<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1997
Registration No. 333-17757
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 1
to
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------------
MERCANTILE BANCORPORATION INC.
(Exact name of registrant as specified in its charter)
MISSOURI 6712 43-0951744
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------------
JON W. BILSTROM, ESQ.
General Counsel and Secretary
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
-------------------------
Copies to:
JOHN Q. ARNOLD ROBERT M. LaROSE, ESQ. JAMES H. ERLINGER III, ESQ.
Chief Financial Officer Thompson Coburn Bryan Cave LLP
Mercantile Bancorporation Inc. Suite 3400 211 North Broadway
P.O. Box 524 One Mercantile Center Suite 3600
St. Louis, Missouri St. Louis, Missouri St. Louis, Missouri
63166-0524 63101 63102-2750
(314) 425-2525 (314) 552-6000 (314) 259-2000
-------------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
-------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
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> 600,419 $19.30 $11,586,747.04 $3,511.14<F3>
shares
====================================================================================================================================
<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), and based upon the
$23,886,676.00 aggregate book value of the 25,321 shares of
common stock, $10.00 par value, of Regional Bancshares, Inc.
issued and outstanding as of November 30, 1996, less
$12,299,928.96, the respective portion of such aggregate book
value to be paid in cash by the Registrant in connection with
the exchange.
<F3> The registrant previously paid $3,511.14 with the original filing
on December 12, 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
[LETTERHEAD OF REGIONAL BANCSHARES, INC.]
January __, 1997
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of
Regional Bancshares, Inc. ("Regional"), I cordially invite you to
attend a Special Meeting of Shareholders of Regional to be held at
10:00 a.m., Central Time, on ______, February __, 1997, at the
offices of Bryan Cave LLP, 211 North Broadway, Suite 3600,
St. Louis, Missouri (the "Special Meeting"). At this important
meeting, you will be asked to consider and vote upon the Agreement
and Plan of Merger, dated as of August 23, 1996 (the "Merger
Agreement"), and each of the transactions contemplated thereby,
pursuant to which Regional will be merged (the "Merger") with and
into Ameribanc, Inc., a Missouri corporation and wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI"). Upon
consummation of the Merger, each share of Regional common stock
will be converted into the right to receive as consideration in the
Merger: (i) an amount in cash equal to $485.76; (ii) 23.7123
shares of MBI common stock; and (iii) 0.4838 of a share of West
Pointe Bank And Trust Company common stock, all as more fully
described in the accompanying Proxy Statement/Prospectus.
I have enclosed the following items relating to the
Special Meeting and the Merger:
1. A Proxy Statement/Prospectus;
2. A proxy card; and
3. A return envelope pre-addressed to Regional for the
proxy card.
The Proxy Statement/Prospectus and related proxy
materials set forth, or incorporate by reference, financial data
and other important information relating to Regional and MBI and
describe the terms and conditions of the proposed Merger. The
Board of Directors requests that you carefully review these
materials before completing the enclosed proxy card or attending
the Special Meeting.
THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY
CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER
AGREEMENT. THE BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTEREST OF REGIONAL AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT. ---
It is very important that your shares are represented at
the Special Meeting, whether or not you plan to attend in person.
The affirmative vote of at least two-thirds of the outstanding
Regional common stock is required for approval of the Merger
Agreement. A failure to vote for approval of the Merger Agreement
will have the same effect as a vote against the Merger Agreement.
Therefore, I urge you to execute, date and return the enclosed
proxy card in the enclosed postage-paid envelope as soon as
possible to assure that your shares will be voted at the Special
Meeting.
The Board of Directors and management of Regional
appreciate your continued support and look forward to seeing you at
the Special Meeting. If you have any questions or require
assistance, please contact the undersigned at (352) 846-1299.
Very truly yours,
DAVID B. UTTERBACK
President and Chairman
<PAGE> 3
REGIONAL BANCSHARES, INC.
