that in which a certificate or certificates for shares of Peoples
Bank Common Stock surrendered shall have been registered, it shall be a
condition to such issuance that the person requesting such issuance shall pay
to Mercantile any transfer taxes payable by reason thereof or of any prior
transfer of such surrendered certificate or certificates or establish to the
satisfaction of Mercantile that such taxes have been paid or are not payable,
and (ii) nothing herein shall relieve Peoples Bankshares or any of the other
shareholders of Peoples Bank of any expenses associated with surrendering
such holder's certificates evidencing Peoples Bank Common Stock to the
Exchange Agent.

1.09 Dissenting Shares.
-----------------

(a) "Dissenting Shares" means any shares of Peoples
Bank Common Stock held by any holder who becomes entitled to payment of the
value of such shares under Section 17-6712 of the Kansas Statutes Annotated
("Section 17-6712"). Any holders of Dissenting Shares shall be entitled to
payment for such shares only to the extent permitted by and in accordance
with the provisions of such law, and Ameribanc shall cause the Surviving Bank
to pay such consideration solely with funds provided by Peoples Bank.

(b) Each party hereto shall give the other prompt
notice of any written demands for the payment of the fair value of such
shareholder's shares, withdrawals of such objections or demands, and any
other instruments, served pursuant to Section 17-6712, received by such
party, and Peoples Bank shall give Mercantile the opportunity to direct all
negotiations and proceedings with respect to such objections or demands.
Peoples Bank shall not voluntarily make any payment with respect to any
demands for payment of value and shall not, except with the prior written
consent of Mercantile, settle or offer to settle any such demands.

1.10 No Fractional Shares. Notwithstanding any other
--------------------
provision of this Agreement, neither certificates nor scrip for fractional
shares of Mercantile Common Stock shall be issued as Acquisition
Consideration. Each holder of shares of Peoples Bank Common Stock who
otherwise would have been entitled to a fraction of a share of Mercantile
Common Stock shall receive in lieu thereof and, at the time such holder
receives the shares of Mercantile Common Stock to which the holder is
entitled as Acquisition Consideration, cash (without interest) in an amount
determined by multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing stock price of Mercantile Common
Stock on the New York Stock Exchange (the "NYSE") Composite Tape as reported
in The Wall Street Journal on the Closing Date. No such holder shall be
entitled to dividends, voting rights or any other rights in respect of any
fractional share.

1.11 Transfer Restrictions; Closing of Stock Transfer Books.
------------------------------------------------------
Peoples Bankshares agrees that from and after the date of this Agreement,
Peoples Bankshares will not sell, dispose of or otherwise transfer any shares
of Peoples Bank Common Stock owned beneficially and of record by Peoples
Bankshares. As to all other shares of Peoples Bank Common Stock, the stock
transfer books of Peoples Bank shall be closed at the close of business on
the Business Day immediately preceding the Closing Date. In the event of a
transfer of ownership of Peoples Bank Common Stock which is not

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<PAGE> 10

registered in the transfer records prior to the closing of such records, the
Acquisition Consideration issuable in conversion of such stock 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 all applicable stock transfer taxes are
paid. Mercantile and the Exchange Agent shall be entitled to rely upon the
stock transfer books of Peoples Bank to establish the identity of those
persons entitled to receive the Acquisition Consideration specified in this
Agreement for their shares of Peoples Bank 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, Mercantile and the
Exchange Agent shall be entitled to deposit any Acquisition Consideration
represented thereby in escrow with an independent party and thereafter be
relieved with respect to any claims to such consideration.

1.12 Anti-Dilution. If, between the date of this Agreement
-------------
and the Effective Time, a share of Mercantile Common Stock shall be changed
into a different number of shares of Mercantile Common Stock or a different
class of shares or shares of another issuer by reason of reclassification,
recapitalization, split-up, merger, exchange of shares or readjustment, or if
a stock dividend thereon shall be declared with a record date within such
period, then the number of shares of Mercantile Common Stock issuable as
Acquisition Consideration pursuant to Section 1.07 of this Agreement will be
appropriately and proportionately adjusted so that the Acquisition
Consideration shall consist of that number of shares of Mercantile Common
Stock or other securities as such shares would have been converted or changed
into pursuant to such reclassification, recapitalization, split-up, merger,
exchange of shares or readjustment or as a result of such stock dividend had
the record date therefor been immediately following the Effective Time.

1.13 Reservation of Right to Revise Transaction. The
------------------------------------------
Mercantile Entities may at any time change the method of effecting the
Acquisition by the Mercantile Entities (including without limitation the
provisions of this Article I) if and to the extent the Mercantile Entities
deem such change to be desirable; provided, however, that no such change
shall (A) alter or change the amount or kind of the Acquisition Consideration,
(B) in the reasonable opinion of the tax counsel or tax advisor of the Sellers,
adversely affect the tax treatment to the holders of Peoples Bank Common Stock
and/or the holders of Peoples Bankshares Common Stock as a result of receiving
the Acquisition Consideration or (C) materially impede or delay receipt of any
approval referred to in Section 6.01(c) or the consummation of the transactions
contemplated by this Agreement or the Plan of Merger. In the event Thompson &
Mitchell is unable to deliver the tax opinion contemplated by Section 6.01(g)
hereof, the parties hereby agree to use their reasonable best efforts to revise
and/or restructure the transaction such that Thompson & Mitchell can deliver
such tax opinion.

ARTICLE II
----------

REPRESENTATIONS AND WARRANTIES OF SELLERS

As an inducement to the Mercantile Entities to enter into and
perform their respective obligations under this Agreement, and notwithstanding
any examinations, inspections, audits and other investigations made by the
Mercantile Entities, the Sellers hereby jointly and severally represent and
warrant to the Mercantile Entities as to the following matters, except that
warranties of Peoples Bank shall relate only to matters pertaining to Peoples
Bank:

2.01 Organization and Authority. Peoples Bankshares is a
--------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of Kansas, is duly qualified to do business, and is in good
standing in all jurisdictions where its ownership or leasing of property or

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<PAGE> 11
the conduct of its business requires it to be so qualified, and has the
corporate power and authority to own its properties and assets and to carry
on its business as it is now being conducted. Peoples Bankshares is
registered as a bank holding company with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). A current and accurate list
of Peoples Bankshares' shareholders, including addresses thereof, and true
and complete copies of the Articles of Incorporation and By-Laws of Peoples
Bankshares, each as in effect on the date of this Agreement, are included in
Schedule 2.01 hereof.
- -------------

Peoples Bank is a commercial bank duly organized, validly existing
and in good standing under the laws of the State of Kansas. The deposits of
Peoples Bank are insured by the FDIC under the Federal Deposit Insurance Act of
1950, as amended (the "FDI Act"). Peoples Bank is 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
the corporate power and authority to own and operate its properties and to carry
out its business as and where the same is now being conducted. A current and
accurate list of Peoples Bank's shareholders, including addresses thereof, and
true and complete copies of the Charter, Certificate of Authority and By-Laws of
Peoples Bank, each as in effect on the date of this Agreement, are included in
Schedule 2.01 hereof.
- -------------

2.02 Corporate Authorization; Records.
--------------------------------

(a) Peoples Bankshares has the corporate power and
authority to enter into this Agreement, and Peoples Bank has the corporate
power and authority to enter into this Agreement and the Plan of Merger and,
subject to the approval of the Exchange and this Agreement by the shareholders
of Peoples Bankshares and to the approval of the Merger, this Agreement and the
Plan of Merger by the shareholders of Peoples Bank, and such approvals of
governmental agencies and other governing boards having regulatory authority
over Peoples Bankshares and/or Peoples Bank as may be required by applicable
law, rule or regulation, to carry out their respective obligations thereunder.
The only shareholder vote of Peoples Bankshares required to approve the Exchange
and this Agreement is the affirmative vote of the holders of a majority of the
outstanding shares of Peoples Bankshares Common Stock. The only shareholder
vote of Peoples Bank required to approve the Merger, this Agreement and the Plan
of Merger is the affirmative vote of the holders of a majority of the
outstanding shares of Peoples Bank Common Stock. The execution, delivery and
performance of this Agreement by Peoples Bankshares and the consummation of the
Exchange have been duly authorized by the Board of Directors of Peoples
Bankshares. The execution, delivery and performance of this Agreement and the
Plan of Merger by Peoples Bank and the consummation of the Merger have been duly
authorized by the Board of Directors of Peoples Bank. Subject to the approvals,
as aforesaid, this Agreement is a valid and binding obligation of Peoples
Bankshares, and this Agreement and the Plan of Merger are the valid and binding
obligations of Peoples Bank, enforceable against each in accordance with their
respective terms.

(b) Neither the execution, delivery and performance by
Peoples Bankshares of this Agreement or by Peoples Bank of this Agreement or
the Plan of Merger, nor the consummation of the transactions contemplated
thereby, nor compliance by Peoples Bankshares or Peoples Bank with any of the
provisions thereof will (a) violate, conflict with or result in a breach of
any provisions of, or constitute a default (or 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 Peoples Bankshares or Peoples Bank under any of the terms,
conditions or provisions of (i) their respective Articles of Incorporation,
Charter or By-Laws, or (ii) any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Peoples Bankshares or Peoples Bank is a party or by which it may be bound, or

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<PAGE> 12

to which Peoples Bankshares or Peoples Bank or any of their respective
properties or assets may be subject, or (b) subject to compliance with the
statutes and regulations referred to in subsection (c) of this Section 2.02,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule
or regulation applicable to Peoples Bankshares or Peoples Bank or any of
their respective properties or assets.

(c) Other than in connection or in compliance with the
provisions of the Kansas Banking 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 FDIC and the Kansas Commissioner,
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 Peoples Bankshares or Peoples Bank of the transactions
contemplated by this Agreement or the Plan of Merger.

(d) The minute books and stock records of Peoples Bankshares
and Peoples Bank are complete and correct in all respects and accurately
reflect in all respects all meetings, consents and other actions of the
organizers, incorporators, shareholders, Board of Directors and committees of
the Board of Directors occurring since the organization of each.

2.03 Subsidiaries. Peoples Bank has no subsidiaries and does
------------
not control, or have any equity ownership interest in, any other corporation,
partnership, joint venture or other business association, other than any
interest pledged to Peoples Bank in the ordinary course of its business as
security for the obligations of third parties to Peoples Bank or held by Peoples
Bank as a consequence of its exercise of rights and remedies in respect of any
interest pledged as security in respect of such obligation.

2.04 Capitalization of Peoples Bank. The authorized capital
------------------------------
stock of Peoples Bank consists of 22,500 shares of Common Stock, $100.00 par
value, of which, as of the date hereof, 22,500 shares were issued and
outstanding. Peoples Bankshares has and will have as of the Effective Time
good and marketable title to 19,997 shares, or 88.88% of the then issued and
outstanding shares of Peoples Bank Common Stock, free and clear of any liens,
claims, charges, encumbrances and assessments of any kind or nature whatsoever.
There are no other shares of capital stock or other Equity Securities (as
defined below) of Peoples Bank outstanding. All of the issued and outstanding
shares of Peoples Bank Common Stock are validly issued, fully paid and
nonassessable. "Equity Securities" of an issuer means capital stock or other
equity securities of such issuer, 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 or other equity
securities of such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue additional
shares of its capital stock or other equity securities of such issuer, or
options, warrants, scrip or rights to purchase, acquire, subscribe to, calls on
or commitments for any shares of its capital stock or other equity securities.

2.05 Financial Statements.
--------------------

(a) Attached hereto as Schedule 2.05(a) are copies of
----------------
the following financial statements:

(i) Balance sheets of Peoples Bankshares as of
December 31, 1994, 1993 and 1992, related statements of income, changes in
shareholders' equity and cash flows for the three (3) years ended December 31,
1994, together with the notes thereto compiled by Peoples Bankshares'
independent auditors;

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<PAGE> 13

(ii) Balance sheets of Peoples Bankshares as of
June 30, 1995 and 1994 and related statements of income, changes in
shareholders' equity and cash flows for the six-month periods ended June 30,
1995 and 1994;

(iii) Form FR Y-6 reports of Peoples Bankshares
as of December 31, 1994, 1993 and 1992, and Form FR Y-9LP and Form FR Y-9C
reports filed during such periods, as furnished by Peoples Bankshares to the
Federal Reserve Board; and

(iv) The Consolidated Reports of Condition and
Income of Peoples Bank as of and for the years ended December 31, 1994, 1993 and
1992, and as of and for the nine-month period ended September 30, 1995, as filed
by Peoples Bank with the FDIC.

(b) The financial statements referenced above are
referred to collectively as the "Peoples Financial Statements." The Peoples
Financial Statements have been prepared in accordance with the books and records
of Peoples Bankshares and Peoples Bank in accordance with generally accepted
accounting principles ("GAAP") or, as to the financial statements referenced in
subsection (a)(iii) and (a)(iv) above, regulatory accounting principles,
consistently applied, and present fairly the consolidated financial positions of
Peoples Bankshares and Peoples Bank, respectively, at the dates thereof and the
consolidated results of their respective operations and cash flows.

(c) Peoples Bankshares and Peoples Bank 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 financial conditions, results of operations,
businesses, assets, prospects or operations.

2.06 Reports. Since January 1, 1992, Peoples Bankshares and
-------
Peoples Bank have filed all reports, registrations and statements, together
with any required amendments thereto, that were required to be filed with any
federal, state, municipal or local government, securities, banking, insurance
and other governmental or regulatory authority, and the agencies and staffs
thereof (such entities being referred to herein collectively as the
"Regulatory Authorities and individually as a "Regulatory Authority"), having
jurisdiction over the affairs of each. All such reports and statements filed
with any such Regulatory Authority are collectively referred to herein as the
"Peoples Reports." As of their respective dates, the Peoples Reports
complied in all respects with all the rules and regulations promulgated by
the applicable Regulatory Authority. With respect to the Peoples Reports
filed with the Regulatory Authorities, there is no material unresolved
violation, criticism or exception by any Regulatory Authority with respect to
any report or statement filed by, or any examination of, Peoples Bank or
Peoples Bankshares.

2.07 Title to and Condition of Assets.
--------------------------------

(a) Except as may be reflected in the Peoples
Financial Statements or set forth on Schedule 2.07(a) and excepting all real
----------------
property (which is the subject of Section 2.08), Peoples Bank has, and at the
Closing Date will have, good and marketable title to its properties and assets,
including, without limitation, those reflected on the Peoples Financial
Statements, relating to Peoples Bank, free and clear of any liens, charges,
pledges, encumbrances, defects, claims or rights of third parties, except for
liens for taxes, assessments or other governmental charges not yet delinquent.

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<PAGE> 14

(b) No assets reflected on the Peoples Financial
Statements in respect of Peoples Bank have been sold, leased, transferred,
assigned or otherwise disposed of since September 30, 1995, except in the
ordinary course of business or as set forth in Schedule 2.07(b) under the
----------------
heading "Dispositions."

(c) All furniture, fixtures, vehicles, machinery and
equipment and computer software owned or used by Peoples Bank, 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, with no single such
item being deemed of importance, are fit for the purposes for which they were
intended, are in good order and repair, free of defects and in good operating
condition, subject only to normal wear and tear. The operation by Peoples Bank
of such assets is in compliance in all respects with all applicable laws,
ordinances and rules and regulations of any governmental authorities having
jurisdiction.

2.08 Real Property.
-------------

(a) The legal description of each parcel of real
property owned by Peoples Bank (other than real property acquired in
foreclosures or in lieu of foreclosure in the course of collection of its
loans and being held by Peoples Bank for disposition as required by law) is
set forth in Schedule 2.08(a) attached hereto under the heading "Owned Real
----------------
Property" (such real property being herein referred to as the "Owned Real
Property"). The legal description of each parcel of real property leased by
Peoples Bank as lessee is also set forth in Schedule 2.08(a) under the
----------------
heading "Leased Real Property" (such real property being herein referred to
as the "Leased Real Property"). Collectively, the Owned Real Property and
the Leased Real Property is herein referred to as the "Real Property."

(b) There is no pending dispute involving Peoples Bank
as to the title of or the right to use any of its Real Property.

(c) Peoples Bank has no interest in any other real
property except interests as a mortgagee, and except for real property acquired
in foreclosures or in lieu of foreclosure and being held for disposition as
required by law.

(d) None of the buildings, structures or other
improvements located on the Real Property encroaches upon or over any adjoining
parcel or real estate or any easement or right-of-way or "setback" line and all
such buildings, structures and improvements are located and constructed in
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 by any governmental authority 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, to the best knowledge of the Sellers, threatened, with respect to any
such building, structure or improvement. The Real Property is in generally
good condition, reasonable wear and tear excepted, and has been maintained in
accordance with reasonable and prudent business practices applicable to like
facilities.

(f) Except as may be reflected on the Peoples
Financial Statements or with respect to such easements, liens, defects or
encumbrances as do not individually or in the aggregate adversely affect the
use or value of the parcel of Real Property, Peoples Bank has, and at the
Closing Date will have, good and marketable title to its Real Property, free
and clear of any liens, charges, pledges, encumbrances, defects, claims or
rights of third parties.

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<PAGE> 15

2.09 Loans, Commitments and Contracts.
--------------------------------

(a) Schedule 2.09(a) contains a complete and accurate
----------------
listing of all contracts entered into with respect to deposits of $100,000 or
more, by account or other identifying number, and all 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 or involving
extensions of credit or other commitments to extend credit by Peoples Bank with
respect to any one entity or related group of entities in excess of $250,000, to
which any of the foregoing is a party or by which it is bound, by account or
other identifying number, and, where applicable, such other information as shall
be necessary to identify any related group of entities.