1520 WASHINGTON AVE.
ALTON, ILLINOIS 62002
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1997
TO THE SHAREHOLDERS OF REGIONAL:
Notice is hereby given that a Special Meeting of
Shareholders of Regional Bancshares, Inc., an Illinois corporation
("Regional"), will be held at the offices of Bryan Cave LLP, 211
North Broadway, Suite 3600, St. Louis, Missouri on February __,
1997, at 10:00 a.m., Central Time, for the following purposes:
(1) To consider and vote upon the adoption and approval
of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of August 23, 1996, and each of the transactions contemplated
thereby, pursuant to which Regional will be merged (the "Merger")
with and into Ameribanc, Inc. ("Ameribanc"), a wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI"), and the
business and operations of Regional will be continued through
Ameribanc, and whereby, upon consummation of the Merger, each share
(other than shares held by MBI or shares as to which a shareholder
has perfected dissenters' rights) of Regional common stock will be
converted into the right to receive per share of Regional common
stock as consideration in the Merger: (i) an amount in cash equal
to $485.76; (ii) 23.7123 shares of MBI common stock; and (iii)
0.4838 of a share of West Pointe Bank And Trust Company common
stock.
(2) To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof.
The record date for determining the shareholders entitled
to receive notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof has been fixed as of the
close of business on January __, 1997.
In the event the Merger is approved and consummated, each
holder of Regional common stock will have the right to dissent from
the Merger and demand payment of the fair value of his or her
shares. The right of a shareholder to receive such payment is
contingent upon strict compliance with the requirements of Section
11.70 of the Illinois Business Corporation Act of 1983, as amended,
the full text of which is attached as Annex A to the accompanying
-------
Proxy Statement/Prospectus. For a summary of these requirements, see
"APPRAISAL RIGHTS OF SHAREHOLDERS OF REGIONAL" in the accompanying
Proxy Statement/Prospectus.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT TO REGIONAL IN THE ACCOMPANYING ENVELOPE.
By Order of the Board of Directors
SARAH E.UTTERBACK
Secretary
January __, 1997
<PAGE> 4
MERCANTILE BANCORPORATION INC.
PROSPECTUS
----------------------------
REGIONAL BANCSHARES, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1997
This Prospectus of Mercantile Bancorporation Inc., a Missouri
corporation ("MBI"), relates to up to 600,419 shares of common stock, $5.00
par value (the "MBI Stock"), and attached preferred share purchase rights
(the "MBI Rights"), of MBI (the MBI Stock and MBI Rights are collectively
referred to herein as the "MBI Common Stock"), to be issued to the
shareholders of Regional Bancshares, Inc., an Illinois corporation
("Regional"), upon consummation of the proposed merger (the "Merger") of
Regional with and into Ameribanc, Inc., a Missouri corporation and wholly
owned subsidiary of MBI ("Ameribanc"). Upon receipt of the requisite
shareholder and regulatory approvals, the Merger will be consummated in
accordance with the terms and conditions of the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of August 23, 1996, by and among
MBI, Ameribanc and Regional. This Prospectus also serves as the Proxy
Statement for Regional in connection with the Special Meeting of
Shareholders of Regional (the "Special Meeting"), which will be held on
February __, 1997, at the time and place and for the purposes stated in the
Notice of Special Meeting of Shareholders accompanying this Proxy
Statement/Prospectus.
Pursuant to the Merger Agreement, MBI will issue up to an
aggregate of 600,419 shares of MBI Common Stock. Upon consummation of the
Merger, the business and operations of Regional will be continued through
Ameribanc and each share (other than a share held by MBI or a share as to
which a shareholder of Regional has perfected dissenters' rights) of the
common stock, $10.00 par value, of Regional (the "Regional Common Stock")
will be converted into the right to receive as consideration in the Merger:
(i) an amount in cash equal to $485.76 (the "Cash Consideration"); (ii)
23.7123 shares of MBI Common Stock (the "Stock Consideration"); and (iii)
0.4838 of a share of the common stock (the "West Pointe Common Stock") of
West Pointe Bank And Trust Company ("West Pointe") (the "West Pointe
Consideration") (the Cash Consideration, the Stock Consideration and the
West Pointe Consideration are collectively referred to herein as the
"Merger Consideration"), all as more fully described in detail at pages
21 to 32 of this Proxy Statement/Prospectus. The fair market value of the MBI
Common Stock and the West Pointe Common Stock to be received pursuant to
the Merger may fluctuate and at the consummation of the Merger may be more
or less than the current fair market value of such shares. See "TERMS OF
THE PROPOSED MERGER - General Description of the Merger." No fractional
shares of MBI Common Stock or West Pointe Common Stock will be issued in
the Merger, but cash will be paid in lieu of fractional shares. See "TERMS
OF THE PROPOSED MERGER - Fractional Shares."
The Merger is intended to qualify as a reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"),
and is intended to achieve certain federal income tax tax-deferral benefits
for Regional shareholders with respect to shares of MBI Common Stock
received in the Merger. See "SUMMARY INFORMATION - Certain Federal Income
Tax Consequences" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
MBI Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "MTL." On January 17, 1997, the closing sale
price for MBI Common Stock as reported on the NYSE Composite Tape was
$51 1/2 per share. Neither the Regional Common Stock nor the West Pointe
Common Stock has an established trading market.
<PAGE> 5
This Proxy Statement/Prospectus, the Notice of Special Meeting
and the form of proxy were first mailed to the shareholders of Regional on
or about January __, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF MBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
FEDERAL OR STATE GOVERNMENTAL AGENCY.
All information contained in this Proxy Statement/Prospectus with
respect to MBI has been supplied by MBI and all information with respect
to Regional has been supplied by Regional.
The date of this Proxy Statement/Prospectus is January __, 1997.
- 2 -
<PAGE> 6
AVAILABLE INFORMATION
---------------------
MBI is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files with the Commission reports, proxy statements
and other information. Such reports, proxy statements and other
information filed with the Commission by MBI can be inspected and copied
at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located at Suite 1300, Seven World Trade Center, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. The Commission maintains an Internet site on the World
Wide Web containing reports, proxy and information statements and other
information filed electronically by MBI with the Commission. The address
of the World Wide Web site maintained by the Commission is http://www.sec.gov.
MBI Common Stock is listed on the NYSE, and such reports, proxy statements and
other information concerning MBI are available for inspection and copying at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and
exhibits thereto (the "Registration Statement") covering the securities
offered hereby which has been filed by MBI with the Commission. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained or incorporated
by reference in the Registration Statement. Statements contained in this
Proxy Statement/Prospectus provide a summary of the contents of any
contract or other document referenced herein but are not necessarily
complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration
Statement. For such further information, reference is made to the
Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE
DOCUMENTS RELATING TO MBI WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. IN ADDITION, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE DOCUMENTS RELATING TO MARK TWAIN BANCSHARES, INC. ("MARK TWAIN"),
A MISSOURI CORPORATION AND BANK HOLDING COMPANY, AND ROOSEVELT FINANCIAL
GROUP, INC. ("ROOSEVELT"), A DELAWARE CORPORATION AND SAVINGS AND LOAN
HOLDING COMPANY, BOTH OF WHICH RECENTLY ENTERED INTO DEFINITIVE AGREEMENTS
WITH MBI TO BE ACQUIRED BY MBI. SUCH DOCUMENTS, EXCLUDING EXHIBITS UNLESS
SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER OF STOCK OF MBI TO WHOM THIS PROXY STATEMENT/
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, TO JON W. BILSTROM,
GENERAL COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O. BOX 524,
ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST
SHOULD BE MADE BY FEBRUARY __, 1997.
The following documents filed with the Commission by MBI under
the Exchange Act are incorporated herein by reference:
(a) MBI's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) MBI's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
(c) MBI's Current Reports on Form 8-K, dated January 16, 1996,
March 11, 1996, November 6, 1996 and December 22, 1996.
(d) The description of the MBI Stock set forth in Item 1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.
- 3 -
<PAGE> 7
(e) The description of the MBI Rights set forth in Item 1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.
The following documents filed with the Commission by Roosevelt
under the Exchange Act are incorporated herein by reference:
(a) Roosevelt's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended by Form 10-K/A, dated July
31, 1996, and Form 10-K/A-2, dated September 13, 1996.
(b) Roosevelt's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
Such incorporation by reference shall not be deemed to
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
All documents filed by MBI, Mark Twain and Roosevelt pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof
and until the date of the Special Meeting shall be deemed to be incorporated
by reference herein and made a part hereof from the date any such document
is filed. The information relating to MBI, Mark Twain and Roosevelt
contained in this Proxy Statement/Prospectus does not purport to be complete
and should be read together with the information in the documents incorporated
by reference herein. Any statement contained herein or in a document
incorporated herein by reference shall be deemed to be modified or
superseded for purposes hereof to the extent that a subsequent statement
contained herein or in any other subsequently filed document incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof. Any statements contained
in this Proxy Statement/Prospectus involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY MBI OR REGIONAL. THIS PROXY STATEMENT/
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF MBI COMMON STOCK TO
WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO SHALL IMPLY
OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
MBI OR REGIONAL OR ANY OF THEIR SUBSIDIARIES OR IN THE INFORMATION SET
FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF.