(b) Except for the contracts and agreements required
to be listed on Schedule 2.09(a) and except as set forth in Schedule 2.09(b)
---------------- ----------------
hereto, Peoples Bank is not a party to or bound by any:

(i) agreement, contract, arrangement,
understanding or commitment with any labor union;

(ii) franchise or license agreement;

(iii) written employment, severance or termination
pay, agency, consulting or similar agreement, contract, arrangement,
understanding or commitment in respect of personal services;

(iv) any material agreement, arrangement or
commitment (A) not made in the ordinary course of business, or
(B) pursuant to which the Sellers or any subsidiary of the Sellers
is or may become obligated to invest in or contribute to any
subsidiary of the Sellers other than pursuant to the Sellers
Employee Plans (as that term is defined in Section 2.19 hereof)
and agreements relating to joint ventures or partnerships set
forth in Schedule 2.03, true and complete copies of which have been
-------------
furnished to the Mercantile Entities;

(v) any agreement, indenture or other instrument
not disclosed in the Peoples Financial Statements relating to the
borrowing of money by Peoples Bank, Peoples Bankshares or any of
their respective subsidiaries or the guarantee by Peoples Bank,
Peoples Bankshares or any of their respective subsidiaries of any
such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by
Peoples Bank, Peoples Bankshares or any of their respective
subsidiaries, such as deposits, Fed Funds borrowings, Federal Home
Loan Bank Board advances and repurchase and reverse repurchase
agreements), other than such agreements, indentures or instruments
providing for annual payments of less than $50,000;

(vi) any contract containing covenants which
limit the ability of Peoples Bank, Peoples Bankshares or any of
their respective subsidiaries to compete in any line of business or
with any person or which involves any restrictions on the
geographical area in which, or method by which, Peoples Bank,
Peoples Bankshares or any of their respective subsidiaries may
carry on their respective businesses (other than as may be required
by law or any applicable Regulatory Authority);

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<PAGE> 16

(vii) any other contract or agreement which is a
"material contract" within the meaning of Item 601(b)(10) of
Regulation S-K as promulgated by the Securities and Exchange
Commission (the "SEC") to be performed after the date of this
Agreement;

(viii) any lease with annual rental payments
aggregating $25,000 or more;

(ix) loans or other obligations payable or owing
to any officer, director or employee except (A) salaries, wages and
directors' fees incurred and accrued in the ordinary course of
business and (B) obligations due in respect of any depository
accounts maintained by any of the foregoing at Peoples Bank in the
ordinary course of business;

(x) loans or debts payable or owing by any
executive officer or director of Peoples Bank, Peoples Bankshares
or any of their respective subsidiaries 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;

(xi) other agreement, contract, arrangement,
understanding or commitment involving an obligation by Peoples Bank,
Peoples Bankshares or any of their respective subsidiaries of more
than $50,000 and extending beyond six months from the date hereof
that cannot be cancelled without cost or penalty upon notice of 30
days or less, other than contracts entered into in respect of
deposits, loan agreements and commitments, notes, security
agreements, repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments to issue
letters of credit, participation agreements and other documents
relating to transactions entered into by Peoples Bank, Peoples
Bankshares or any of their respective subsidiaries in the ordinary
course of business and not involving extensions of credit with
respect to any one entity or related group of entities in excess of
$250,000.

(c) Peoples Bank carries property, casualty,
liability, directors and officer errors and omissions, products liability and
other insurance coverages as set forth in Schedule 2.09(c) under the heading
----------------
"Insurance."

(d) True, correct and complete copies of the
agreements, contracts, leases, insurance policies and other documents
referred to in Schedule 2.09(c) shall be furnished or made available to the
----------------
Mercantile Entities.

(e) To the best knowledge of the Sellers, each of the
agreements, contracts, leases, insurance policies and other documents referred
to in Schedule 2.09(a), Schedule 2.09(b) and Schedule 2.09(c) is a valid,
---------------- ---------------- ----------------
binding and enforceable obligation of the parties sought to be bound thereby,
except as the enforceability thereof against the parties thereto (other than
Peoples Bank) 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) Schedule 2.09(f) under the heading "Loans" contains
----------------
a true, correct and complete listing, as of the date of this Agreement, by
account or other identifying number, of (i) all

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<PAGE> 17

loans in excess of $200,000, of Peoples Bank which have been accelerated during
the past twelve months, (ii) all loan commitments or lines of credit of Peoples
Bank in excess of $100,000 which have been terminated by Peoples Bank during the
past twelve months by reason of default or adverse developments in the
condition of the borrower or other events or circumstances affecting the
credit of the borrower, (iii) all loans, lines of credit and loan commitments
in excess of $100,000 as to which Peoples Bank has given written notice to
the borrower or customer of Peoples Bank's intent to terminate during the
past twelve months, (iv) with respect to all loans in excess of $100,000, all
notification letters and other written communications from Peoples Bank to
any of its borrowers, customers or other parties during the past twelve
months wherein Peoples Bank has requested or demanded that actions be taken
to correct existing defaults or facts or circumstances which may become
defaults, (v) each borrower, customer or other party which has notified
Peoples Bank during the past twelve months of, or asserted against Peoples
Bank, in writing, any "lender liability" or similar claim, and each borrower,
customer or other party which has given Peoples Bank any oral notification
of, or asserted against Peoples Bank, any such claim, and (vi) all loans in
excess of $50,000 (1) that are contractually past due 90 days or more in the
payment of principal and/or interest, (2) that are on non-accrual status, (3)
where a reasonable doubt exists as to the timely future collectibility of
future principal and interest, whether or not interest is still accruing or
the loan is less than 90 days past due, (4) the interest rate terms have been
reduced and/or the maturity dates have been extended subsequent to the
agreement under which the loan was originally created due to concerns
regarding the borrower's ability to pay in accordance with such initial
terms, (5) where a specific reserve allocation exists in connection
therewith, or (6) that have been classified "substandard," "doubtful" or
"loss" or the equivalent thereof by any Regulatory Authority.

2.10 Absence of Defaults. Except as set forth in Schedule
------------------- --------
2.10 attached hereto under the heading "Defaults," there are no pending
- ----
disputes between Peoples Bank and the other parties to the agreements,
contracts, leases, insurance policies and other documents referred to in
Schedule 2.09, and to the best knowledge of the Sellers, all such agreements,
- --------------
contracts, leases, insurance policies and other documents are in full force
and effect and not in default with respect to Peoples Bank or any other party
thereto, and will continue in full force and effect immediately after the
Closing Date.

2.11 Absence of Undisclosed Liabilities. Except as disclosed
----------------------------------
in Schedule 2.11 or in any other Schedule attached hereto:
-------------

(a) As of the date hereof, Peoples Bank has no debts,
liabilities or obligations, equal to or exceeding $25,000, individually, or
$50,000, in the aggregate, whether accrued, absolute, contingent or otherwise
and whether due or to become due, which are required to be reflected in the
Peoples Financial Statements or the notes thereto in accordance with GAAP
consistently applied except:

(i) liabilities reflected in the Peoples
Financial Statements, and

(ii) debts, liabilities or obligations incurred
since September 30, 1995, in the ordinary and usual course
of its businesses, none of which are for breach of
contract, breach of warranty, torts, infringements or
lawsuits, and none of which adversely affect its financial
positions or results of operations, businesses, assets,
prospects or operations; and

(b) to the best knowledge of the Sellers, Peoples Bank
was not, as of September 30, 1995, and since such date to the date hereof has
not become a party to, any contract or agreement, excluding deposits, loan
agreements and commitments, notes, security agreements, repurchase and
reverse repurchase agreements, bankers' acceptances, outstanding letters of
credit and commitments

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<PAGE> 18

to issue letters of credit, participation agreements and other documents
relating to transactions entered into by Peoples Bank in the ordinary course of
business which affected, affects or may reasonably be expected to affect,
materially and adversely, its financial position, results of operations,
business, assets or operations.

2.12 Allowance for Loan and Lease Losses; Non-Performing
---------------------------------------------------
Assets.
- ------
(a) All of the accounts, notes and other receivables
which are reflected in the balance sheet of Peoples Bank as of September 30,
1995 were acquired in the ordinary course of business and are collectible in
full in the ordinary course of business, except for possible loan and lease
losses which are adequately provided for in accordance with GAAP in the
allowance for loan and lease losses in such balance sheet, and (ii) the
collection experience of Peoples Bank since September 30, 1995 to the date
hereof has not been materially adverse to the credit and collection
experience of Peoples Bank in the nine months ended September 30, 1995 and
the year ended December 31, 1994.

(b) The allowance for loan losses contained in the
balance sheet of Peoples Bank as of September 30, 1995 was established in
accordance with the past practices and experiences of Peoples Bank and the
such allowance was adequate in all material respects under the requirements
of GAAP to provide for possible losses on loans and leases (including,
without limitation, accrued interest receivable) and credit commitments
(including, without limitation, stand-by letters of credit) as of the date of
such balance sheet; provided, however, nothing herein contained shall be
construed as a warranty of the collectibility of any loan or that the actual
loan losses incurred will not exceed the amount of the allowance.

(c) Schedule 2.12(c) sets forth as of the date of this
----------------
Agreement all assets classified as real estate acquired through foreclosure,
including in-substance foreclosed real estate ("Non-Performing Assets").

(d) The aggregate amount of all loans described by
Section 2.09(f)(vi) and all Non-Performing Assets pursuant to Section 2.12(c)
shall not exceed $300,000.

2.13 Taxes. Each of Peoples Bankshares and Peoples Bank has
-----
timely filed or will timely file (including all extensions) all tax returns
required to be filed at or prior to the Closing Date ("Peoples Returns").
Each of Peoples Bankshares and Peoples Bank has paid, or has set up adequate
reserves on the Peoples Financial Statements for the payment of, all taxes
required to be paid in respect of the periods covered by such returns and has
set up adequate reserves on the Peoples Financial Statements for the payment
of all taxes anticipated to be payable in respect of the period subsequent to
the last of said periods (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). Each of Peoples Bankshares and Peoples Bank will not
have any liability for any such taxes in excess of the amounts so paid or
reserves so established and no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against Peoples Bankshares or Peoples Bank which would not be
covered by existing reserves. Neither Peoples Bankshares nor Peoples Bank is
delinquent in the payment of any tax, assessment or governmental charge, nor
has it requested any extension of time within which to file any tax returns
in respect of any fiscal year which have not since been filed and no requests
for waivers of the time to assess any tax are pending. The federal, state
and foreign income tax returns of each of Peoples Bankshares and Peoples Bank
have not been audited by the Internal Revenue Service (the "IRS") or the
state or foreign taxing authority during the previous seven years. Neither
Peoples Bankshares nor Peoples Bank has made any election under Income Tax
Regulation Section Section 1.1502-33(d)(3) or 1.1552-1(c), each of which relates
to the allocation of the consolidated federal income tax liability,

-14
<PAGE> 19

and, other than the Tax Sharing Agreement dated July 15, 1993 by and between
Peoples Bankshares and Peoples Bank (the "Tax Sharing Agreement"), neither
Peoples Bankshares nor Peoples Bank is a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement, or any other contractual obligation to
pay or contribute to the tax obligations of any other person. There is no
deficiency or refund litigation or matter in controversy with respect to
Peoples Returns. Neither Peoples Bankshares nor any of its subsidiaries has
extended or waived any statute of limitations on the assessment of any tax
due that is currently in effect.

2.14 Material Adverse Change. Since September 30, 1995,
-----------------------
there has been no material adverse change in the financial condition, results
of operations, business, assets, prospects or operations of Peoples Bank,
other than changes in banking laws or regulations, or interpretations
thereof, or other conditions 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, Peoples Bank is not a party to any pending or, to the best
-------------
knowledge of the Sellers, threatened, claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or cannot reasonably be expected to
have, an adverse effect on the business, financial condition, results of
operations or prospects of Peoples Bank. Without limiting the generality of the
foregoing, except as set forth in Schedule 2.15, there are no actions, suits or
-------------
proceedings pending or, to the best knowledge of the Sellers, threatened against
Peoples Bankshares or Peoples Bank or any of their respective officers or
directors by any shareholder of Peoples Bankshares or Peoples Bank (or any
former shareholder) or involving claims under the Community Reinvestment Act of
1977, Bank Secrecy Act, the fair lending laws or any other laws applicable to
Peoples Bank.

2.16 Compliance with Laws.
--------------------

(a) To the best knowledge of the Sellers, Peoples
Bankshares and Peoples Bank 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 financial condition, results
of operations, business or prospects of Peoples Bank.

(b) Each of Peoples Bankshares and Peoples Bank has
complied with all laws, regulations and orders (including, without limitation,
zoning ordinances, building codes, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and securities, tax, environmental, civil rights
and occupational health and safety laws and regulations and including, without
limitation, in the case of Peoples Bank, all statutes, rules, regulations and
policy statements pertaining to the conduct of a banking, deposit-taking,
lending or related business, or to the exercise of trust powers) and governing
instruments applicable to it and to the conduct of its business, and (ii)
neither Peoples Bankshares nor Peoples Bank is in default under, and no event
has occurred which, with the lapse of time or notice or both, could result in
the default under, the terms of any judgment, order, writ, decree, permit or
license of any Regulatory Authority or court, whether federal, state, municipal
or local and whether at law or in equity.

-15-
<PAGE> 20

(c) Except as set forth in Schedule 2.15, Peoples Bank
-------------
is not subject to or reasonably likely to incur a liability as a result of
its ownership, operation or use of any Property (as defined below) of the
Sellers (whether directly or as a consequence of such Property being part of
the investment portfolio of Peoples Bank) (A) that is contaminated by or
contains any hazardous waste, toxic substance or related materials, including,
without limitation, asbestos, PCBs, pesticides, herbicides and 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.
"Property" shall include all property (real or personal, tangible or intangible)
owned or controlled by Peoples Bank, including, without limitation, property
under foreclosure, property held by Peoples Bank in its capacity as a trustee
and property in which any venture capital or similar unit of Peoples Bank has an
interest. No claim, action, suit or proceeding is pending against Peoples Bank
relating to the Property before any court or other Regulatory Authority or
arbitration tribunal relating to Toxic Substances, pollution or the environment,
and there is no outstanding judgment, order, writ, injunction, decree or award
against or affecting Peoples Bank with respect to the same. Except for
statutory or regulatory restrictions of general application, no Regulatory
Authority has placed any restriction on the business of Peoples Bank which
reasonably could be expected to have a material adverse effect on the condition
of Peoples Bank.

(d) Since December 31, 1991, neither Peoples Bankshares
nor Peoples Bank has received any notification or communication which has not
been favorably resolved from any Regulatory Authority (i) asserting that Peoples
Bankshares or any subsidiary of Peoples Bankshares is not in substantial
compliance with any of the statutes, regulations or ordinances that such
Regulatory Authority enforces, except with respect to matters which (A) are set
forth on Schedule 2.15(c) or in any writing previously furnished to the
----------------
Mercantile Entities and (B) reasonably could not be expected to have a material
adverse effect on the condition of Peoples Bank, (ii) threatening to revoke any
license, franchise, permit or governmental authorization that is material to the
condition of Peoples Bank including, without limitation, such company's status
as an insured depository institution under the Federal Deposit Insurance Act,
(iii) requiring or threatening to require Peoples Bankshares or Peoples Bank, or
indicating that Peoples Bankshares or Peoples Bank may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to direct, restrict or
limit in any manner the operations of Peoples Bankshares or Peoples Bank,
including, without limitation, any restriction on the payment of dividends. No
such cease and desist order, agreement or memorandum of understanding or other
agreement is currently in effect.

(e) Neither Peoples Bankshares nor Peoples Bank is
required by Section 32 of the Federal Deposit Insurance Act to give prior
notice to any federal banking agency of the proposed addition of an individual
to its board of directors or the employment of an individual as a senior
executive officer.

2.17 Labor. No work stoppage involving Peoples Bank is pending
-----
or, to the best knowledge of Sellers, threatened. Peoples Bank is not involved
in, or threatened with or affected by, any labor dispute, arbitration, lawsuit
or administrative proceeding which could adversely affect the business of
Peoples Bank. Employees of Peoples Bank 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, no officer or director of Peoples Bankshares, Peoples
-------------
Bank or any subsidiary of Peoples Bankshares, or any "associate" (as such
term is defined in Rule 14a-1 under the Exchange Act) of any such officer or
director, has any interest in any contract or property (real or personal,
tangible or intangible), used in, or pertaining to the business of, Peoples
Bank which would be required to be disclosed by Item 404 of

-16-
<PAGE> 21

Regulation S-K promulgated by the SEC if Peoples Bank had a class of securities
registered under Section 12 of the Exchange Act.

2.19 Employee Benefit Plans.
----------------------

(a) Schedule 2.19(a) lists all pension, retirement,
----------------
supplemental retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, medical, disability, workers' compensation, vacation,
group insurance, severance and other employee benefit, incentive and welfare
policies, contracts, plans and arrangements, and all trust agreements related
thereto, maintained by or contributed to by Peoples Bankshares or Peoples
Bank in respect of any of the present or former directors, officers or other
employees of and/or consultants to Peoples Bank (collectively, the "Sellers
Employee Plans"). The Sellers have furnished the Mercantile Entities with
the following documents with respect to each of the Sellers Employee Plans:
(i) a true and complete copy of all written documents comprising such Sellers
Employee Plan (including amendments and individual agreements relating
thereto) or, if there is no such written document, an accurate and complete
description of the Sellers Employee Plan; (ii) the most recently filed Form
5500 or Form 5500-C (including all schedules thereto), if applicable; (iii)
the most recent financial statements and actuarial reports, if any; (iv) the
summary plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter, if any.
Without limiting the generality of the foregoing, the Sellers have furnished
the Mercantile Entities with true and complete copies of each form of stock
option grant or stock option agreement that is outstanding under any stock
option plan of Peoples Bank.

(b) All of the Sellers Employee Plans have been
maintained and operated in all material respects in accordance with their
terms and the requirements of all applicable statutes, orders, rules and
final regulations, including, without limitation, to the extent applicable,
ERISA and the Code. All contributions required to be made to the Sellers
Employee Plans have been made.

(c) With respect to each of the Sellers Employee Plans
which is a pension plan (as defined in Section 3(2) of ERISA) (the "Pension
Plans"): (i) each Pension Plan which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined to be so
qualified by the IRS and, to the best knowledge of the Sellers, such
determination letter may still be relied upon, and each related trust is
exempt from taxation under Section 501(a) of the Code; (ii) 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(a)), exceed
----------------
the value of the assets of the Pension Plan allocable to such vested or
accrued benefits; (iii) to the best knowledge of the Sellers, there has been
no "prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, which could subject any Pension Plan or
associated trust, or, to the best knowledge of the Sellers, Peoples Bank, to
any tax or penalty; (iv) except as set forth in Schedule 2.19(c), no Pension
----------------
Plan or any trust created thereunder has been terminated, nor to the best
knowledge of the Sellers have there been any "reportable events" with respect
to any Pension Plan, as that term is defined in Section 4043 of ERISA since
January 1, 1987; and (v) 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). Except as set forth in
Schedule 2.19(c), no Pension Plan is a "multiemployer plan" as that term is
- ----------------
defined in Section 3(37) of ERISA.

(d) Except as set forth on Schedule 2.19(d), Peoples
----------------
Bank does not have any liability for any post-retirement health, medical or
similar benefit of any kind whatsoever, except as required by statute or
regulation.

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<PAGE> 22

(e) Peoples Bank does not have any material liability
under ERISA or the Code as a result of its being a member of a group
described in Sections 414(b), (c), (m) or (o) of the Code.

(f) Except as set forth on Schedule 2.19(f), neither
----------------
the execution nor delivery of this Agreement or the Plan of Merger, nor the
consummation of any of the transactions contemplated hereby and thereby, will
(i) result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute payment) becoming due to any
director or employee of Peoples Bank, (ii) increase any benefit otherwise
payable under any of the Sellers Employee Plans or (iii) result in the
acceleration of the time of payment of any such benefit. The Sellers shall
use their best efforts to insure that no amounts paid or payable by Peoples
Bank or the Mercantile Entities to or with respect to any employee or former
employee of Peoples Bank will fail to be deductible for federal income tax
purposes by reason of Section 280G of the Code.