- 4 -
<PAGE> 8
<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 Ameribanc. . . . . . . . . . . . . . . . . . . . . . 8
Business of Regional . . . . . . . . . . . . . . . . . . . . . . 8
Business of West Pointe. . . . . . . . . . . . . . . . . . . . . 9
The Proposed Merger. . . . . . . . . . . . . . . . . . . . . . . 9
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 9
Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 10
Amendment; Termination . . . . . . . . . . . . . . . . . . . . . 10
Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 10
Interests of Certain Persons in the Merger . . . . . . . . . . . 11
Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 11
Special Meeting of Regional Shareholders . . . . . . . . . . . . 11
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 11
Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . 12
Certain Federal Income Tax Consequences. . . . . . . . . . . . . 13
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 13
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 13
Markets and Market Prices. . . . . . . . . . . . . . . . . . . . 14
Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 15
Summary Financial Data . . . . . . . . . . . . . . . . . . . . . 16
INFORMATION REGARDING SPECIAL MEETING. . . . . . . . . . . . . . . . 19
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Date, Time and Place . . . . . . . . . . . . . . . . . . . . . . 19
Record Date; Vote Required; Voting Agreements. . . . . . . . . . 19
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . 19
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . 20
TERMS OF THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . 21
General Description of the Merger. . . . . . . . . . . . . . . . 21
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 22
Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 24
Amendment of Merger Agreement. . . . . . . . . . . . . . . . . . 24
Termination of Merger Agreement. . . . . . . . . . . . . . . . . 24
Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 25
Interests of Certain Persons in the Merger . . . . . . . . . . . 25
Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 26
Background of and Reasons for the Merger; Board Recommendations. 26
Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 28
Surrender of Regional Stock Certificates and Receipt of Merger
Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 28
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 29
Business Pending the Merger. . . . . . . . . . . . . . . . . . . 29
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 32
- 5 -
<PAGE> 9
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. . . . . . . . 33
RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL. . . . . . . . . . . . 37
PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . 39
Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 39
Pro Forma Combined Consolidated Financial Statements (Unaudited) 40
INFORMATION REGARDING REGIONAL . . . . . . . . . . . . . . . . . . . 50
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . 58
Security Ownership of Certain Beneficial Owners and Management . 67
INFORMATION REGARDING MBI STOCK. . . . . . . . . . . . . . . . . . . 68
Description of MBI Common Stock and Attached Preferred Share
Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . . 68
Restrictions on Resale of MBI Stock by Affiliates. . . . . . . . 70
Comparison of the Rights of Shareholders of MBI and Regional . . 70
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . 73
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Certain Transactions with Affiliates . . . . . . . . . . . . . . 74
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . 74
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . 74
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . 74
Proposals to Overhaul the Savings Association Industry . . . . . 75
Support of Subsidiary Banks. . . . . . . . . . . . . . . . . . . 76
FIRREA and FDICIA. . . . . . . . . . . . . . . . . . . . . . . . 76
Depositor Preference Statute . . . . . . . . . . . . . . . . . . 77
The Interstate Banking and Community Development Legislation . . 77
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . 77
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . 78
CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 80
ANNEX A -- Dissenters' Rights Provisions of the Illinois Business
Corporation Act . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
- 6 -
<PAGE> 10
SUMMARY INFORMATION
-------------------
THE FOLLOWING SUMMARY OF THE IMPORTANT TERMS OF THE PROPOSED
MERGER AND RELATED INFORMATION DISCUSSED ELSEWHERE IN THIS PROXY STATEMENT/
PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION WHICH APPEARS ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
SHAREHOLDERS OF REGIONAL ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS IN
ITS ENTIRETY. ALL MBI PER SHARE DATA REFLECT A THREE-FOR-TWO STOCK SPLIT
DISTRIBUTED IN THE FORM OF A STOCK DIVIDEND ON APRIL 11, 1994.
BUSINESS OF MBI
MBI, a Missouri corporation, was organized in 1970 and is a
registered bank holding company under the federal Bank Holding Company Act
of 1956, as amended (the "BHCA"). At September 30, 1996, MBI indirectly
owned all of the capital stock of Mercantile Bank of St. Louis National
Association ("Mercantile Bank"), 37 other commercial banks and one
federally-chartered thrift, which together operated from 437 banking
offices and 405 Fingertip Banking automated teller machines, including 42
off-premises machines, located throughout Missouri, Illinois, eastern
Kansas, northern Arkansas and Iowa. MBI's services concentrate in four
major lines of business -- consumer, corporate, investment banking and
trust services. MBI also operates non-banking subsidiaries which provide
related financial services, including investment management, brokerage
services and asset-based lending. As of September 30, 1996, MBI had
60,163,042 shares of its Common Stock outstanding and reported, on a
consolidated basis, total assets of $18.2 billion, total deposits of $14.6
billion, total loans of $12.2 billion and shareholders' equity of $1.5
billion.
On January 2, 1996, MBI completed the acquisitions of (i) Hawkeye
Bancorporation ("Hawkeye"), an Iowa corporation and registered bank holding
company under the BHCA, located in Des Moines, Iowa, and (ii) First Sterling
Bancorp, Inc. ("Sterling"), an Illinois corporation and registered bank holding
company under the BHCA, located in Sterling, Illinois. These acquisitions were
accounted for under the pooling-of-interests method of accounting. As of
January 2, 1996, Hawkeye and Sterling reported total assets of $2.0 billion and
$168 million, respectively.
On February 9, 1996 and March 7, 1996, respectively, MBI completed the
acquisitions of (i) Security Bank of Conway, F.S.B. ("Conway"), a federal stock
savings bank located in Conway, Arkansas, and (ii) Metro Savings Bank, F.S.B.
("Metro"), a federal stock savings bank located in Wood River, Illinois. These
acquisitions were accounted for under the purchase method of accounting. As of
February 9, 1996, Conway reported total assets of $103 million. As of March 7,
1996, Metro reported total assets of $81 million.
In connection with the acquisition of Hawkeye, MBI restated its
consolidated financial statements as of and for the years ended December 31,
1995, 1994 and 1993. MBI filed supplemental financial statements as of and for
the years ended December 31, 1995, 1994 and 1993 in a Current Report on Form
8-K, dated March 11, 1996, which has been incorporated by reference into this
Proxy Statement/Prospectus. Due to the immateriality of the financial condition
and results of operations of Sterling to that of MBI, the supplemental
consolidated financial statements of MBI do not reflect the acquisition of
Sterling.
On August 22, 1996, November 1, 1996 and November 7, 1996,
respectively, MBI completed the acquisitions of (i) Peoples State Bank
("Peoples"), a Kansas state-chartered bank, located in Topeka, Kansas, (ii)
First Financial Corporation of America ("First Financial"), a Missouri
corporation and registered bank holding company under the BHCA, located in
Salem, Missouri, and (iii) TODAY'S BANCORP, INC. ("TODAY'S"), a Delaware
corporation and registered bank holding company under the BHCA, located in
Freeport, Illinois. These acquisitions were accounted for under the purchase
method of accounting. As of August 22, 1996, November 1, 1996 and November 7,
1996, respectively, Peoples, First Financial and TODAY'S reported total assets
of $96 million, $88 million and $501 million.
- 7 -
<PAGE> 11
On October 27, 1996, MBI entered into an agreement to acquire
Mark Twain, a Missouri corporation and registered bank holding company under
the BHCA, located in St. Louis, Missouri. This acquisition will be accounted
for under the pooling-of-interests method of accounting. As of September 30,
1996, Mark Twain reported total assets of $3.1 billion, total deposits of $2.4
billion, total loans and leases of $2.1 billion and shareholders' equity of
$289 million.
On July 15, 1996, Mark Twain entered into an agreement to acquire
First City Bancshares, Incorporated of Missouri ("First City"), a Missouri
corporation, located in Springfield, Missouri. Such acquisition is expected
to be consummated prior to the consummation of the Merger and will be
accounted for under the purchase method of accounting. As of September 30,
1996, First City reported total assets of $89 million, total deposits of $77
million, total loans and leases of $58 million and shareholders' equity of
$6 million.
On December 22, 1996, MBI entered into an agreement to acquire
Roosevelt, a Delaware corporation and registered savings and loan holding
company under the Home Owner's Loan Act of 1933, located in St. Louis,
Missouri. Such acquisition will be accounted for under the purchase method of
acccounting. As of September 30, 1996, Roosevelt reported total assets of $9.0
billion, total deposits of $5.1 billion, total loans and leases of $4.2 billion
and shareholders' equity of $506 million. On January 2, 1997, Roosevelt
announced that it will recognize in the fourth quarter of 1996 approximately
$80 million of pre-tax expenses, previously deferred in accordance with
generally accepted accounting principles ("GAAP"), related to historical
activities with interest rate exchange agreements. The current charge results
from the continuing balance sheet repositioning associated with the execution
of Roosevelt's retail strategy. After a tax benefit of 35% is recorded,
shareholders' equity of Roosevelt will be reduced by approximately $52 million.