2.20 Conduct of Peoples Bankshares' and Peoples Bank's
-------------------------------------------------
Businesses to Date. Except as disclosed in Schedule 2.20 or otherwise in
- ------------------ -------------
this Agreement, from and after September 30, 1995: (a) Peoples Bank has
carried on its business in the ordinary and usual course consistent with past
practices, (b) neither Peoples Bankshares nor Peoples Bank has issued or sold
any of its capital stock or any corporate debt securities which would be
classified as long-term debt on its balance sheet, (c) neither Peoples
Bankshares nor Peoples Bank has granted any option for the purchase of its
capital stock, effected any stock split or otherwise changed its capitalization,
(d) Peoples Bank 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) Peoples Bank has
not incurred any 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 any of its assets or properties, (f) Peoples
Bank has not discharged or satisfied any lien, mortgage, pledge, claim, security
interest, charge, encumbrance, or restriction or paid any obligation or
liability (absolute or contingent), other than in the ordinary course of
business, (g) Peoples Bank has not 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) Peoples Bank
has not 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, entered into any new, or amended or
supplemented any existing, employment, management, consulting, deferred
compensation, severance or other similar contract, entered into, terminated
or substantially modified any Sellers Employee Plan in respect of any of its
present or former directors, officers or other employees, or agreed to do any
of the foregoing, (i) Peoples Bank has not suffered any 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) Peoples Bank has not entered
into any transaction, contract or commitment outside the ordinary course of
its business.

2.21 Registration Statement, Etc. None of the information
----------------------------
regarding Peoples Bankshares and/or Peoples Bank supplied or to be supplied
by either of them for inclusion or included in (a) a Registration Statement
on Form S-4 to be filed with the SEC by Mercantile for the purpose of
registering the shares of Mercantile Common Stock to be issuable as
Acquisition Consideration pursuant to the provisions of this Agreement (the
"Registration Statement"), (b) the Proxy Statement to be mailed to
shareholders of Peoples Bankshares and to shareholders of Peoples Bank in
connection with the meetings to be called to consider the approval of the
Exchange, the Merger, this Agreement and the Plan of Merger (the "Proxy
Statement") and (c) any other documents to be filed with the SEC or any

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<PAGE> 23

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 of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the special meetings of Peoples
Bankshares' shareholders and of Peoples Bank's shareholders referred to in
Section 5.03, be false or misleading with respect to any 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 Peoples Bankshares and/or Peoples Bank is responsible for
filing with any regulatory authority in connection with the Acquisition will
comply as to form with the provisions of applicable law.

2.22 Brokers and Finders; Other Liabilities. Except as set
--------------------------------------
forth on Schedule 2.22, neither Peoples Bankshares nor Peoples Bank nor any
-------------
of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has
acted directly or indirectly for Peoples Bankshares and/or Peoples Bank in
connection with this Agreement or the Plan of Merger or the transactions
contemplated hereby and thereby. Peoples Bank shall be liable in respect of
all reasonable fees and expenses of counsel and accountants for Peoples Bank.

2.23 Directors' and Officers' Insurance. Peoples Bank has
----------------------------------
taken or will take all requisite action (including, without limitation, the
making of claims and the giving of notices) pursuant to its directors' and
officers' liability insurance policy or policies in order to preserve all
rights thereunder with respect to all matters (other than matters arising in
connection with this Agreement or the Plan of Merger and the transactions
contemplated hereby and thereby) occurring prior to the Effective Time that
are known to the Sellers, except for such matters which, individually or in
the aggregate, will not have and reasonably could not be expected to have a
material adverse effect on the condition of Peoples Bank. Set forth on
Schedule 2.09(c) is a list of all insurance policies maintained by or for the
- ----------------
benefit of Peoples Bank as of the date hereof for its directors, officers,
employees or agents.

2.24 Tax and Regulatory Matters. Neither Peoples Bankshares
--------------------------
nor Peoples Bank 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 6.01(c) or the consummation of the transactions
contemplated by this Agreement and the Plan of Merger.

2.25 Interest Rate Risk Management Instruments. Peoples Bank
-----------------------------------------
is not a party to, nor are any of its properties or assets bound by, interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements, except that certain variable rate loans and
investment securities held by Peoples Bank contain floors and caps.

ARTICLE III
-----------

REPRESENTATIONS AND WARRANTIES OF THE MERCANTILE ENTITIES

As an inducement to the Sellers to enter into and perform their
respective obligations under this Agreement, and notwithstanding any
examinations, inspections, audits or other investigations made by the
Sellers, the Mercantile Entities hereby jointly and severally represent and
warrant to the Sellers as to the following matters:

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<PAGE> 24
3.01 Organization and Authority. Mercantile and Ameribanc
--------------------------
are each corporations duly organized, validly existing and in good standing
under the laws of the State of Missouri, each is duly qualified to do business
and each 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
each has the corporate power and authority to own its properties and assets and
to carry on its business as it is now being conducted. Mercantile and Ameribanc
are each registered as a bank holding company with the Federal Reserve Board
under the BHC Act. Acquisition Bank will, prior to the Closing date, be
chartered as a Kansas state bank by the Kansas Commissioner, will be duly
organized, validly existing and in good standing under the laws of the State of
Kansas, will be duly qualified to do business and will be 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 will have the corporate power
and authority to own its properties and assets and to carry on its business as
it is now being conducted. Acquisition Bank will be a bank insured by the FDIC
under the FDI Act.

3.02 Corporate Authorization.
-----------------------

(a) Mercantile and Ameribanc 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 Mercantile and Ameribanc and the consummation of the
transactions contemplated hereby have been duly authorized by the Executive
Committee of the Board of Directors of Mercantile and the Board of Directors
of Ameribanc, and no other approval of the respective Boards or shareholders
or any committees thereof is required. Subject to such approvals of
governmental agencies and other governing boards having regulatory authority
over Mercantile and Ameribanc as may be required by statute or regulation,
this Agreement is a valid and binding obligation of Mercantile and Ameribanc,
enforceable against each in accordance with its terms.

(b) Neither the execution, delivery and performance by
Mercantile or Ameribanc of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by Mercantile or Ameribanc
with any of the provisions hereof, will (a) violate, conflict with or result
in a breach of any provisions of, or constitute a default (or 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 Mercantile or Ameribanc under any of the terms,
conditions or provisions of (i) their respective Articles of Incorporation or
By-Laws or (ii) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Mercantile or
Ameribanc is a party or by which it may be bound, or to which Mercantile or
Ameribanc or any of its properties or assets may be subject, or (b) subject
to compliance with the statutes and regulations referred to in subsection (c)
of this Section 3.02, to the best knowledge of the Mercantile Entities,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule
or regulation applicable to Mercantile or Ameribanc or any of their
properties or assets.

(c) Other than in connection with or in compliance
with the provisions of the Kansas Banking 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 FDIC or the Kansas
Commissioner, 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 Mercantile, Ameribanc and Acquisition Bank
of the transactions contemplated by this Agreement and the Plan of Merger.

-20-
<PAGE> 25

3.03 Capitalization of Mercantile. The authorized capital
----------------------------
stock of Mercantile consists of (a) 100,000,000 shares of Mercantile Common
Stock, of which, as of September 30, 1995, 55,333,878 shares were issued and
outstanding and (b) 5,000,000 shares of preferred stock, no par value
("Mercantile Preferred Stock"), issuable in series, of which 5,306 shares of
Series B-1 Preferred Stock and 9,500 shares of Series B-2 Preferred Stock
were issued and outstanding. Mercantile has designated 1,000,000 shares of
Mercantile Preferred Stock as "Series A Junior Participating Preferred Stock"
and has reserved such shares under a Rights Agreement dated May 23, 1988 (the
"Mercantile Rights Agreement") between Mercantile and Mercantile Bank of
St. Louis National Association, as Rights Agent. As of November 30, 1995,
Mercantile had reserved (i) 4,278,691 shares of Mercantile Common Stock for
issuance under various Mercantile employee and/or director stock option,
incentive and/or benefit plans ("Mercantile Employee/Director Stock Grants");
(ii) 322,000 shares of Mercantile Common Stock for issuance upon the
acquisition of Security Bank of Conway, F.S.B. ("Conway") pursuant to the
Amended and Restated Agreement and Plan of Reorganization dated as of July 7,
1995, as amended and restated as of September 18, 1995, by and between
Conway, Mercantile and Mercantile Bancorporation Inc. of Arkansas, (iii)
521,424 shares of Mercantile Common Stock for issuance upon the acquisition
of First Sterling Bancorp, Inc. ("Sterling") pursuant to the Agreement and
Plan of Merger dated as of July 24, 1995 by and between Sterling, Mercantile
and Mercantile Bancorporation Incorporated of Illinois ("MBII"), (iv)
7,996,952 shares of Mercantile Common Stock for issuance upon the acquisition
of Hawkeye Bancorporation ("Hawkeye") pursuant to the Agreement and Plan of
Merger dated as of August 4, 1995, by and between Hawkeye and Mercantile and
(v) 199,446 shares of Mercantile Common Stock for issuance upon the
acquisition of Metro Savings Bank, F.S.B. ("Metro") pursuant to the Agreement
and Plan of Reorganization dated as of September 15, 1995 by and between
Metro, Mercantile and MBII. From November 30, 1995 through the date of this
Agreement, no shares of Mercantile Common Stock have been issued, excluding
any such shares which may have been issued in connection with Mercantile
Employee/Director Stock Grants.

Mercantile continually evaluates possible acquisitions and may
prior to the Effective Time enter into one or more agreements providing for,
and may consummate, the acquisition by Mercantile of another bank, bank
holding company or other company (or the assets and/or liabilities thereof)
for consideration that may include equity securities. In addition, prior to
the Effective Time, Mercantile may, depending on market conditions and other
factors, otherwise determine to issue equity, equity-linked or other
securities for financing purposes. Except in connection with currently
pending and/or subsequent acquisition transactions and except for securities
to be issued pursuant to various Mercantile stock option, incentive and/or
benefit plans, there are no other Equity Securities of Mercantile
outstanding. All of the issued and outstanding shares of Mercantile Common
Stock are validly issued, fully paid and nonassessable, and have not been
issued in violation of any preemptive right of any shareholder of Mercantile.
At the Effective Time, the Mercantile Common Stock issued pursuant to this
Agreement will be duly authorized, validly issued and in compliance with all
applicable federal and state securities laws, fully paid and nonassessable
and not subject to preemptive rights.

3.04 Mercantile Financial Statements. The supplemental
-------------------------------
consolidated balance sheets of Mercantile and its subsidiaries (hereinafter
sometimes referred to collectively as "Mercantile Subsidiaries") as of
December 31, 1994, 1993 and 1992 and related supplemental consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1994, together with the
notes thereto, audited by KPMG Peat Marwick LLP, and the consolidated balance
sheet of Mercantile and the Mercantile Subsidiaries as of September 30, 1995
and related consolidated statements of income and cash flows for the nine-month
period ended September 30, 1995, as filed with the SEC (collectively,
the "Mercantile Financial Statements"), have been prepared in accordance with
GAAP, present fairly the consolidated financial position of Mercantile and
the Mercantile Subsidiaries at the dates thereof and the consolidated results
of operations, changes in shareholders' equity

-21-
<PAGE> 26

and cash flows of Mercantile and the Mercantile Subsidiaries for the periods
stated therein and are derived from the books and records of Mercantile and the
Mercantile Subsidiaries.

3.05 Reports. Since January 1, 1992, Mercantile and each of
-------
the Mercantile Subsidiaries 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, Annual
Report on Form 10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the Office of the Comptroller of
the Currency (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 "Mercantile
Reports." As of their respective dates, the Mercantile Reports complied 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 Change. Since September 30, 1995,
-----------------------
there has been no material adverse change in the financial condition, results
of operations or prospects of Mercantile and the Mercantile Subsidiaries
taken as a whole, other than changes in banking laws or regulations, or
interpretations thereof, or other conditions that affect the banking industry
generally, or changes in the general level of interest rates.

3.07 Registration Statement, Proxy Statement, Etc. None of
---------------------------------------------
the information regarding Mercantile and the Mercantile Subsidiaries supplied
or to be supplied by Mercantile for inclusion or included in (a) the
Registration Statement, (b) the Proxy Statement, or (c) 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, to the best knowledge of the Mercantile
Entities be false or misleading with respect to any 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 special meetings of shareholders of
Peoples Bankshares and Peoples Bank 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 either such meeting. All
documents which the Mercantile Entities are responsible for filing with the
SEC and any regulatory authority in connection with the Acquisition will
comply as to form and contents in all respects with the provisions of
applicable law.

3.08 Brokers and Finders. Neither Mercantile, Ameribanc nor
-------------------
any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has
acted directly or indirectly for Mercantile or Ameribanc in connection with
this Agreement and the Plan of Merger or the transactions contemplated hereby
and thereby.

3.09 Legal Proceedings or Other Adverse Facts. There is no
----------------------------------------
legal action or governmental proceeding or investigation pending, or to the
best knowledge of the Mercantile Entities, threatened against Mercantile or
Ameribanc that could prevent or adversely affect or seeks to prohibit the
consummation of the transactions contemplated hereby, nor is Mercantile or
Ameribanc subject to any order of a court or governmental authority having
any such effect. Neither Mercantile nor Ameribanc

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<PAGE> 27

has knowledge of any other fact that could prevent or adversely affect the
consummation of the transactions contemplated hereby.

ARTICLE IV
----------

CONDUCT OF BUSINESSES 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, Peoples
Bankshares and Peoples Bank shall conduct their respective businesses according
to the ordinary and usual course consistent with past and current practices and
shall use their best efforts to maintain and preserve their respective business
organizations, employees and advantageous business relationships and retain the
services of its officers and key employees.

4.02 Forbearances of Peoples Bankshares and Peoples Bank.
---------------------------------------------------
During the period from the date of this Agreement to the Closing Date,
neither Peoples Bankshares nor Peoples Bank shall, without the prior written
consent of the Mercantile Entities:

(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock,
except that (i) Peoples Bank may declare and pay a cash dividend of not more
than $20.00 per share on the Peoples Bank Common Stock in January of 1996 for
the year ended December 31, 1995 and (ii) Peoples Bank may declare and pay
dividends of not more than $5.00 per share for each of the first and second
quarter of 1996; provided, however, Peoples Bank shall coordinate the record
and payment dates of each such quarterly dividend such that the record and
payment dates for a given quarterly dividend are the same as Mercantile's
record and payment dates for its regular quarterly dividend for that quarter;
provided, further, however, if the Effective Time shall not have occurred on
or before September 10, 1996, Peoples Bank may declare and pay a dividend for
each quarter ending thereafter in which the Mercantile Board of Directors
shall declare a dividend on shares of Mercantile Common Stock that in the
aggregate is not in excess of the greater of (A) the aggregate quarterly
dividend that would have been paid by Mercantile on the Acquisition
Consideration if the Acquisition had been consummated on September 10, 1996
and (B) $112,500; provided, further, however, Peoples Bank shall not declare
or pay its quarterly dividend for any quarter in which Peoples Bank's
shareholders will be entitled to receive a regular quarterly dividend on the
shares of Mercantile Common Stock to be issued in the Acquisition.

(b) enter into or amend any employment, severance or
similar agreement or arrangement with any director or officer or employee, or
materially modify any of the Sellers Employee Plans or grant any salary or
wage increase or materially increase any employee benefit (including
incentive or bonus payments), except (i) normal individual increases in
compensation to employees consistent with past practice, (ii) as required by
law or contract and (iii) such increases of which the Sellers notify the
Mercantile Entities in writing and which the Mercantile Entities do not
disapprove within 10 days of the receipt of such notice;

(c) authorize, recommend, propose or announce an
intention to authorize, so recommend or propose, or enter into an agreement
in principle with respect to, any merger, consolidation or business
combination (other than the Acquisition and the Topeka Merger), any
acquisition of a material amount of assets or securities, any disposition of
a material amount of assets or securities or any release or relinquishment of
any material contract rights;

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<PAGE> 28

(d) propose or adopt any amendments to its articles of
incorporation or other charter document or By-Laws;

(e) issue, sell, grant, confer or award any of its
Equity Securities or effect any stock split or adjust, combine, reclassify or
otherwise change its capitalization as it existed on the date of this
Agreement;

(f) purchase, redeem, retire, repurchase or exchange,
or otherwise acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise;

(g) (i) without first consulting with Mercantile,
enter into, renew or increase any loan or credit commitment (including
stand-by letters of credit) to, or invest or agree to invest in any person or
entity or modify any of the material provisions or renew or otherwise extend
the maturity date of any existing loan or credit commitment (collectively,
"Lend to") in an amount in excess of $250,000 or in any amount which, when
aggregated with any and all loans or credit commitments of Peoples Bank to
such person or entity, would be in excess of $250,000, provided no such
consultation shall be required in respect of single-family residential loans
or credits that (A) remain in Peoples Bank's loan portfolio, (B) do not
exceed $125,000 and (C) are saleable in recognized secondary markets pursuant
to Peoples Bank's lending policies as in effect on the date hereof; (ii)
without first obtaining the written consent of Mercantile, Lend to any person
or entity in an amount in excess of $400,000 or in any amount which, when
aggregated with any and all loans or credit commitments of Peoples Bank to
such person or entity, would be in excess of $400,000; (iii) Lend to any
person other than in accordance with Peoples Bank's lending policies as in
effect on the date hereof, provided that in the case of clauses (i) and (ii)
Peoples Bank may make any such loan in the event (A) Peoples Bank has
delivered to Mercantile or its designated representative a notice of its
intention to make such loan and such information as Mercantile or its
designated representative may reasonably require in respect thereof and (B)
Mercantile or its designated representative shall not have reasonably
objected to such loan by giving written or facsimile notice of such objection
within two business days following the delivery to Mercantile or its
designated representative of the notice of intention and information as
aforesaid; or (iv) Lend to any person or entity any of the loans or other
extensions of credit to which or investments in which are on a "watch list"
or similar internal report of Peoples Bank (except those denoted "pass"
thereon), in an amount in excess of $25,000; provided, however, that nothing
in this paragraph shall prohibit Peoples Bank from honoring any contractual
obligation in existence on the date of this Agreement or, with respect to
loans described in clause (i) above, making such loans after consulting with
Mercantile. Notwithstanding clauses (i) and (ii) of this Section 4.02(g),
the Sellers shall be authorized, without first consulting with the Mercantile
Entities or obtaining the Mercantile Entities' prior written consent, to
increase the aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any and all such increases
shall not be in excess of the lesser of five percent (5%) of such
Pre-Existing Facilities or $25,000;

(h) directly or indirectly (including through its
officers, directors, employees or other representatives) (i) initiate, solicit
or encourage any discussions, inquiries or proposals with any third party (other
than the Mercantile Entities or the affiliates thereof) relating to the
disposition of any significant portion of the business or assets of Peoples
Bankshares or Peoples Bank or the acquisition of Equity Securities of Peoples
Bankshares or Peoples Bank or the merger of Peoples Bankshares or Peoples Bank
with any person (other than the Mercantile Entities or the affiliates thereof)
or any similar transaction (each such transaction being referred to herein as an
"Acquisition Transaction"), or (ii) provide any such person with information or
assistance or negotiate with any such person with respect to an Acquisition
Transaction, and Peoples Bankshares and Peoples Bank shall

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<PAGE> 29

promptly notify Mercantile orally of all the relevant details relating to all
inquiries, indications of interest and proposals which it may receive with
respect to any Acquisition Transaction;

(i) take any action that would (i) materially impede
or delay the consummation of the transactions contemplated by this Agreement
and the Plan of Merger or the ability of the Mercantile Entities and the
Sellers to obtain any approval of any Regulatory Authority required for the
transactions contemplated by this Agreement and the Plan of Merger or to
perform its covenants and agreements under this Agreement or the Plan of
Merger or (ii) prevent or impede the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the Code;

(j) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity;

(k) in the case of Peoples Bank, materially
restructure or change its investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported, or execute individual investment transactions of greater than
$500,000 for U.S. Treasury Securities and Federal Agency securities and
$100,000 for all other investment instruments, provided that for purposes of
this Subsection (k), such consent shall not be unreasonably withheld;

(l) agree in writing or otherwise take any of the
foregoing actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other act which would make any of the
representations and warranties in Article II of this Agreement untrue or
incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
act; or

(m) enter into or increase any loan or credit
commitment (including standby letters of credit) to any executive officer or
director of Peoples Bankshares or Peoples Bank, any shareholder of Peoples
Bankshares or Peoples Bank, or any entity controlled, directly or indirectly,
by any of the foregoing or engage in any transaction with any of the
foregoing which is of the type or nature sought to be regulated in 12 U.S.C.
371c and 12 U.S.C. 371c-1, without first obtaining the prior written consent
of Mercantile, which consent shall not be unreasonably withheld. For
purposes of this subsection (m), "control" shall have the meaning associated
with that term under 12 U.S.C. 371c.

4.03 Forbearances of the Mercantile Entities. During the
---------------------------------------
period from the date of this Agreement to the Closing Date, the Mercantile
Entities shall not, without the prior consent of the Sellers, agree in
writing or otherwise engage in any activity, enter into any transaction or
take or omit to take any other action which would make any of the
representations and warranties of Article III of this Agreement untrue or
incorrect in any material respect if made anew after engaging in such activity,
entering into such transaction, or taking or omitting such other action.

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<PAGE> 30

ARTICLE V
---------

ADDITIONAL AGREEMENTS

5.01 Access and Information; Due Diligence.
-------------------------------------

(a) Peoples Bankshares and Peoples Bank each shall
afford to the Mercantile Entities, and to the Mercantile Entities' accountants,
counsel and other representatives, full access during normal business hours,
during the period prior to the Closing Date, to all its properties, books,
contracts, commitments and records and, during such period, shall furnish
promptly to the Mercantile Entities (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 or banking laws and (ii) all other
information concerning its business, properties and personnel as the Mercantile
Entities may reasonably request. In the event of the termination of this
Agreement, the Mercantile Entities shall, and shall cause their respective
advisors and representatives to, (1) hold confidential all information obtained
in connection with any transaction contemplated hereby with respect to the other
party which is not otherwise public knowledge, (2) return to Peoples Bankshares
and Peoples Bank all documents (including copies thereof) obtained hereunder
from Peoples Bankshares and Peoples Bank and (3) use their 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.

(b) Mercantile, promptly following the date of this
Agreement, shall commence its review of Peoples Bankshares and Peoples Bank
and their respective operations, business affairs, prospects and financial
conditions, including, without limitation, those matters which are the
subject of Peoples Bankshares' and Peoples Bank's representations and
warranties included herein (the "Mercantile Due Diligence Review").
Mercantile shall conclude such review by not later than twenty (20) business
days after the date of this Agreement (the "Mercantile Due Diligence
Period"), but the pendency of such Mercantile Due Diligence Review shall not
delay Mercantile's obligation pursuant to Section 5.02 of this Agreement to
file a Registration Statement with the SEC and all other necessary
applications and filings with the appropriate federal and state regulatory
agencies. Mercantile shall advise Peoples Bankshares and Peoples Bank of any
situation, event, circumstance or other matter which first came to the
attention of Mercantile during the Mercantile Due Diligence Review which
could result in the termination of this Agreement by Mercantile pursuant to
Section 7.01(d) hereof, or, if applicable, of the absence of any situation,
event, circumstance or other matter, it being the intention of Mercantile to
provide notice to Peoples Bankshares and Peoples Bank, as promptly as
possible, of any perceived impediment to the consummation of the Acquisition.
Notwithstanding anything hereinabove contained or implied to the contrary,
the Mercantile Due Diligence Review shall not limit, restrict or preclude, or
be construed to limit, restrict or preclude, Mercantile, 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 Mercantile Due Diligence Period of any event or
condition which was not detected in the Mercantile Due Diligence Review by
Mercantile and which would constitute a breach of any representation,
warranty or agreement of Peoples Bankshares or Peoples Bank under this
Agreement.

5.02 Registration Statement; Regulatory Matters.
------------------------------------------

(a) Mercantile shall prepare and, subject to the review
and consent of the Sellers with respect to matters relating to the Sellers, file
with the SEC, as soon as is reasonably practicable, the Registration Statement
with respect to the shares of Mercantile Common Stock issuable

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<PAGE> 31

as Acquisition Consideration and shall use its best efforts to cause the
Registration Statement to become effective. Mercantile shall also take
any action required to be taken under any applicable state blue sky or
securities laws in connection with the issuance of such shares, and Peoples
Bankshares and Peoples Bank shall furnish Mercantile all information concerning
Peoples Bankshares and Peoples Bank as Mercantile may reasonably request in
connection with any such action.

(b) 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 and the Plan of Merger as soon as
is reasonably practicable after the date of this Agreement, including,
without limitation, Mercantile filing the necessary applications with the
FDIC and the Kansas Commissioner.

5.03 Shareholder Approvals. Peoples Bankshares shall call a
---------------------
special meeting of its shareholders to be held as soon as is reasonably
practicable for the purpose of voting upon the Exchange and this Agreement
and related matters. Peoples Bank shall call a special meeting of its
shareholders to be held as soon as is reasonably possible for the purpose of
voting upon the Merger, this Agreement and the Plan of Merger and related
matters. In connection with such meetings, Mercantile shall prepare, subject
to the review and consent of Peoples Bankshares and Peoples Bank, the Proxy
Statement (which shall be a part of the Registration Statement to be filed
with the SEC by Mercantile) and mail it to the respective shareholders. The
respective Boards of Directors of Peoples Bankshares and of Peoples Bank
shall submit and recommend for approval of their respective shareholders the
matters to be voted upon at such meetings. The Boards of Directors of
Peoples Bankshares and Peoples Bank hereby do and will recommend this
Agreement, the Plan of Merger and the transactions contemplated hereby and
thereby to their respective shareholders and use their respective best
efforts to obtain the votes and approvals of their respective shareholders
necessary for the approval and adoption of the matters contemplated hereby.
Peoples Bankshares, upon approval of the Exchange by the shareholders of
Peoples Bankshares, agrees to vote all shares of Peoples Bank Common Stock
that it owns beneficially and of record for the approval of the Merger, this
Agreement and the Plan of Merger at the special meeting of shareholders of
Peoples Bank.

5.04 Current Information. During the period from the date of
-------------------
this Agreement to the Closing Date, each party will promptly furnish all
other parties with copies of all monthly and other interim financial
statements as the same become available and 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 parties of the following events immediately upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken by the affected party with respect thereto: (a) the occurrence of any
event which could cause any representation or warranty of such party or any
schedule, statement, report, notice, certificate or other writing furnished
by such party to be untrue or misleading in any respect; (b) any material
change in its business, financial condition, results of operations or
prospects; (c) the issuance or commencement of any governmental and/or
regulatory agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter which
shall now or hereafter be in effect, any communications pertaining thereto;
or (d) the institution or the threat of any material litigation involving
such party.

5.05 Conforming Entries.
------------------

(a) Notwithstanding that the Sellers believe that the
Sellers have established all reserves and taken all provisions for possible
loan losses required by GAAP and applicable

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<PAGE> 32

laws, rules and regulations, the Sellers recognize that Mercantile may have
adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). From and
after the date of this Agreement to the Effective Time, the Sellers and
Mercantile shall consult and cooperate with each other with respect to
conforming the loan, accrual and reserve policies of Peoples Bank to those
policies of Mercantile, as specified in each case in writing to the Seller,
based upon such consultation and as hereinafter provided.

(b) In addition, from and after the date of this
Agreement to the Effective Time, the Sellers and Mercantile shall consult and
cooperate with each other with respect to determining (i) appropriate Peoples
Bank accruals, reserves and charges to establish and take in respect of
excess equipment write-off or write-down of various assets and other
appropriate charges and accounting adjustments taking into account the
parties' business plans following the Acquisition, and (ii) appropriate
structuring of Peoples Bank's investment securities portfolio giving due
regard to, among other things, rate sensitivity, maturity and credit quality
issues, as specified in each case in writing to the Sellers, based upon such
consultation and as hereinafter provided.

(c) The Sellers and Mercantile shall consult and
cooperate with each other with respect to determining the amount and the
timing for recognizing for financial accounting purposes the Seller's
expenses of the Acquisition and the restructuring charges related to or to be
incurred in connection with the Acquisition.

(d) Subject to the language contained in the second
sentence hereof, at the request of Mercantile, the Sellers shall (i)
establish and take such reserves and accruals to conform Peoples Bank's loan,
accrual and reserve policies to Mercantile's policies, (ii) establish and
take such accruals, reserves and charges in order to implement such policies
in respect of excess facilities and equipment capacity, severance costs,
litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for various accounting
purposes such expenses of the Acquisition and restructuring charges related
to or to be incurred in connection with the Acquisition, and (iii) effect
such divestitures or otherwise implement such restructuring in respect of
Peoples Bank's investment securities portfolio to conform Peoples Bank's
investment securities portfolio policies to Mercantile's policies, in the
case of each of the foregoing at such times as are requested by Mercantile in
a written notice to the Sellers. It is the objective of Mercantile and the
Sellers that such reserves, accruals, charges and divestitures, if any, to be
taken shall be consistent with GAAP and taken only after the approval
conditions set forth in Section 6.01(c) hereof have been satisfied or waived
(except to the extent that any waiting period associated therewith may then
have commenced but not expired) and Mercantile has informed the Sellers that
it is not aware of any facts which would indicate that the other Closing
conditions in Article VI hereof cannot be met at Closing.

5.06 Environmental Reports. The Sellers shall provide to the
---------------------
Mercantile Entities as soon as reasonably practicable, but not later than twenty
(20) business days, after the acquisition, leasing, foreclosure or repossession
by Peoples Bank of any real property subsequent to the date hereof, a report of
a phase one environmental investigation of such real property (excluding space
in retail or similar establishments leased by Peoples Bank for automatic teller
machines or bank branch facilities where the space leased comprises less than
20% of the total space leased to all tenants of such property). If required by
the phase one report with respect to any parcel of real property referred to
above, in the reasonable opinion of the Mercantile Entities, the Sellers shall
also provide to the Mercantile Entities a phase two investigation report on such
designated parcels as soon as practicable. The Mercantile Entities shall have
fifteen (15) business days from the receipt of any such phase two investigation
report to notify the Sellers of any dissatisfaction with the contents of such
report. If the estimated costs of all remedial or other corrective actions or
measures with regard to the real property referred to above required by

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<PAGE> 33
applicable law exceed $250,000 in the aggregate, as reasonably estimated by an
environmental expert retained for such purpose by the Sellers upon the
Mercantile Entities' reasonable request and such costs will be incurred by
Peoples Bank, or if such cost cannot be so reasonably estimated by such expert
to be such amount or less with any reasonable degree of certainty, then the
Mercantile Entities, after providing the Sellers with written notice of the
Mercantile Entities' intent to do so and allowing the Sellers a six-month period
from the date of such notice to take and complete, to the reasonable
satisfaction of the Mercantile Entities, all such remedial or other corrective
actions and measures (the aggregate cost which will be incurred by Peoples Bank
shall not exceed $250,000) and shall have the right pursuant to Section 7.01(f)
hereof to terminate this Agreement.

5.07 Agreements of Affiliates. Set forth as Schedule 5.07 is
------------------------ -------------
a list (which includes individual and beneficial ownership) of all persons
whom the Sellers believe to be "affiliates" of either Peoples Bankshares
and/or Peoples Bank for purposes of Rule 145 under the Securities Act.
Seller shall use its best efforts to cause each person who is identified as
an "affiliate" to deliver to Mercantile, as of the date hereof, or as soon as
practicable hereafter, a written agreement in substantially the form set
forth as Exhibit B to this Agreement providing that each such person will
---------
agree not to sell, pledge, transfer or otherwise dispose or any shares of
Mercantile Common Stock to be received by such person in the Merger and/or
the Exchange except in compliance with the applicable provisions of the
Securities Act and the rules and regulations promulgated thereunder. Prior
to the Effective Time, and via letter, the Sellers shall amend and supplement
Schedule 5.07 and use all reasonable efforts to cause each additional person
- -------------
who is identified as an "affiliate" to execute a written agreement as set
forth in Section 5.07.

5.08 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and the
Plan of Merger and consummating the Acquisition, except that Ameribanc shall
pay all printing expenses and filing fees incurred in connection with this
Agreement, the Registration Statement and the Proxy Statement.

5.09 Miscellaneous Agreements and Consents.
-------------------------------------

(a) 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 action, 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
and the Plan of Merger as expeditiously as possible, including, without
limitation, using their respective 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 and
thereby. The Sellers and the Mercantile 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 foregoing, desirable for the
consummation of the transactions contemplated by this Agreement and the Plan
of Merger.

(b) The Sellers, prior to the Effective Time, shall
(i) consult and cooperate with the Mercantile Entities regarding
implementation of those policies and procedures established by the Mercantile
Entities for their governance and that of their respective subsidiaries and
not otherwise referenced in Section 5.05 hereof, including, without limitation,
policies and procedures pertaining to the accounting, asset/liability
management, audit, credit, human resources, treasury and legal functions, and
(ii) at the request of the Mercantile Entities, conform the Seller's existing
policies and procedures in respect of such matters to the Mercantile Entities'
policies and procedures or, in the absence of any existing policy or procedure
of the Sellers regarding any such function, introduce the Mercantile Entities'
policies and procedures in respect thereof (to the extent deemed reasonable by
the Sellers), unless to do so would cause Peoples Bankshares and/or Peoples Bank
to be in violation of any law, rule or regulation

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<PAGE> 34

or any Regulatory Authority having jurisdiction over Peoples Bankshares and/or
Peoples Bank. No action taken in connection with the foregoing shall be the
basis to assert the violation of a representation, warranty or covenant of the
Sellers herein.

5.10 Press Releases. The Sellers and the Mercantile 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, the Plan of Merger or any of the transactions contemplated hereby
or thereby.

5.11 Indemnification of Peoples Bank's Directors, Officers
----------------------------------------------------
and Employees. Mercantile agrees that the Merger shall not affect or
- -------------
diminish any of Peoples Bank's duties and obligations of indemnification
existing at the Effective Time of Merger in favor of employees, agents,
directors or officers of Peoples Bank arising by virtue of its Charter or
By-Laws in the form in effect at the date hereof or arising by operation of
law or arising by virtue of any contract, resolution, or other agreement or
document existing at the date hereof, and such duties and obligations shall
continue in full force and effect for so long as they would otherwise survive
and continue in full force and effect. To the extent that Peoples Bank's
existing directors' and officers' liability insurance policy would provide
coverage for any action or omission occurring prior to the Effective Time,
the Sellers agree to give proper notice to the insurance carrier and to the
Mercantile Entities of a potential claim thereunder so as to preserve Peoples
Bank's rights to such insurance coverage. Mercantile 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 Mercantile, including Peoples Bank, on and after the Effective Time.

5.12 Employee Benefit Plans.
----------------------

(a) Following the Effective Time, the Mercantile
Entities shall cause the Surviving Bank to honor in accordance with their
terms all employment, severance and other compensation contracts set forth on
Schedule 5.12 between Peoples Bank 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
Sellers Employee Plans.

(b) The provisions of any plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of Peoples Bank shall be deleted and terminated as of the
Effective Time, and the Sellers shall ensure that following the Effective
Time no holder of options to acquire shares of capital stock of Peoples Bank
or any participant in any Seller Stock Plans shall have any right thereunder
to acquire any securities of Peoples Bank.

(c) The Sellers Employee Plans shall not be terminated
by reason of the Merger but shall continue thereafter as plans of the
Surviving Bank until such time as the employees of Peoples Bank are
integrated into Mercantile's employee benefit plans that are available to
other employees of Mercantile 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. Mercantile shall take
such steps as are necessary or required to integrate the employees of Peoples
Bank in Mercantile's employee benefit plans available to other employees of
Mercantile and its subsidiaries as soon as practicable after the Effective
Time, with (i) full credit for prior service with Peoples Bank for purposes
of vesting and eligibility for participation (but not benefit accruals under
any defined benefit plan), and co-payments and deductibles, and (ii) waiver
of all waiting periods and pre-existing condition exclusions or penalties.

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<PAGE> 35

5.13 Taxes of Peoples Bankshares. Any liability in respect
---------------------------
of any consolidated, combined or unitary tax imposed upon the Sellers
(including any federal income tax liability shown to be due on the final
return of Peoples Bankshares) (i) with respect to a taxable period ending on
or before the Closing Date or (ii) with respect to a taxable period beginning
on or before the Closing Date and ending after the Closing Date, but only
with respect to the portion of such period up to and including the Closing
Date, shall be allocated between Peoples Bankshares and Peoples Bank pursuant
to (or in accordance with the principles of) Income Tax Regulation
Sec. 1.1552-1(a)(1); any such liability (i) with respect to a taxable period
beginning after the Closing Date or (ii) with respect to a period that begins
on or before the Closing Date and ends thereafter, but only with respect to
the portion of such period after the Closing Date, shall be allocated to
Peoples Bankshares. Any refund in respect of any taxable period beginning on
or before the Closing Date shall be allocated between Peoples Bank and
Peoples Bankshares proportionately in accordance with the allocation of the
tax liability for such period under the preceding sentence. Peoples
Bankshares, with the assistance and review of the Mercantile Entities, shall
prepare and timely file all tax declarations, information returns, returns
and statements required to be filed by it after the Closing Date. On or
before the Closing Date, Peoples Bankshares and Peoples Bank shall have taken
all actions required to terminate the Tax Sharing Agreement.

5.14 State Takeover Statutes. The Sellers will take all
-----------------------
steps necessary to exempt the transactions contemplated by this Agreement,
the Plan of Merger and any agreement contemplated hereby or thereby from, and
if necessary challenge the validity of, any applicable state takeover law.

5.15 Tax Opinion Certificates. The Sellers shall cause such
------------------------
of their executive officers and/or directors and such holders of Peoples
Bankshares Common Stock and/or Peoples Bank Common Stock, in each case, as
may reasonably requested by Thompson & Mitchell, counsel to the Mercantile
Entities, to timely execute and deliver to Thompson & Mitchell certificates
substantially in the forms of Exhibit C, Exhibit D, Exhibit E and Exhibit F
--------- --------- --------- ---------
hereto.