In addition, Roosevelt announced that it intentionally reduced its assets
by approximately $1.2 billion to $7.8 billion at year end.
MBI's principal executive offices are located at One Mercantile
Center, St. Louis, Missouri 63101 and its telephone number is (314) 425-2525.
BUSINESS OF AMERIBANC
Ameribanc, a Missouri corporation which was organized in 1991,
is a wholly owned subsidiary of MBI and registered bank holding company
under the BHCA. At September 30, 1996, Ameribanc owned all of the capital
stock of 38 banks, one federally-chartered thrift and one trust company, which
together operated from 437 locations in Missouri, Illinois, northern Arkansas,
eastern Kansas and Iowa. Ameribanc will be the surviving corporation upon
consummation of the Merger.
BUSINESS OF REGIONAL
Regional, an Illinois corporation, was organized in 1979 and is
registered as a bank holding company under the BHCA. Regional currently
owns all of the issued and outstanding shares of capital stock of the Bank
of Alton ("Bank of Alton"), an Illinois state-chartered bank, located in
Alton, Illinois. As of September 30, 1996, 25,321 shares of Regional
Common Stock were issued and outstanding and Regional reported, on a
consolidated basis, total assets of $182 million, total deposits of $147
million, total loans and leases of $103 million and shareholders' equity
of $23 million. See "INFORMATION REGARDING REGIONAL."
Regional's principal executive offices are located at 1520
Washington Avenue, Alton, Illinois 62002 and its telephone number is (618)
474-3500.
- 8 -
<PAGE> 12
BUSINESS OF WEST POINTE
West Pointe, an Illinois state-chartered bank located in
Belleville, Illinois, was organized in 1990. West Pointe currently
operates from two locations in Belleville and Swansea, Illinois. As of
September 30, 1996, 350,000 shares of West Pointe Common Stock were issued
and outstanding and West Pointe reported total assets of $125 million,
total deposits of $114 million, net loans and leases of $81 million and
shareholders' equity of $9.3 million.
THE PROPOSED MERGER
Subject to the satisfaction of the terms and conditions set forth
in the Merger Agreement, Regional, an Illinois corporation, will be merged
with and into Ameribanc, a Missouri corporation. Upon consummation of the
Merger, Regional's corporate existence will terminate and Ameribanc will
continue as the surviving entity. Simultaneously with the effectiveness
of the Merger, each share of Regional Common Stock (other than (a) a share
held by MBI or any MBI corporate affiliate, except a share held in a
fiduciary capacity or in satisfaction of a debt previously contracted in
good faith, or (b) a share as to which a Regional shareholder has perfected
dissenters' rights pursuant to Section 11.70 of the Illinois Act
("Dissenting Shares")) will be converted into the right to receive as
consideration in the merger: (i) the Cash Consideration (cash equal to
$485.76); (ii) the Stock Consideration (23.7123 shares of MBI Common
Stock); and (iii) the West Pointe Consideration (0.4838 of a share of West
Pointe Common Stock). The Stock Consideration and West Pointe
Consideration are subject to certain anti-dilution protections but are not
adjustable based on the operating results, financial condition or other
factors affecting MBI, Regional or West Pointe prior to the consummation
of the Merger. The fair market value of the MBI Common Stock and West
Pointe Common Stock to be received pursuant to the Merger may fluctuate and
at the consummation of the Merger may be more or less than the current fair
market value of such shares.
MBI will select an exchange agent (the "Exchange Agent") for
purposes of effecting the conversion of Regional Stock into the right to
receive cash, MBI Common Stock and West Pointe Common Stock upon
consummation of the Merger. Within two business days following the
Effective Time (as defined below), a letter of transmittal (including
instructions setting forth the procedures for exchanging certificates
representing shares of Regional Common Stock for the cash, MBI Common Stock
and West Pointe Common Stock payable to each holder thereof pursuant to the
Merger Agreement) will be sent to each record holder as of the Effective
Time (as defined below). Upon surrender to the Exchange Agent of such
certificate(s), together with a duly completed and executed letter of
transmittal, such holder will receive the cash, shares of MBI Common Stock
and shares of West Pointe Common Stock to which such holder is entitled
under the Merger Agreement, together with an amount in cash for any
fractional shares of MBI Common Stock or West Pointe Common Stock which
such holder would otherwise be entitled to receive. See "TERMS OF THE
PROPOSED MERGER - Surrender of Stock Certificates and Receipt of Merger
Consideration" and "- Fractional Shares."