5.16 Escrow Account. Contemporaneously with the Closing,
--------------
Peoples Bank shall deposit with an escrow agent (the "Escrow Agent"), which
shall be selected by Mercantile, such funds as Mercantile shall reasonably
determine are necessary to provide for (i) any payments to dissenters
pursuant to Section 1.09 hereof and (ii) any and all claims incurred in
connection with preparing for, entering into and carrying out this Agreement
or the consummation of the Merger (collectively, the "Obligations"). Upon
payment of the Obligations, the Escrow Agent shall remit to Peoples Bank any
funds remaining in the escrow account. Peoples Bank hereby agrees to execute
an escrow agreement in a form approved by Mercantile and that Peoples Bank,
upon transfer of the funds to the Escrow Agent, shall have no further claim
or right to or interest in such funds.

ARTICLE VI
----------

CONDITIONS

6.01 Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Acquisition. The respective obligations of each party to effect the Acquisition
- -----------
shall be subject to the fulfillment or waiver at or prior to the Closing Date of
the following conditions:

(a) The approval of the Exchange and this Agreement
shall have received the requisite vote of shareholders of Peoples Bankshares
at the special meeting of shareholders called pursuant to Section 5.03
hereof.

-31-
<PAGE> 36

(b) The approval of the Merger, this Agreement and the
Plan of Merger shall have received the requisite vote of shareholders of
Peoples Bank at the special meeting of shareholders called pursuant to
Section 5.03 hereof.

(c) This Agreement, the Plan of Merger and the
transactions contemplated hereby and thereby shall have been approved by the
FDIC, the Kansas Commissioner and any other federal and/or state regulatory
agencies whose approval is required for consummation of the transactions
contemplated hereby.

(d) The Registration Statement shall have been
declared effective and shall not be subject to a stop order or any threatened
stop order.

(e) Neither Peoples Bankshares, Peoples Bank,
Mercantile, Ameribanc nor Acquisition Bank 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 Acquisition.

(f) The Mercantile Entitles and Peoples Bankshares
shall have taken all such actions as are necessary to effect the Exchange
simultaneously with the Merger.

(g) Each of Mercantile and the Sellers shall have
received from Thompson & Mitchell an opinion (which opinion shall not have
been withdrawn at or prior to the Effective Time) reasonably satisfactory in
form and substance to it to the effect that the Acquisition will constitute a
reorganization within the meaning of Section 368 of the Code and that no gain
or loss will be recognized by the shareholders of Peoples Bankshares and/or
Peoples Bank to the extent they receive Mercantile Common Stock in exchange
for shares of Peoples Bankshares Common Stock and/or Peoples Bank Common
Stock.

6.02 Conditions to Obligations of the Sellers. The
----------------------------------------
obligations of the Sellers to effect the Acquisition shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:

(a) Representations and Warranties. The
------------------------------
representations and warranties of the Mercantile Entities set forth in
Article III hereof shall be true and correct in all material respects, except
such as are not of a magnitude as to be materially adverse to the business,
financial condition, results of operations or prospects of Mercantile and its
subsidiaries, taken as a whole, 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, (ii) where the facts which caused the
failure of any representation or warranty to be so true and correct have not
resulted, and are not likely to result, in a material adverse effect on the
condition of Mercantile and its subsidiaries taken as a whole and (iii) for
the effect of transactions contemplated by this Agreement) and the Sellers
shall have received a signed certificate which is to the best knowledge of
any Executive Vice President of Mercantile, signing solely in his capacity as
an officer of Mercantile, and is to that effect.

(b) Performance of Obligations. The Mercantile
--------------------------
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 the Sellers shall have received a signed certificate which is to
the knowledge of any Executive Vice President of Mercantile, signing solely
in his capacity as an officer of Mercantile, and is to that effect.

-32-
<PAGE> 37

(c) Permits, Authorizations, etc. The Mercantile
-----------------------------
Entities shall have obtained any and all material permits, authorizations,
consents, waivers and approvals required for the lawful consummation by it of
the Acquisition.

(d) No Material Adverse Change. 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
Mercantile and its subsidiaries, taken as a whole.

(e) Opinion of Counsel. Mercantile shall have
------------------
delivered to the Sellers an opinion of counsel to Mercantile dated as of the
Closing Date or a mutually agreeable earlier date in substantially the form
set forth as Exhibit G to this Agreement.
---------

6.03 Conditions to Obligations of the Mercantile Entities.
----------------------------------------------------
The obligations of the Mercantile Entities to effect the Acquisition shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following additional conditions:

(a) Representations and Warranties. The
------------------------------
representations and warranties of the Sellers set forth in Article II hereof
shall be true and correct in all material respects, except such as are not of
a magnitude as to be materially adverse to the business, financial condition,
results of operations or prospects of Peoples Bank, 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, (ii) where the facts
which caused the failure of any representation or warranty to be so true and
correct have not resulted, and are not likely to result, in a material
adverse effect on the condition of Peoples Bank and (iii) for the effect of
transactions contemplated by this Agreement) and Mercantile shall have
received a signed certificate which is to the best knowledge of the Chairman
and Chief Executive Officer and President of each of Peoples Bankshares and
Peoples Bank, signing solely in their capacities as officers of Peoples
Bankshares and Peoples Bank, and is to that effect.

(b) Performance of Obligations. The Sellers shall
--------------------------
have performed in all material respects all obligations required to be
performed by them under this Agreement prior to the Closing Date, and
Mercantile shall have received a signed certificate which is to the knowledge
of the Chairman and the Chief Executive Officer and President of each of
Peoples Bankshares and Peoples Bank, signing solely in their capacities as
officers of Peoples Bankshares and Peoples Bank, and is to that effect.

(c) Permits, Authorizations, etc. The Sellers shall
-----------------------------
have obtained any and all material consents or waivers from other parties to
loan agreements, leases or other contracts material to the Peoples Bank's
businesses required for the consummation of the Acquisition, and the Sellers
shall have obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of the
Acquisition.

(e) Opinion of Counsel. The Sellers shall have
------------------
delivered to Mercantile an opinion of counsel to the Sellers dated as of the
Closing Date or a mutually agreeable earlier date in substantially the form
set forth as Exhibit H to this Agreement.
---------

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<PAGE> 38

(f) Delivery of Certificates. Peoples Bankshares
------------------------
shall have delivered to the Exchange Agent the certificates evidencing shares
of Peoples Bank Common Stock owned beneficially or of record by Peoples
Bankshares, and such other documentation as shall be reasonably required by
Mercantile or the Exchange Agent to effect the Exchange.

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 Peoples Bankshares and Peoples Bank:

(a) by mutual consent by the Executive Committee of
the Board of Directors of Mercantile and the Board of Directors of each other
party hereto; or

(b) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of each other party hereto
at any time after December 31, 1996 if the Acquisition shall not theretofore
have been consummated; or

(c) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of each other party hereto
if the FDIC, the Kansas Commissioner or any other federal and/or state
regulatory agency whose approval is required for the consummation of the
Acquisition shall have denied approval of such transaction; or

(d) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of Ameribanc, at any time
prior to the completion of the Mercantile Due Diligence Period, in the event
any situation, event, circumstance or other matter shall come to the
attention of Mercantile during the course of the Mercantile Due Diligence
Review conducted pursuant to Section 5.01(b) hereof which Mercantile shall,
in a good faith exercise of its reasonable discretion, determine to be of
type or nature which is of such a magnitude as to be materially adverse to
the business, financial condition, results of operations or prospects of
Peoples Bank and is not capable of being expeditiously or effectively
resolved or remedied in a manner acceptable to Mercantile; or

(e) by the Executive Committee of the Board of
Directors of Mercantile or the Boards of Directors of Ameribanc, on the one
hand or by the Boards of Directors of Peoples Bankshares and Peoples Bank, on
the other hand, in the event of a breach by the other of any representation,
warranty or agreement contained in this Agreement, which breach is of such a
magnitude as to be materially adverse to the business, financial condition,
results of operations or prospects of the breaching party and its
subsidiaries taken as a whole and is not cured after 45 days' written notice
thereof is given to the party committing such breach or waived by such other
party(ies).

(f) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of Ameribanc pursuant to
and in accordance with the provisions of Section 5.06 hereof.

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

-34-
<PAGE> 39

each, except as set forth in the second sentence of Section 5.01(a) and in
Sections 5.08 and 8.02, and, except that no termination of this Agreement
pursuant to subsection (e) of Section 7.01 shall relieve the non-performing
party of any liability to any other party hereto arising from the intentional,
deliberate and willful non-performance of any covenant herein, after the giving
of notice and the opportunity to cure.

7.03 Amendment. This Agreement, the Exhibits and the
---------
Schedules hereto may be amended by the parties hereto, by action taken by or
on behalf of the respective Executive Committees of the Board of Directors or
the respective Boards of Directors, at any time before or after approval of
this Agreement by the shareholders of Peoples Bankshares and Peoples Bank;
provided, however, that after any such approval no such modification shall
(A) alter the amount or change the form of the Acquisition Consideration
contemplated by this Agreement to be received by Peoples Bankshares or the
other shareholders of Peoples Bank, (B) adversely affect the tax treatment of
the shareholders of the Sellers, as generally described in Section 6.01(g)
hereof, (C) alter or change any of the terms of this Agreement if such
alteration or change would adversely affect the shareholders of Peoples Bank
or (D) impede or delay receipt of any approvals, referred to in Section
6.01(c) or the consummation of the transactions contemplated by this
Agreement and the Plan of Merger. 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 shareholders are, entitled to the benefits thereof.

ARTICLE VIII
------------

GENERAL PROVISIONS

8.01 Non-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 below in this Section 8.01,
all representations, warranties and agreements in this Agreement of the
Mercantile Entities, the Sellers or in any instrument delivered by the
Mercantile Entities or the Sellers 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 termination of this Agreement in accordance with
its terms, the agreements contained in Sections 5.01 (second sentence), 5.08,
7.02 and 8.02 shall survive such termination.

8.02 Indemnification. The Sellers and the Mercantile
---------------
Entities (hereinafter, in such capacity being referred to individually and/or
collectively, as the "Indemnifying Party") agree to indemnify and hold
harmless each other and their officers, directors and controlling persons
(each such other party being hereinafter referred to, individually and/or
collectively, as the "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, to which the Indemnifying 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 (or 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 for inclusion
thereof 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 agrees to reimburse each such
Indemnified Party, as incurred, for

-35-
<PAGE> 40

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 8.02 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 8.03 shall be void and of no effect. There shall not be any third
party beneficiaries of any provisions hereof except for Sections 1.08, 5.11,
5.12 and 8.02 which may be enforced against obligated party 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 or 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 or meaning of any
provision hereof.

8.07 Entire Agreement. This Agreement and the Appendices and
----------------
Schedules hereto constitutes the entire agreement between the parties with
respect to the subject matter hereof, 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 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.

8.09 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to be duly received (a) on the date
given if delivered personally or by cable, telegram or telex or (b) on the
date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

-36-
<PAGE> 41

(i) if to the Mercantile Entities:

Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524

Attention: John W. Rowe
Executive Vice President
Mercantile Bank of St. Louis National
Association
Telecopy: (314) 425-2752

Copies to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
Telecopy: (314) 425-1386

and
Thompson & Mitchell
One Mercantile Center
St. Louis, Missouri 63101
Attention: Robert M. LaRose, Esq.
Telecopy: (314) 342-1717

(ii) if to Sellers:
Peoples State Bankshares, Inc.
1080 S.W. Wanamaker Road, Suite A
Topeka, Kansas 66604-3888
Attention: Ronald D. Lutz
Chairman and Chief Executive Officer
Telecopy: (913) 271-8085

Copy to:
Stinson, Mag & Fizzell
1201 Walnut Street, Suite 2800
Kansas City, Missouri 64106-2150
Attention: Howard H. Mick, Esq.
Telecopy: (816) 691-3495

8.10 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.

-37-
<PAGE> 42

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized and their
respective corporate seals to be affixed hereto, all as of the date first
written above.

"MERCANTILE ENTITIES"

MERCANTILE BANCORPORATION INC.
ATTEST:

/s/ William A. Hayter By: /s/ John W. Rowe
- -------------------------------- ------------------------------------
William A. Hayter John W. Rowe
Senior Vice President Executive Vice President
Mercantile Bank of St. Louis Mercantile Bank of St. Louis
National Association National Association, Authorized
Officer

AMERIBANC, INC.
ATTEST:

/s/ Jon W. Bilstrom By: /s/ Michael T. Normile
- -------------------------------- --------------------------------------
Jon W. Bilstrom Michael T. Normile
Secretary Vice President

"SELLERS"

PEOPLES STATE BANKSHARES, INC.
ATTEST:

/s/ Joyce M. Lutz By: /s/ Ronald Lutz
- -------------------------------- --------------------------------------
Joyce M. Lutz Ronald Lutz
Secretary and Treasurer Chairman and Chief Executive Officer

PEOPLES STATE BANK
ATTEST:

/s/ Joyce M. Lutz By: /s/ Ronald Lutz
- -------------------------------- --------------------------------------
Joyce M. Lutz Ronald Lutz
Secretary and Vice President Chairman and Chief Executive Officer

-38-

<PAGE> 1
Exhibit 2.2

PLAN OF MERGER

This Plan of Merger (the "Plan") dated as of May 2, 1996 by and
between PEOPLES STATE BANK, a Kansas state bank ("Peoples Bank"), and
MERCANTILE BANK OF SHAWNEE COUNTY, a Kansas state bank in organization
("Mercantile-Shawnee"), such banks being hereinafter collectively referred to
as the "Constituent Banks."

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, Peoples Bank is chartered as a Kansas state bank by the
Kansas State Bank Commissioner, is duly authorized, validly existing and in
good standing under the laws of the State of Kansas, having an authorized
capital of 22,500 shares of common stock, $100.00 par value (the "Peoples Bank
Common Stock"), of which 22,500 shares will be issued and outstanding as of the
Effective Time, as herein defined; and

WHEREAS, Mercantile-Shawnee will be organized as a Kansas state
bank chartered by the Kansas State Bank Commissioner, duly authorized, validly
existing and in good standing under the laws of the State of Kansas, having
authorized capital of 10,000 shares of common stock, $100.00 par value
(the "Mercantile-Shawnee Common Stock"), of which 10,000 shares will be
issued and outstanding as of the Effective Time and which will be owned
beneficially and of record by Ameribanc, Inc., a Missouri corporation
("Ameribanc"); and

WHEREAS, the respective Boards of Directors of Peoples Bank and
Mercantile-Shawnee each will have duly approved this Plan providing for the
merger of Mercantile-Shawnee with and into Peoples Bank as the surviving bank
as authorized by the statutes of the State of Kansas (the "Merger"); and

WHEREAS, Peoples Bank, Peoples State Bankshares, Inc., a Kansas
corporation and holder of eighty-eight and 88/100 percent (88.88%) of the
Peoples Bank Common Stock ("Peoples Bankshares"), Ameribanc and Mercantile
Bancorporation Inc., a Missouri corporation and holder of all of the issued and
outstanding stock of Ameribanc ("Mercantile"), have entered into an Agreement
and Plan of Reorganization (the "Agreement"), pursuant to which Ameribanc and
Peoples Bankshares will consummate an exchange of all shares of Peoples Bank
Common Stock owned beneficially and of record by Peoples Bankshares (the
"Exchange") for shares of the common stock, $5.00 par value, of Mercantile
("Mercantile Common Stock"), and, simultaneously with the Exchange,
Mercantile-Shawnee will merge with and into Peoples Bank (the "Merger" and
together with the Exchange, the "Acquisition"), whereby, (1) upon consummation
of the Exchange, each share of Peoples Bank Common Stock that is beneficially
owned by Peoples Bankshares will be transferred to Ameribanc in exchange for
approximately 14.4819 shares of Mercantile Common Stock and (2) upon
consummation of the Merger, each outstanding share of Peoples Bank Common Stock
(other than shares transferred to Ameribanc pursuant to the Exchange or shares
as to which the holder thereof has perfected dissenters' rights under Section
17-6712 of the Kansas Statutes Annotated) will be converted into approximately
14.4819 shares of Mercantile Common Stock; and

WHEREAS, Ameribanc owns all the outstanding shares of
Mercantile-Shawnee;

NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of setting forth
the terms and conditions of the Merger, the manner and the basis of causing
the shares of Peoples Bank Common Stock (other than shares owned

<PAGE> 2
by Ameribanc or any dissenters) to be converted into Mercantile Common Stock,
as herein provided, and such other details and provisions as are deemed
necessary or proper, the parties hereto have agreed, subject to the approval
and adoption of this Plan by the requisite vote of the shareholders of each
Constituent Bank, and subject to the conditions hereinafter set forth, as
follows:

ARTICLE I

Merger and Name of Surviving Bank
---------------------------------

At the Effective Time (as defined herein), Mercantile-Shawnee shall
be merged with and into Peoples Bank, which is hereby designated as the
"Surviving Bank," the name of which upon and after the Effective Time shall be
"Peoples State Bank."

ARTICLE II

Terms and Conditions of Merger
------------------------------

The terms and conditions of the Merger are (in addition to those
set forth elsewhere in this Plan) as follows:

Section 1. At the Effective Time:

(a) Mercantile-Shawnee shall be merged with and into Peoples
Bank, and Peoples Bank shall be, and is designated herein as, the Surviving
Bank.

(b) The separate existence of Mercantile-Shawnee shall cease.

(c) The Surviving Bank shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises, of a public as well as
of a private nature, of each of the Constituent Banks; and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every
other interest, of or belonging to or due to each of the Constituent Banks,
shall be taken and deemed to be transferred to and vested in the Surviving
Bank without further act or deed; and the title to any real estate, or any
interest therein, vested in either Constituent Bank shall not revert or be in
any way impaired by reason of the Merger; the Surviving Bank shall
thenceforth be responsible and liable for all the liabilities and obligations
of each of the Constituent Banks; and any claim existing or action or
proceeding pending by or against either of such Constituent Banks may be
prosecuted to judgment as if the Merger had not taken place, or such
Surviving Bank may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of either of the Constituent Banks
shall be impaired by the Merger.

Section 2. At the Effective Time, the Charter of the Surviving
Bank shall be the Charter of Peoples Bank until amended in accordance with
its provisions and applicable law. Surviving Bank's capital account and
surplus account shall equal the combined capital accounts and surplus
accounts, respectively, of Peoples Bank and of Mercantile-Shawnee.

Section 3. At the Effective Time the members of the Board of
Directors and the terms of those directors of Surviving Bank shall be as
designated by Ameribanc immediately prior to the Effective Time.

-2-
<PAGE> 3
Section 4. At the Effective Time, the officers of Surviving Bank
shall be the persons designated by Ameribanc immediately prior to the
Effective Time and such persons will serve in their designated offices,
thereafter, until their respective successors are duly elected and qualified.

ARTICLE III

Manner and Basis of Converting Shares
-------------------------------------

The manner and basis of converting the shares of Peoples Bank
into the right to receive Mercantile Common Stock and the mode of carrying
the Merger into effect are as follows:

Section 1. Conversion of Bank Common Stock
-------------------------------

At the Effective Time, the 10,000 shares of Mercantile-Shawnee
Common Stock outstanding shall be converted into 10,000 shares of
Surviving Bank common stock.

Section 2. Conversion of Peoples Bank Common Stock
---------------------------------------

(a) At the Effective Time, Mercantile will issue 325,843 shares
of Mercantile Common Stock in the Exchange and the Merger (hereinafter such
shares shall be referred to in the aggregate as the "Acquisition
Consideration").

(b) At the Effective Time, Peoples Bankshares, by virtue of the
Exchange and without any other action on the part of the Mercantile Entities
or Peoples Bankshares, will be entitled to receive approximately 14.4819
shares of Mercantile Common Stock for each share of Peoples Bank Common Stock
then beneficially owned by Peoples Bankshares upon delivery at the closing of
the Acquisition of the certificates evidencing its shares of Peoples Bank
Common Stock. Also at the Effective Time, by virtue of the Merger and
without any action on the part of the Mercantile, Ameribanc, Mercantile-
Shawnee, Peoples Bank or any Peoples Bank shareholder, each share of Peoples
Bank Common Stock issued and outstanding at the Effective Time (other than
any shares transferred to Ameribanc pursuant to the Exchange and any shares
as to which the holder thereof has perfected dissenters' rights under Section
17-6712 of the Kansas Statutes Annotated), shall cease to be outstanding and
shall be converted into and become the right to receive approximately 14.4819
shares of Mercantile Common Stock.

(c) Neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued as Acquisition Consideration. Each
holder of shares of Peoples Common Stock who otherwise would have been
entitled to a fraction of a share of Mercantile Common Stock shall receive in
lieu thereof and, at the time such holder receives the shares of Mercantile
Common Stock to which the holder is entitled as Acquisition Consideration,
cash (without interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled by the
closing stock price of Mercantile Common Stock on the New York Stock Exchange
Composite Tape as reported in The Wall Street Journal on the Closing Date.
No such holder shall be entitled to dividends, voting rights or any other
rights in respect of any fractional share.

Section 3. Dissenting Peoples Shareholders
-------------------------------

Any shareholder of Peoples Bank who (1) votes against or fails to
vote in favor of the Merger at the shareholder meeting of Peoples Bank called
to vote upon the Merger and (2) gives notice in writing at or prior to the
meeting of his or her objection to the Merger shall be entitled to receive
the value of the shares held by him or her, valued as of the effective date
of the Merger, if demand is made

-3-
<PAGE> 4
before twenty days after the date of mailing by the Surviving Bank of notice
that the Merger has become effective.

Section 4. Peoples Bank Common Stock Certificates
--------------------------------------

After the Effective Time, each holder of an outstanding
certificate which prior thereto represented shares of Peoples Bank Common
Stock shall be entitled, upon surrender thereof to Mercantile or its
designee, to receive in exchange therefor the number of shares of Mercantile
Common Stock into which it has been converted. Until so surrendered, each
such outstanding certificate which, prior to the Effective Time, represented
shares of Peoples Bank Common Stock shall for all purposes evidence the right
to receive the Mercantile Common Stock into which such shares shall have been
so converted; provided that dividends or other distributions which are
payable in respect of shares of Mercantile Common Stock into which shares of
Peoples Bank Common Stock shall have been so converted shall be set aside by
Mercantile and shall not be paid to holders of certificates representing such
shares of Peoples Common Stock until such certificates shall have been so
surrendered in exchange for certificates representing such Mercantile Common
Stock. Upon such surrender the holders of such shares shall be entitled to
receive such dividends without interest.

The Mercantile Common Stock into which shares of the Peoples
Common Stock shall have been converted pursuant to this Article III shall be
issued in full satisfaction of all rights pertaining to such converted
shares.

ARTICLE IV

Other Provisions with Respect to Merger
---------------------------------------

Section 1. This Plan shall be submitted to the shareholders of
each Constituent Bank as provided by Chapter 9 of the Kansas Statutes
Annotated (the "Kansas Banking Act"). After the approval or adoption thereof
by the shareholders of each Constituent Bank in accordance with the
requirements of the laws of the Kansas Banking Act, all required documents
shall be executed, filed and recorded and all required acts shall be done in
order to accomplish the Merger pursuant to the Kansas Banking Act subject to
the terms and conditions of the Agreement.

Section 2. Termination. If the Agreement is terminated, then
this Plan shall simultaneously terminate without further action by the
Constituent Banks. In the event of such termination, the Board of Directors
of each of the Constituent Banks shall direct its officers not to file this
Plan as provided above notwithstanding favorable action on this Plan by the
shareholders of Peoples or Bank.

Section 3. Approval of Commissioner. The parties agree to
submit this Plan to the Kansas State Bank Commissioner (the "Kansas
Commissioner") for approval, together with certified copies of the
authorizing resolutions of the Boards of Directors of Mercantile-Shawnee and
Peoples Bank showing approval by a majority of the entire Board of each.
Whether approved or disapproved by the Kansas Commissioner,
Mercantile-Shawnee and Peoples Bank shall pay all expenses incurred by the
Commissioner in connection with the examination of this Plan.

Section 4. Retention of Branches. Pursuant to the Kansas Banking
Act and with the approval of the Kansas Commissioner, immediately following
the Effective Time (as hereinafter defined) the Surviving Bank shall maintain
and operate branches at each of the locations set forth in Exhibit A
---------

-4-
<PAGE> 5
attached hereto and made a part hereof. This section shall not limit the
Surviving Bank's right to future branching opportunities as set forth in the
Kansas Banking Act.

ARTICLE V

Approval and Effective Time of Merger; Miscellaneous Matters
------------------------------------------------------------

Section 1. The Merger shall become effective when all the
following actions have been taken: (i) this Plan shall be (a) authorized,
adopted and approved on behalf of each Constituent Bank in accordance with
the Kansas Statute, and (b) filed with the Kansas Commissioner and the Kansas
Commissioner shall have granted his approval of the Merger; (ii) the approval
necessary under the Federal Deposit Insurance Act shall have been received
and all applicable waiting periods shall have expired; and (iii) copies of
resolutions of the shareholders of each merging bank approving it, certified
by the Mercantile-Shawnee's president or vice-president or the cashier, shall
be filed with the Kansas Commissioner. The time at which such actions are
completed and the required documentation is filed by the Kansas Commissioner
with the Office of the Secretary of State of the State of Kansas is herein
referred to as the "Effective Time."

Section 2. If at any time the Surviving Bank shall deem or be
advised that any further grants, assignments, confirmations or assurances are
necessary or desirable to vest, perfect or confirm, of record or otherwise,
in the Surviving Bank the title to any property of Peoples Bank acquired or
to be acquired by or as a result of the Merger, the officers or any of them
and directors of the Surviving Bank shall be and they hereby are severally
and fully authorized to execute and deliver any and all such deeds,
assignments, confirmations and assurances and to do all things necessary or
proper so as to best prove, confirm and ratify title to such property in the
Surviving Bank and otherwise carry out the purposes of the Merger and the
terms of this Plan.

Section 3. For the convenience of the parties and to facilitate
the filing and recording of this Plan, any number of counterparts hereof may
be executed, and each such counterpart shall be deemed to be an original
instrument and all such counterparts together shall be considered one
instrument.

Section 4. This Plan cannot be altered or amended except
pursuant to an instrument in writing signed on behalf of the parties hereto.

[the remainder of this page is left intentionally blank]

-5-
<PAGE> 6
IN WITNESS WHEREOF, each Constituent Bank has caused this Plan to
be executed, all as of the date first above written.

PEOPLES STATE BANK

[SEAL]

By:/s/ Ronald D. Lutz
----------------------------------
ATTEST: Ronald D. Lutz, Chairman and
Chief Executive Officer

/s/ Joyce M. Lutz
- ------------------------------------
Joyce M. Lutz, Secretary

MERCANTILE BANK OF SHAWNEE COUNTY,
IN ORGANIZATION

By:/s/ P. Stephen Appelbaum
-------------------------------------
P. Stephen Appelbaum

By:/s/ Michael T. Normile
-------------------------------------
Michael T. Normile

By:/s/ Jon W. Bilstrom
-------------------------------------
Jon W. Bilstrom

By:/s/ Audrey Polite
-------------------------------------
Audrey Polite

By:/s/ Michael J. Marshall
-------------------------------------
Michael J. Marshall
[SEAL]
Constituting all of the incorporators of
Mercantile Bank of Shawnee County, In
Organization
ATTEST:

/s/ Joy L. Moore
- ------------------------------------
Joy L. Moore, Secretary

-6-
<PAGE> 7

STATE OF KANSAS )
) SS.
COUNTY OF SHAWNEE )

On this 8th day of May, 1996, before me personally appeared
Ronald D. Lutz, to me personally known, who, being by me duly sworn, did say
that he is the Chairman and Chief Executive Officer of Peoples State Bank, a
Kansas state-chartered bank, and that the foregoing instrument was signed on
behalf of said bank by authority of its Board of Directors; and said Ronald D.
Lutz acknowledged said instrument to be the free act and deed of said bank.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first above
written.

/s/ Barbara J. Pritz
-------------------------------------
Notary Public
[SEAL]

STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )

On this 10th day of May, 1996, before me personally appeared P.
Stephen Appelbaum, Michael T. Normile, Jon W. Bilstrom, Audrey Polite and
Michael J. Marshall, to me personally known, who, being by me duly sworn, did
each say that he or she is an incorporator of Mercantile Bank of Shawnee
County, a Kansas state-chartered bank in organization, and that the foregoing
instrument was signed on behalf of said bank; and said P. Stephen Appelbaum,
Michael T. Normile, Jon W. Bilstrom, Audrey Polite and Michael J. Marshall
acknowledged said instrument to be the free act and deed of said bank.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the City and State aforesaid, the day and year first above
written.

/s/ Harlon D. Keel
-------------------------------------
[SEAL] Notary Public

-7-
<PAGE> 8
Exhibit A
---------

1064 S.W. Wanamaker Road
Topeka, Kansas 66604-3888

5730 S.W. 21st Street
Topeka, Kansas 66604-3795

3625 N.W. 46th Street
Topeka, Kansas 66618

443 Main Steet
Rossville, Kansas 66533-9637

Country Center
Silver Lake, Kansas 66539

953380018/9

<PAGE> 1

Exhibit 2.3

VOTING AGREEMENT

This Voting Agreement dated as of December 19, 1995, is entered into
between Mercantile Bancorporation Inc. ("Mercantile"), and the undersigned
director and shareholder ("Shareholder") of Peoples State Bankshares, Inc.
("Peoples Bankshares").

WHEREAS, Peoples Bankshares, Mercantile, Ameribanc, Inc. ("Ameribanc")
and Peoples State Bank ("Peoples Bank") have proposed to enter into an
Agreement and Plan of Reorganization (the "Agreement"), dated as of today,
whereby Ameribanc and Peoples Bankshares will consummate an exchange of all
shares of Peoples Bank common stock, $100.00 par value (the "Peoples Bank
Common Stock"), owned beneficially and of record by Peoples Bankshares (the
"Exchange") for shares of common $5.00 par value, of Mercantile ("Mercantile
Common Stock"), and, simultaneously with the Exchange, a Kansas State bank to
be owned by Ameribanc will be merged with and into Peoples Bank (the "Merger"
and together with the Exchange, the "Acquisition"), and the shareholders of
Peoples Bank (other than Ameribanc and Peoples Bankshares) will receive
shares of Mercantile Common Stock in conversion of their shares of Peoples
Bank Common Stock; and

WHEREAS, Mercantile is willing to expend the substantial time, effort
and expense necessary to implement the Acquisition, only if Shareholder
enters into this Voting Agreement; and

WHEREAS, the Shareholder believes that the Acquisition is in his best
interest and the best interest of Peoples Bankshares;

NOW, THEREFORE, in consideration of the premises, Shareholder hereby
agrees as follows:

1. Voting Agreement. Shareholder will vote, or cause to be voted,
----------------
all of the shares of Peoples Bankshares Common Stock he now owns or hereafter
acquires and over which he now has, or prior to the record date for voting at
the Meeting (as hereafter defined) acquires, voting control in favor of the
Exchange at the meeting of shareholders of Peoples Bankshares to be called
for the purpose of approving the Exchange (the "Meeting").

2. No Competing Transaction. Shareholder will not, directly or
------------------------
indirectly, cause the initiation, solicitation or encouragement or voting any
of the shares of Peoples Bankshares Common Stock now or hereafter acquired by
Shareholder in favor of any other merger or sale of all or substantially all
the assets of Peoples Bankshares to any person other than Mercantile or its
affiliates until the earlier to occur of: (i) the closing of the Exchange and
the Merger, (ii) the termination of the Agreement or (iii) the abandonment of
the Exchange and the Merger by the mutual agreement of Peoples Bankshares,
Peoples Bank, Ameribanc and Mercantile.

3. Transfers Restricted. From and after the date of this Shareholder
--------------------
Agreement, Shareholder will not sell, dispose of or otherwise transfer any
shares of Peoples Bankshares Common Stock owned beneficially or of record by
him, unless the transferee, prior to such transfer, executes a voting
agreement with respect to the transferred shares substantially to the effect
of this Voting Agreement and satisfactory to Mercantile.

4. Meeting. At Mercantile's request, Shareholder shall use his best
-------
efforts to cause the Meeting to be held as soon as practicable.

5. Representations and Warranties True and Correct. Shareholder
-----------------------------------------------
acknowledges that he has reviewed the representations and warranties of
Peoples Bankshares set forth in Article II of the Agreement

<PAGE> 2
and certifies that to the best knowledge of Shareholder, such representations
and warranties are true and correct in all material respects.

6. No Ownership Interest. Nothing contained in this Shareholder
---------------------
Agreement shall be deemed to vest in Mercantile any direct or indirect
ownership or incidence of ownership of or with respect to any shares of
Peoples Bankshares Common Stock. All rights, ownership and economic benefits
of and relating to the shares of Peoples Bankshares Common Stock owned by
Shareholder shall remain and belong to Shareholder, and Mercantile shall have
no authority to manage, direct, superintend, restrict, regulate, govern or
administer any of the policies or operations of Peoples Bankshares or
exercise any power or authority to direct Shareholder in the voting of any of
his shares of Peoples Bankshares Common Stock, except as otherwise expressly
provided herein, or the performance of his duties or responsibilities as a
director of Peoples Bankshares.

7. Evaluation of Investment. Shareholder, by reason of his knowledge
------------------------
and experience in financial and business matters and in his capacity as a
director and executive officer of Peoples Bankshares, believes himself
capable of evaluating the merits and risks of the potential investment in
Mercantile Common Stock contemplated by the Agreement.

8. Documents Delivered. Shareholder acknowledges having reviewed the
-------------------
Agreement and its attachments and the related Plan of Merger and that
reports, proxy statements and other information with respect to Mercantile
filed with the Securities and Exchange Commission were, prior to his
execution of this Shareholder Agreement, available for inspection and copying
at the offices of Mercantile and that Mercantile delivered the following such
documents to Peoples Bankshares and Peoples Bank:

(a) Mercantile's Annual Report on Form 10-K for the year ended
December 31, 1994;
(b) Mercantile's Annual Report to Shareholders for the year
ended December 31, 1994; and
(c) Mercantile's Quarterly Report on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995.

9. Amendment and Modification. This Shareholder Agreement may be
--------------------------
amended, modified or supplemented at any time by the written approval of such
amendment, modification or supplement by Shareholder and Mercantile.

10. Entire Agreement. This Shareholder Agreement evidences the entire
----------------
agreement among the parties hereto with respect to the matters provided for
herein and there are no agreements, representations or warranties with
respect to the matters provided for herein other than those set forth herein
and in the Agreement. This Shareholder Agreement supersedes any agreements
among Peoples Bankshares and Shareholder concerning the Exchange, the Merger
or the disposition or control of the capital stock of Peoples Bankshares.

11. Severability. The parties agree that if any provision of this
------------
Shareholder Agreement shall under any circumstances be deemed invalid or
inoperative, this Shareholder Agreement shall be construed with the invalid
or inoperative provisions deleted and the rights and obligations of the
parties shall be construed and enforced accordingly.

-2-
<PAGE> 3
12. Counterparts. This Shareholder Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

13. Governing Law. The validity, construction, enforcement and effect
-------------
of this Shareholder Agreement shall be governed by the internal laws of the
State of Missouri.

14. Headings. The headings for the paragraphs of this Shareholder
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect the meaning or interpretation of this Shareholder Agreement.

15. Successors. This Shareholder Agreement shall be binding upon and
----------
inure to the benefit of Mercantile and its successors, and Shareholder and
Shareholder's spouse and their respective executors,
personal representatives, administrators, heirs, legatees, guardians and
other legal representatives. This Shareholder Agreement shall survive the
death or incapacity of Shareholder. This agreement may be assigned by
Mercantile only to an affiliate of Mercantile.

IN WITNESS WHEREOF, the parties have caused this Shareholder Agreement
to be executed as of the date first above written.

MERCANTILE BANCORPORATION INC.

By:
--------------------------------------------------
John W. Rowe
Executive Vice President
Mercantile Bank of St. Louis National Association
Authorized Officer

SHAREHOLDER

-----------------------------------------------------

-3-

<PAGE> 1

Exhibit 5.1

[Letterhead of Thompson Coburn]

May 10, 1996

Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524

Re: Registration Statement on Form S-4
----------------------------------

Gentlemen:

We refer you to the Registration Statement on Form S-4 filed by
Mercantile Bancorporation Inc. (the "Company") on May 10, 1996 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended, pertaining to the
proposed issuance by the Company of up to 325,843 shares of the Company's
common stock, $5.00 par value (the "Shares"), in connection with the
acquisition by reorganization of Peoples State Bank ("Peoples") pursuant to
the Agreement and Plan of Reorganization dated December 19, 1995 (the
"Reorganization Agreement"), by and among the Company, Ameribanc, Inc.,
Peoples and Peoples State Bankshares, Inc., all as provided in the
Registration Statement. In rendering the opinions set forth herein, we have
examined such corporate records of the Company, such laws and such other
information as we have deemed relevant, including the Company's Restated
Articles of Incorporation and Bylaws, as amended and currently in effect, the
resolutions adopted by the Executive Committee of the Company's Board of
Directors relating to the reorganization transaction, certificates received
from state officials and statements we have received from officers and
representatives of the Company. In delivering this opinion, the undersigned
assumed the genuineness of all signatures; the authenticity of all documents
submitted to us as originals; the conformity to the originals of all
documents submitted to us as certified, photostatic or conformed copies; the
authenticity of the originals of all such latter documents; and the
correctness of statements submitted to us by officers and representatives of
the Company.

Based only on the foregoing, the undersigned is of the opinion
that:

1. The Company has been duly incorporated and is validly
existing under the laws of the State of Missouri; and

2. The Shares to be sold by the Company, when issued as
provided in the Reorganization Agreement, will be duly authorized, duly and
validly issued and fully paid and nonassessable.

<PAGE> 2

Mercantile Bancorporation, Inc.
May 10, 1996
Page 2

We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the section of
the Proxy Statement/Prospectus entitled "Legal Matters."

Very truly yours,

/s/ Thompson Coburn

<PAGE> 1
Exhibit 8.1

[Letterhead of Thompson Coburn]

May 10, 1996

Board of Directors
Peoples State Bankshares, Inc.
1080 S.W. Wanamaker Road, Suite A
Topeka, Kansas 66604

Board of Directors
Peoples State Bank
1064 S.W. Wanamaker Road
Topeka, Kansas 66604

Ladies and Gentlemen:

You have requested our opinion with regard to certain federal
income tax consequences of the proposed acquisition of all of the issued and
outstanding stock of Peoples State Bank, a Kansas state bank ("Bank"), by
Ameribanc, Inc., a Missouri corporation ("Ameribanc"). Ameribanc is a wholly
owned subsidiary of Mercantile Bancorporation Inc., a Missouri corporation
("MBI"). The proposed acquisition will be accomplished in two simultaneous
steps consisting of (i) an exchange by Ameribanc of solely MBI common stock,
par value $5.00 per share ("MBI Common Stock"), in return for all Bank common
stock, par value $100.00 per share ("Bank Common Stock") owned by Peoples
State Bankshares, Inc., a Kansas corporation ("Bankshares") (the "Exchange"),
and (ii) the merger of a to-be-formed, wholly owned subsidiary of Ameribanc
with and into Bank (the "Merger") pursuant to which the stockholders of Bank
(other than Ameribanc) who do not dissent from the Merger will receive solely
MBI Common Stock in exchange for their Bank Common Stock. In connection with
the Exchange, Bankshares will distribute the MBI Common Stock received and
all of its remaining properties in complete liquidation (the "Liquidation")
and will dissolve in connection with the Liquidation. As soon as practicable
after the Merger, Mercantile Bank of Topeka will be merged with and into
Bank.

In connection with the preparation of our opinion, we have
examined and have relied upon the following:

(i) The Agreement and Plan of Reorganization among MBI,
Ameribanc, Bank and Bankshares dated as of December 19, 1995,
including the schedules and exhibits thereto (the "Agreement");

(ii) MBI's Registration Statement on Form S-4, including the
Joint Proxy Statement/Prospectus contained therein, filed with
the Securities and Exchange Commission on May 10, 1996 (the
"Registration Statement");

(iii) the "Voting Agreements" (as defined in the Registration
Statement) and that agreement described under the caption
"Interests of Certain Persons in the Acquisition" in the
Registration Statement;

(iv) The representations and undertaking of MBI substantially in
the form of Exhibit A hereto;

<PAGE> 2

Peoples State Bankshares, Inc.
Peoples State Bank
May 10, 1996
Page 2

(v) The representations and undertakings of Bankshares and Bank
substantially in the forms of Exhibit B and Exhibit C hereto,
respectively;

(vi) The representations and undertakings of certain holders of
Bankshares common stock, par value $1.00 per share ("Bankshares
Common Stock"), and certain holders of Bank Common Stock,
generally in the forms of Exhibit D and Exhibit E hereto,
respectively; and

(vii) The Rights Plan between MBI and Mercantile Bank of St.
Louis National Association as rights agent dated May 23, 1988.

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 Agreement, we are of the opinion that for federal income
tax purposes, each of the Exchange and the Merger will constitute a
reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code"), with the
following federal income tax consequences:

1. No gain or loss will be recognized by Bankshares on its
transfer of Bank Common Stock solely in exchange for MBI Common Stock in the
Exchange.

2. No gain or loss will be recognized by Bankshares on its
distribution of MBI Common Stock in the Liquidation.

3. Each stockholder of Bankshares who exchanges, in the
Liquidation, his or its shares of Bankshares Common Stock solely for shares
of MBI Common Stock:

a) will recognize no gain or loss as a result of the
exchange, 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 MBI
Common Stock received equal to the aggregate adjusted tax basis
of the shares of Bank Common Stock surrendered (Code section
358(a)(1)); and

<PAGE> 3

Peoples State Bankshares, Inc.
Peoples State Bank
May 10, 1996
Page 3

c) will have a holding period for the shares of MBI
Common Stock received which includes the period during which the
shares of Bank Common Stock surrendered were held, provided that
the shares of Bank Common Stock surrendered were capital assets
in the hands of such holder at the time of the Liquidation (Code
section 1223(1)).

4. Each stockholder of Bank who exchanges, in the Merger, his
or its shares of Bank Common Stock solely for shares of MBI Common Stock:

a) will recognize no gain or loss as a result of the
exchange, 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 MBI
Common Stock received (including any fractional share of MBI
Common Stock deemed to be received, as described in paragraph 5,
below) equal to the aggregate adjusted tax basis of the shares of
Bank Common Stock surrendered (Code section 358(a)(1)); and

c) will have a holding period for the shares of MBI
Common Stock received (including any fractional share of MBI
Common Stock deemed to be received, as described in paragraph 5,
below) which includes the period during which the shares of Bank
Common Stock surrendered were held, provided that the shares of
Bank Common Stock surrendered were capital assets in the hands
of such holder at the time of the Merger (Code section 1223(1)).

5. Each stockholder of Bank who receives, in the Merger, cash
in lieu of a fractional share of MBI Common Stock will be treated as if the
fractional share had been received in the Merger and then redeemed by MBI.
Provided that the shares of Bank 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 basis in the shares of MBI 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).

* * * * * * * * * * * *

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 stockholders
of Bank who acquired shares of Bank Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation, and (ii) the tax
consequences to special classes of stockholders, 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

<PAGE> 4

Peoples State Bankshares, Inc.
Peoples State Bank
May 10, 1996
Page 4

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 described
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
Internal Revenue 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 and to
this firm in the Registration Statement.

Very truly yours,

/s/ Thompson Coburn

<PAGE> 5

Exhibit A
CERTIFICATE
-----------

The undersigned, * , [Undersigned's Title] of
----------------
Mercantile Bancorporation Inc., a Missouri corporation ("MBI"), HEREBY
CERTIFIES that (a) I am familiar with the terms and conditions of the
Agreement and Plan of Reorganization among MBI, Ameribanc, Inc., a Missouri
corporation ("Ameribanc"), Peoples State Bank, a Kansas state bank ("Bank"),
and Peoples State Bankshares, Inc., a Kansas corporation ("Bankshares") dated
as of December 19, 1995, including the schedules and exhibits thereto (the
"Agreement"), and (b) I am aware that, pursuant to the Agreement, Ameribanc
will acquire all outstanding Bank common stock, par value $100.00 per share
("Bank Common Stock"), solely in exchange for MBI common stock, par value
$5.00 per share ("MBI Common Stock"), in two simultaneous transactions
consisting of (i) an exchange by Bankshares of its Bank Common Stock solely
in return for MBI Common Stock to be issued on behalf of Ameribanc (the
"Exchange"), and (ii) the merger of a to-be-formed, wholly owned subsidiary
of Ameribanc ("Acquisition Bank") with and into Bank (the "Merger" and,
collectively with the Exchange, the "Acquisition") pursuant to which the
stockholders of Bank (other than Ameribanc) who do not dissent from the
Merger will receive solely MBI Common Stock; and (c) I am aware that (i) this
Certificate will be relied on by Thompson Coburn, counsel for MBI and
Ameribanc, in rendering its opinion to Bankshares and Bank that the Exchange
and the Merger will each constitute a reorganization within the meaning of
section 368 of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) the representations and undertaking recited herein will survive the
Exchange and the Merger.

The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF MBI, that:

(1) Neither MBI nor any other member of MBI's "affiliated
group" (as the quoted term is defined in Code section 1504, the "MBI
Affiliated Group") has owned, directly or indirectly, any stock of Bank
within the last five years.

(2) Before the Merger, Ameribanc will be in control of
Acquisition Bank within the meaning of section 368(c) of the Code.

(3) Before the Merger, Acquisition Bank will have no assets or
liabilities other than assets, if any, received from Ameribanc to satisfy
Acquisition Bank's capitalization requirements

<PAGE> 6
(the "Minimum Assets"). MBI will cause the Minimum Assets to be returned to
Ameribanc within thirty (30) days after the Merger by means of a dividend
distribution or other payment.

(4) No indebtedness between Bankshares, Bank, or any other
member of Bankshares's "affiliated group" (as the quoted term is defined in
Code section 1504, the "Bankshares Affiliated Group"), on the one hand, and
MBI or any other member of the MBI Affiliated Group, on the other hand,
exists or will exist prior to the Acquisition that (a) was issued or acquired
at a discount, (b) will be settled, as a result of the Acquisition, at a
discount, or (c) will result in the recognition of gain under Treasury
Regulation Sec. 1.1502-13. No "installment obligation" (as the quoted term
is defined for purposes of Code section 453B) between Bank, on the one hand,
and MBI or Acquisition Bank, on the other hand, exists or will exist prior to
the Merger that will be extinguished as a result of the Merger.

(5) The fair market value of the MBI Common Stock to be
received by each Bank stockholder in the Acquisition (including cash to be
received in lieu of fractional shares of MBI Common Stock, if any) will be
approximately equal to the fair market value of the Bank Common Stock
surrendered in the Acquisition by each such stockholder.

(6) Except as otherwise set forth by the undersigned on an
attachment hereto, MBI is aware of no plan, intention or arrangement
(including any option or pledge) on the part of any holder of Bankshares
Common Stock or Bank Common Stock to sell, exchange or otherwise dispose of
any of the MBI Common Stock to be received in connection with the Acquisition
or the subsequent liquidation of Bankshares, with the exception of fractional
shares of MBI Common Stock to be exchanged for cash pursuant to the
Acquisition.

(7) The payment of cash in lieu of fractional shares of MBI
Common Stock in the Acquisition will be solely for the purpose of avoiding
the expense and inconvenience to MBI of issuing fractional shares and will
not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Acquisition to the stockholders of
Bankshares and Bank in lieu of fractional shares of MBI Common Stock will not
exceed one percent of the total consideration that will be issued in the
Acquisition. The fractional share interests of each Bank stockholder will be
aggregated, and no Bank stockholder will receive cash in lieu of fractional
share interests in an amount equal to or greater than the value of one full
share of MBI Common Stock.

<PAGE> 7

(8) MBI, Acquisition Bank, Bankshares, the stockholders of
Bankshares, Bank, and the stockholders of Bank will each pay their respective
expenses, if any, incurred in connection with the Acquisition; provided,
however, that Ameribanc (and not MBI) will pay or assume those expenses set
forth in Section 5.08 of the Agreement.

(9) Except with regard to Transaction Costs (as defined below),
neither MBI nor any other member of the MBI Affiliated Group will pay (or
lend) any amount or incur (or guarantee) any liability to or for the benefit
of, or assume or cancel any liability of, Bankshares, Bank, any stockholder
of Bankshares, any stockholder of Bank or any other member of the Bankshares
Affiliated Group in connection with the Exchange or the Merger, and no
liability to which Bank Common Stock or Bankshares Common Stock is subject
will be extinguished as a result of the Merger.
For purposes of this representation, any payment (or loan) to or
for the benefit of Bankshares or any stockholder of Bankshares or Bank
(including without limitation, any payment from Bankshares or Bank in the
form of a dividend, distribution, or redemption, or any payment to a
dissenter) with cash or other property furnished (or reimbursed), directly or
indirectly, by MBI or any other member of the MBI Affiliated Group will be
treated as a payment by MBI to or for the benefit of a stockholder of
Bankshares or Bank.
For purposes of this representation, 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 stockholder
of Bankshares or Bank or to cause by other means the release of such
guaranty).
For purposes of this representation, the term "Transaction Costs"
shall mean amounts paid or liabilities incurred in connection with the Merger
(i) to Bank stockholders with respect to the MBI Common Stock (including cash
in lieu of fractional shares thereof) to be delivered in the Merger, (ii) by
MBI or any other member of the MBI Affiliated Group for legal, accounting,
and investment banking and/or advisor services rendered to MBI or any other
member of the MBI Affiliated Group, (iii) for those expenses payable or
assumable by Ameribanc in accordance with representation 8 above, (iv) as
compensation to any employee of MBI or of any member of the MBI Affiliated
Group for services rendered in the ordinary course of his or her employment,
and (v) compensation to any employee of Bank that qualifies under
representation (15) below.

<PAGE> 8

(10) All payments made to dissenters, if any, and all expenses
incurred by Bank in connection with the Acquisition and not paid by Bank
before the Effective Date will be funded with Bank assets from an escrow to
be established and funded before the Acquisition by Bank for that purpose, as
described in Section 5.16 of the Agreement (the "Escrow").

(11) Neither MBI nor any other member of the MBI Affiliated
Group has any plan or intention to redeem or otherwise reacquire any of the
MBI Common Stock issued to the stockholders of Bank in the Merger.

(12) After the Merger, (a) Ameribanc will not issue additional
shares of its stock that would result in MBI losing control of Ameribanc
within the meaning of section 368(c) of the Code, and (b) neither Ameribanc
nor any other member of the MBI Affiliated Group will 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 Ameribanc that, if exercised or converted, would affect MBI's
retention of control of Ameribanc (as defined above).

(13) Neither MBI nor any other member of the MBI Affiliated
Group has any plan or intention (a) to liquidate Bank or Ameribanc, (b) to
merge Bank or Ameribanc with and into another corporation, (c) except for
transfers of Bank stock to controlled corporations (as described in section
368(a)(2)(C) of the Code), to sell or otherwise dispose of (whether by
dividend distribution or otherwise) the stock of Bank or Ameribanc, or (d)
except for dispositions made in the ordinary course of business or
dispositions approved in writing by Thompson Coburn, to cause, suffer, or
permit Bank to sell or otherwise dispose of (whether by dividend distribution
or otherwise) (i) any assets of Bank (excluding any assets of Acquisition
Bank acquired by Bank as a result of the Merger and excluding any funds
deposited in the Escrow that are paid out by the Escrow in accordance with
the terms of the Escrow) or (ii) any assets of any other member of the
Bankshares Affiliated Group.
The proposed merger of Mercantile Bank of Topeka, a Kansas state
bank, with and into Bank (the "Topeka Merger") after the Acquisition is not a
plan or intention described in this representation 13. There will be no
dissenters to the Topeka Merger, Bank will not dispose of any of its assets
(or any assets of any other member of the Bankshares Affiliated Group) in
connection with the Topeka Merger, and Bank (and its Kansas banking charter,
as may be amended in connection with the Topeka Merger) will survive the
Topeka Merger.

<PAGE> 9

(14) After the Merger, Ameribanc and Bank will continue the
historic businesses of Bank and the other members of the Bankshares
Affiliated Group, or will use a significant portion of the historic business
assets of the members of the Bankshares Affiliated Group in a business (no
stock of any member of the Bankshares Affiliated Group shall be treated as a
business asset for purposes of this representation).

(15) None of the compensation to be paid or accrued after the
Merger to or for the benefit of any stockholder-employee of Bank will be
separate consideration for, or allocable to, any of his or her shares of Bank
Common Stock; none of the shares of MBI Common Stock received in the Merger
by any Bank stockholder-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 Bank stockholder-
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.

(16) With regard to the Rights Plan between MBI and Mercantile
Bank of St. Louis National Association as rights agent, dated May 23, 1988
(the "Rights Agreement"), no "Distribution Date" (as the quoted term is
defined in the Rights Agreement) has occurred, and the Acquisition will not
cause the occurrence of a Distribution Date.

(17) The Agreement, the "Voting Agreements" (as defined in the
Registration Statement) and that agreement described under the caption
"Interests of Certain Persons in the Acquisition" in the Registration
Statement (including, in each case, the schedules and exhibits thereto,
collectively, the "Acquisition Documents") represent all of the agreements and
understandings between or among MBI, Bankshares, Bank or the stockholders and
employees of each of Bankshares and Bank in connection with the Exchange and
the Merger. No terms of the Acquisition Documents have been waived or
modified.

The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson Coburn 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 again immediately before the Merger.

<PAGE> 10

IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of MBI this ----- day of ------------, 1996.

--------------------------------

<PAGE> 11

Exhibit B
CERTIFICATE
-----------

The undersigned, , [Undersigned's Title] of
-------------------
Peoples State Bankshares, Inc., a Kansas corporation ("Bankshares"), HEREBY
CERTIFIES that (a) I am familiar with the terms and conditions of the
Agreement and Plan of Reorganization among Mercantile Bancorporation Inc., a
Missouri corporation ("MBI"), Ameribanc, Inc., a Missouri corporation
("Ameribanc"), Peoples State Bank, a Kansas state bank ("Bank"), and
Bankshares dated as of December 19, 1995, including the schedules and
exhibits thereto (the "Agreement"), and (b) I am aware that, pursuant to the
Agreement, Ameribanc will acquire all outstanding Bank common stock, par
value $100.00 per share ("Bank Common Stock"), solely in exchange for MBI
common stock, par value $5.00 per share ("MBI Common Stock"), in two
simultaneous transactions consisting of (i) an exchange by Bankshares of its
Bank Common Stock solely in return for MBI Common Stock to be issued on
behalf of Ameribanc (the "Exchange"), and (ii) the merger of a to-be-formed,
wholly owned subsidiary of Ameribanc with and into Bank (the "Merger")
pursuant to which the stockholders of Bank (other than Ameribanc) who do not
dissent from the Merger will receive solely MBI Common Stock; and (c) I am
aware that (i) this Certificate will be relied on by Thompson Coburn, counsel
for MBI and Ameribanc, in rendering its opinion to Bankshares and Bank that
the Exchange and the Merger will each constitute a reorganization within the
meaning of section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) the representations and undertaking recited herein will
survive the Exchange and the Merger.

The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF Bankshares,
that:

(1) To the best knowledge of the undersigned, neither MBI nor
any other member of MBI's "affiliated group" (as the quoted term is defined
in Code section 1504, the "MBI Affiliated Group") has owned, directly or
indirectly, any stock of Bankshares or Bank within the last five years.
(2) No indebtedness between Bankshares or any other member of
Bankshares's "affiliated group" (as the quoted term is defined in Code
section 1504, the "Bankshares Affiliated Group"), on the one hand, and MBI or
any other member of the MBI Affiliated Group, on the other hand, exists or
will exist prior to the effective time of the Exchange (the "Effective Time")
that (a) was issued or acquired at a discount, (b) will be settled, as a
result of the Exchange, at a discount, or (c) will result in the recognition
of gain under Treasury Regulation Sec. 1.1502-13. No "installment

<PAGE> 12
obligation" (as the quoted term is defined for purposes of Code section
453B), between Bankshares, on the one hand, and MBI or Ameribanc, on the
other hand, exists or will exist prior to the Exchange that will be
extinguished as a result of the Exchange.

(3) At the Effective Time and except with regard to Transaction
Costs (as defined below), each liability of Bankshares and each liability to
which an asset of Bankshares is subject will have been incurred by Bankshares
in the ordinary course of business and no such liability will have been
incurred in anticipation of the Exchange. In addition, at the time of the
Exchange and except with regard to Transaction Costs, Bankshares 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 stockholder of Bankshares or Bank in connection with the Exchange or the
Merger.
No liabilities of Bankshares will be assumed (or guaranteed) by
MBI or any other member of the MBI Affiliated Group, and the Bank Common
Stock to be acquired by Ameribanc will not be subject to any liabilities at
the Effective Time. No liabilities of Bankshares will be assumed by Bank in
connection with the Exchange or the Merger, and all shared liabilities of
Bankshares and Bank (including joint and several liabilities for such items
as federal income taxes and certain pension liabilities) will be allocated
between Bankshares and Bank pursuant to agreements containing terms similar
to those contained in arm's length agreements between unrelated parties.
For purposes of this representation, (a) the term "Bankshares"
shall be deemed also to refer to each other member of the Bankshares
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 Bankshares stockholder 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 Exchange or the Merger
(i) to dissenters, if any, (ii) for legal, accounting, and investment banking
and/or advisor services rendered to Bankshares or any other member of the
Bankshares Affiliated Group, if any, and (iii) as compensation to any
employee of Bankshares or any other member of the Bankshares Affiliated Group
for services rendered in the ordinary course of his or her employment.

(4) At the Effective Time, neither Bankshares nor any other
member of the Bankshares Affiliated Group will have outstanding any warrants,
options, convertible securities, or

<PAGE> 13
any other type of right (including any preemptive right) pursuant to which
any person could acquire stock in Bank.

(5) In the Exchange, Bankshares will transfer to Ameribanc
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 Bankshares immediately prior to the Exchange.
For purposes of this representation, Bankshares assets used to pay
stockholders who receive cash, and Bankshares assets used to pay expenses of
the Exchange or the Merger or to fund any redemption or distribution within
24 months before the Effective Time (except for regular, normal dividends)
shall be included as assets of Bankshares held immediately prior to the
Exchange. For purposes of this representation, any asset of Bankshares or
any other member of the Bankshares Affiliated Group that is disposed of
within 24 months before the Effective Time other than in the ordinary course
of business also shall be included as an asset of Bankshares held immediately
prior to the Exchange (including, for example and without limitation, funds
to be deposited by Bank in the escrow described in Section 5.16 of the
Agreement for the purpose of paying dissenters and expenses of the Merger
(the "Escrow"), but excluding the August 1994 disposition of Citizens State
Bank, a Kansas state bank ("Citizens")).

(6) At the time of the disposition of Citizens in August 1994,
there was no plan, intention or arrangement to dispose of Bank. In excess of
90 percent of the proceeds from such disposition (i) were used by Bankshares
to fund operating expenses, to repay loans incurred to purchase the stock of
Citizens and/or Bank, or (ii) have been retained by Bankshares. A portion of
the proceeds were used to pay bonuses to employee stockholders of Bankshares
in January of 1995, none of which bonuses constituted unreasonable
compensation. Other than these bonuses, none of such proceeds were used to
fund any distribution to stockholders of Bankshares.

(7) The fair market value of the MBI Common Stock to be
received by each Bankshares stockholder in connection with the Exchange
(pursuant to the subsequent liquidation of Bankshares) will be approximately
equal to the fair market value of the Bankshares common stock, par value
$1.00 per share ("Bankshares Common Stock"), surrendered in connection with
the Exchange by each such stockholder.

(8) None of the compensation paid or accrued to or for the
benefit of any Bankshares stockholder-employee will be separate consideration
for, or allocable to, any of his or her

<PAGE> 14
shares of Bankshares Common Stock; none of the shares of MBI Common Stock
received in the Exchange by any Bankshares stockholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
all compensation paid or accrued to or for the benefit of any Bankshares
stockholder-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 and
Bankshares's past practices.

(9) 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
Bankshares 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 Bankshares Common Stock to sell, exchange
or otherwise dispose of a number of shares of MBI Common Stock received by
such holders in the Exchange that would reduce such holders' aggregate
ownership of MBI Common Stock to a number of shares having a value, as of the
Effective Time, of less than 50 percent of the value of all of the formerly
outstanding Bankshares Common Stock as of the Effective Time. For purposes
of this representation, shares of Bankshares Common Stock exchanged for cash
or other property, surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of MBI Common Stock will be treated as outstanding as of
the Effective Time. Moreover, all shares of Bankshares Common Stock and
shares of MBI Common Stock held by Bankshares stockholders and otherwise
sold, redeemed, or disposed of before or after the Effective Time will be
taken into account in making this representation. All of the MBI Common
Stock received by Bankshares in the Exchange will be distributed by
Bankshares in the liquidation of Bankshares described in representation (13)
below.

(10) The total cash consideration that will be paid in the
Exchange to Bankshares in lieu of a fractional share of MBI Common Stock will
not exceed the value of one share of MBI Common Stock.

(11) Expenses, if any, that are incurred in connection with the
Exchange and are properly attributable to Bankshares's stockholders will be
paid by those stockholders and not by Bankshares. Bankshares will pay its
own expenses that are incurred in connection with the Exchange.

(12) Bankshares is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.

<PAGE> 15
(13) No stock of Bankshares will be issued after the execution
date of the Agreement. Bankshares will distribute all of its properties
(including the MBI Common Stock received in the Exchange) and liabilities to
its stockholders no later than six months after the Effective Time and will
at that time be dissolved. Bankshares will make all liquidating and other
distributions after the Effective Time on a pro rata basis in accordance with
the fair market value of the Bankshares Common Stock held by each stockholder
of Bankshares at the Effective Time.

(14) The Agreement, the "Voting Agreements" (as defined in the
Registration Statement) and that agreement described under the caption
"Interests of Certain Persons in the Acquisition" in the Registration Statement
(including, in each case, the schedules and exhibits thereto, collectively, the
"Acquisition Documents") represent all of the agreements and understandings
between or among MBI, Bankshares, Bank or the stockholders and employees of
each of Bankshares and Bank in connection with the Exchange and the Merger. No
terms of the Acquisition Documents have been waived or modified.

IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of Bankshares this ----- day of ---------------, 1996.

--------------------------------

<PAGE> 16

Exhibit C
CERTIFICATE
-----------

The undersigned, , [Undersigned's Title] of
-------------------
Peoples State Bank, a Kansas state bank ("Bank"), HEREBY CERTIFIES that (a) I
am familiar with the terms and conditions of the Agreement and Plan of
Reorganization among Mercantile Bancorporation Inc., a Missouri corporation
("MBI"), Ameribanc, Inc., a Missouri corporation ("Ameribanc"), Bank, and
Peoples State Bankshares, Inc., a Kansas corporation ("Bankshares"), dated as
of December 19, 1995, including the schedules and exhibits thereto (the
"Agreement"), and (b) I am aware that, pursuant to the Agreement, Ameribanc
will acquire all outstanding Bank common stock, par value $100.00 per share
("Bank Common Stock"), solely in exchange for MBI common stock, par value
$5.00 per share ("MBI Common Stock"), in two simultaneous transactions
consisting of (i) an exchange by Bankshares of its Bank Common Stock solely
in return for MBI Common Stock to be issued on behalf of Ameribanc (the
"Exchange"), and (ii) the merger of a to-be-formed, wholly owned subsidiary
of Ameribanc with and into Bank (the "Merger") pursuant to which the
stockholders of Bank (other than Ameribanc) who do not dissent from the
Merger will receive solely MBI Common Stock; and (c) I am aware that (i) this
Certificate will be relied on by Thompson Coburn, counsel for MBI and
Ameribanc, in rendering its opinion to Bankshares and Bank that the Exchange
and the Merger will each constitute a reorganization within the meaning of
section 368 of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) the representations and undertaking recited herein will survive the
Exchange and the Merger.

The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF Bank,
that:

(2) No indebtedness between Bank or any other member of
Bankshares's "affiliated group" (as the quoted term is defined in Code
section 1504, the "Bankshares Affiliated Group"), on the one hand, and MBI or
any other member of the MBI Affiliated Group, on the other hand, exists or
will exist prior to the effective time of the Merger (the "Effective Time")
that (a) was issued or acquired at a discount, (b) will be settled, as a
result of the Merger, at a discount, or (c) will result in the recognition of
gain under Treasury Regulation Sec. 1.1502-13. No "installment

<PAGE> 17
obligation" (as the quoted term is defined for purposes of Code section
453B), between Bank, on the one hand, and Ameribanc or Mercantile Bank of
Topeka, a Kansas state bank, on the other hand, exists or will exist prior to
the Merger that will be extinguished as a result of the Merger.

(3) At the Effective Time, the fair market value of the assets
of Bank will exceed the sum of the amount of liabilities of Bank, plus the
amount of liabilities, if any, to which Bank's assets are then subject.

(4) At the Effective Time and except with regard to Transaction
Costs (as defined below), each liability of Bank and each liability to which
an asset of Bank is subject will have been incurred by Bank 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, Bank 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 stockholder
of Bank or Bankshares in connection with the Merger.
No liabilities of Bank will be assumed (or guaranteed) by MBI or
any other member of the MBI Affiliated Group. No liabilities of Bankshares
will be assumed by Bank in connection with the Exchange or the Merger, and
all shared liabilities of Bankshares and Bank (including joint and several
liabilities for such items as federal income taxes and certain pension
liabilities) will be allocated between Bankshares and Bank pursuant to
agreements containing terms similar to those contained in arm's length
agreements between unrelated parties.
For purposes of this representation, (a) the term "Bank" shall be
deemed also to refer to each other member of the Bankshares 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 Bank stockholder 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 Bank or any subsidiary of Bank, if any, and (iii) as
compensation to any employee of Bank or any subsidiary of Bank for services
rendered in the ordinary course of his or her employment.

<PAGE> 18
(5) At the Effective Time, neither Bank nor any other member of
the Bankshares Affiliated Group will 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 Bank.

(6) The fair market value of the MBI Common Stock to be
received by each Bank stockholder in the Merger (including cash to be
received in lieu of fractional shares of MBI Common Stock, if any) will be
approximately equal to the fair market value of the Bank Common Stock
surrendered in the Merger by each such stockholder.

(7) None of the compensation paid or accrued before the Merger
to or for the benefit of any Bank stockholder-employee will be separate
consideration for, or allocable to, any of his or her shares of Bank Common
Stock; none of the shares of MBI Common Stock received in the Merger by any
Bank stockholder-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 Bank stockholder-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.

(8) 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 Bank
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 Bank Common Stock to sell, exchange or otherwise
dispose of a number of shares of MBI Common Stock received by such holders in
the Merger that would reduce such holders' aggregate ownership of MBI Common
Stock to a number of shares having a value, as of the Effective Time, of less
than 50 percent of the value of all of the formerly outstanding Bank Common
Stock as of the Effective Time. For purposes of this representation, shares
of Bank Common Stock exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional shares of MBI Common
Stock will be treated as outstanding as of the Effective Time. Moreover, all
shares of Bank Common Stock and shares of MBI Common Stock held by Bank
stockholders and otherwise sold, redeemed, or disposed of before or after the
Effective Time will be taken into account in making this representation.

(9) The payment of cash in lieu of fractional shares of MBI
Common Stock will be solely for the purpose of avoiding the expense and
inconvenience to MBI of issuing fractional

<PAGE> 19
shares and will not represent separately bargained-for consideration. The
total cash consideration that will be paid in the Merger to the Bank
stockholders in lieu of fractional shares of MBI Common Stock will not exceed
one percent of the total consideration that will be issued in the transaction
to the Bank stockholders in exchange for their shares of Bank Common Stock.
The fractional share interests of each Bank stockholder will be aggregated,
and no Bank stockholder will receive cash in lieu of fractional share
interests in an amount equal to or greater than the value of one full share
of MBI Common Stock.

(10) Expenses, if any, that are incurred in connection with the
Merger and are properly attributable to Bank's stockholders (including
Bankshares) will be paid by those stockholders and not by Bank. Bank will
pay its own expenses that are incurred in connection with the Merger.

(11) All payments made to dissenters and all expenses of Bank
incurred in connection with the Merger that remain unpaid at the Effective
Time, if any, will be paid from the escrow described in Section 5.16 of the
Agreement (the "Escrow"). The Escrow will be established and funded with
Bank assets for that purpose before the Merger.

(12) The assets held by Bank immediately after the Effective
Time would be sufficient to enable Bank to continue all its operations at
current levels of activity and in accordance with past practice, without
resort to additional capital or borrowed funds. For purposes of this
representation, Bank assets used to pay dissenters or to pay stockholders who
receive cash, and Bank assets used to pay expenses of the Merger or to fund
the Escrow shall not be treated as assets held by Bank immediately prior to
the Merger.

(13) Immediately after the Effective Time, Bank will hold 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 Bank immediately prior to the Merger. For purposes
of this representation, Bank assets used to pay dissenters or to pay
stockholders who receive cash, and Bank assets used to pay expenses of the
Merger, to fund the Escrow or to fund any redemption or distribution within
24 months before the Merger (except for regular, normal dividends) shall be
included as assets of Bank held immediately prior to the Merger. For
purposes of this representation, any asset of Bank or any subsidiary of Bank
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 Bank held
immediately prior to the Merger.

<PAGE> 20
(14) The Agreement, the "Voting Agreements" (as defined in the
Registration Statement) and that agreement described under the caption
"Interests of Certain Persons in the Acquisition" in the Registration Statement
(including, in each case, the schedules and exhibits thereto, collectively,
the "Acquisition Documents") represent all of the agreements and understandings
between or among MBI, Bankshares, Bank or the stockholders and employees of
each of Bankshares and Bank in connection with the Exchange and the Merger. No
terms of the Acquisition Documents have been waived or modified.

IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of Bank this ----- day of ---------------, 1996.

--------------------------------

<PAGE> 21
Exhibit D

CERTIFICATE
-----------

The undersigned stockholder of Peoples State Bankshares, Inc., a
Kansas corporation ("Bankshares"), [stockholder's name], a holder of *
-------------------- -----
shares of Bankshares common stock, par value $1.00 per share ("Bankshares
Common Stock"), HEREBY CERTIFIES that (a) I am familiar with the terms and
conditions of the Agreement and Plan of Reorganization among Mercantile
Bancorporation Inc., a Missouri corporation ("MBI"), Ameribanc, Inc., a
Missouri corporation ("Ameribanc"), Peoples State Bank, a Kansas state bank
("Bank"), and Bankshares dated as of December 19, 1995 (the "Agreement"),
and (b) I am aware that, pursuant to the Agreement, Ameribanc will acquire all
outstanding Bank common stock, par value $100.00 per share ("Bank Common
Stock"), solely in exchange for MBI common stock, par value $5.00 per share
("MBI Common Stock"), in two simultaneous transactions consisting of (i) an
exchange by Bankshares of its Bank Common Stock solely in return for MBI Common
Stock to be issued on behalf of Ameribanc (the "Exchange"), and (ii) the merger
of a to-be-formed, wholly owned subsidiary of Ameribanc with and into Bank
pursuant to which the stockholders of Bank (other than Ameribanc) who do not
dissent from the Merger will receive solely MBI Common Stock; and (c) I am
aware that (i) this Certificate will be relied on by Thompson Coburn, counsel
for MBI and Ameribanc, in rendering its opinion to Bankshares and Bank that
the Exchange and the Merger will each constitute a reorganization within the
meaning of section 368 of the Internal Revenue Code of 1986, as amended, and
(ii) the representations and undertaking recited herein will survive the
Exchange and the Merger.

The undersigned HEREBY FURTHER CERTIFIES that the undersigned has
no plan, intention or arrangement to sell, exchange or otherwise dispose of
(including any option, pledge or transfer in trust) any of the MBI Common
Stock to be received in connection with the Exchange and subsequent
liquidation of Bankshares.

<PAGE> 22

IN WITNESS WHEREOF, the undersigned has executed this
certificate, or caused this certificate to be executed by its duly authorized
representative, this ----- day of ---------------, 1996.

--------------------------------

<PAGE> 23
Exhibit E

CERTIFICATE
-----------

The undersigned stockholder of Peoples State Bank, a Kansas state
bank ("Bank"), [stockholder's name], a holder of * shares of Bank
-------------------- -----
common stock, par value $100.00 per share ("Bank Common Stock"), HEREBY
CERTIFIES that (a) I have been advised that an Agreement and Plan of
Reorganization has been entered into among Mercantile Bancorporation Inc., a
Missouri corporation ("MBI"), Ameribanc, Inc., a Missouri corporation
("Ameribanc"), Bank and Peoples State Bankshares, a Kansas corporation
("Bankshares") dated as of December 19, 1995, and (b) I am aware that,
pursuant to the Agreement, Ameribanc will acquire all outstanding Bank common
stock, par value $100.00 per share ("Bank Common Stock"), solely in exchange
for MBI common stock, par value $5.00 per share ("MBI Common Stock"), in two
simultaneous transactions consisting of (i) an exchange by Bankshares of its
Bank Common Stock solely in return for MBI Common Stock to be issued on
behalf of Ameribanc, and (ii) the merger of a to-be-formed, wholly owned
subsidiary of Ameribanc with and into Bank (the "Merger") pursuant to which
the stockholders of Bank (other than Ameribanc) who do not dissent from the
Merger will receive solely MBI Common Stock; and (c) I am aware that (i) this
Certificate will be relied on by Thompson Coburn, counsel for MBI and
Ameribanc, in rendering its opinion to Bankshares and Bank that the Exchange
and the Merger will each constitute a reorganization within the meaning of
section 368 of the Internal Revenue Code of 1986, as amended, and (ii) the
representations and undertaking recited herein will survive the Exchange and
the Merger.

The undersigned HEREBY FURTHER CERTIFIES that the undersigned has
no plan, intention or arrangement to sell, exchange or otherwise dispose of
(including any option, pledge or transfer in trust) any of the MBI Common
Stock to be received in the Merger, with the exception of any fractional
share of MBI Common Stock to be exchanged for cash pursuant to the Merger.

<PAGE> 24
IN WITNESS WHEREOF, the undersigned has executed this
certificate, or caused this certificate to be executed by its duly authorized
representative, this ----- day of ---------------, 1996.

--------------------------------

<PAGE> 1

Exhibit 23.1

Independent Auditors' Consent
-----------------------------

The Board of Directors and Stockholders
Mercantile Bancorporation Inc.:

We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

St. Louis, Missouri
May 10, 1996

<PAGE> 1

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of Mercantile Bancorporation Inc. We also
consent to the inclusion of our reports dated March 27, 1996, with respect to
(i) the consolidated balance sheet of Peoples State Bankshares, Inc. and
Subsidiary as of December 31, 1995, and the related consolidated statements
of earnings, stockholders' equity and cash flows for the year then ended, and
(ii) the balance sheet of Peoples State Bank, Topeka, Kansas as of December
31, 1995, and the related statements of earnings, stockholders' equity and
cash flows for the year then ended.

/s/ GRA, Thompson, White & Co., P.C.

GRA, THOMPSON, WHITE & CO., P.C.
Merriam, Kansas
May 8, 1996