CONDITIONS TO THE MERGER
The Merger Agreement provides that the consummation of the Merger
is subject to certain terms and conditions, including the approval of the
Merger Agreement by the holders of the outstanding shares of Regional
Common Stock and the receipt of both the requisite regulatory approvals and
an opinion of MBI Counsel regarding certain federal income tax aspects of
the transaction. For a discussion of each of the conditions to the Merger,
see "TERMS OF THE PROPOSED MERGER - Conditions to the Merger."
- 9 -
<PAGE> 13
EFFECTIVE TIME; CLOSING DATE
The Merger will become effective on the date and at the time (the
"Effective Time") of the issuance of a certificate of merger by each of the
Office of the Secretary of State of the State of Missouri and the Office
of the Secretary of State of the State of Illinois. Unless MBI, Ameribanc
and Regional otherwise agree, the closing for the Merger (the "Closing")
will occur on a date (the "Closing Date") mutually agreed upon by the
parties which is no later than forty-five days following the satisfaction
or waiver of the conditions to the consummation of the Merger provided in
the Merger Agreement. See
"TERMS OF THE PROPOSED MERGER - Effective Time; Closing Date" and "- Conditions
to the Merger."
AMENDMENT; TERMINATION
The Merger Agreement may be amended by a subsequent writing
signed by each of MBI, Ameribanc and Regional upon the approval of their
respective Boards of Directors, whether before or after the approval of the
Merger Agreement by the Regional shareholders at the Special Meeting;
provided, however, that after such shareholder approval, no modification
may, without the approval of the Regional shareholders who are affected by
such modification (i) alter or change the amount or form of Merger
Consideration to be received by the Regional shareholders or (ii) otherwise
materially adversely affect the Regional shareholders.
The Merger Agreement may be terminated at any time prior to the
Effective Time by the mutual consent of the parties or unilaterally by
either party (i) upon the occurrence of certain events or (ii) if the
Merger is not consummated by August 23, 1997. See "TERMS OF THE PROPOSED
MERGER - Conditions to the Merger" and "- Termination of the Merger
Agreement."
VOTING AGREEMENTS
In addition to and contemporaneously with the Merger Agreement,
MBI executed separate Voting Agreements (the "Voting Agreements") with
certain of the executive officers and directors of Regional and the
controlling shareholder of Regional, pursuant to which such officers,
directors and controlling shareholder agreed that they will vote or cause to
be voted all of the shares of Regional Common Stock then beneficially owned
or controlled or subsequently acquired in favor of the approval of the
Merger Agreement at the Special Meeting. In addition, until the earliest to
occur of the Closing Date, the termination of the Merger Agreement or the
abandonment of the Merger by mutual agreement of MBI and Regional, such
officers, directors and controlling shareholder further agreed not to vote
or cause to be voted any of such shares in favor of the approval of any
other agreement relating to the merger or sale of substantially all of the
assets of Regional to any person other than MBI or its affiliates. Such
officers, directors and controlling shareholder also agreed not to transfer
such shares unless, prior to such transfer, the transferee executes an
agreement with respect to the transferred shares in substantially the same
form as the Voting Agreement and reasonably satisfactory to MBI. As of the
Record Date, such officers, directors and controlling shareholder owned
beneficially an aggregate of 23,987 shares of Regional Common Stock, or
approximately 94.7% of the issued and outstanding shares. See "TERMS OF THE
PROPOSED MERGER - Other Agreements - Voting Agreement."
- 10 -
<PAGE> 14
INTERESTS OF CERTAIN PERSONS IN THE MERGER
From and after the Effective Time, MBI and Ameribanc, as
applicable, have agreed to indemnify each present and former director,
officer, employee and agent of Regional or Bank of Alton, to the extent
provided in the Articles of Incorporation, By-Laws and applicable
indemnification agreements of Regional and Bank of Alton as in effect on
August 23, 1996, against amounts paid by such person in connection with any
action or omission occurring prior to the Effective Time and arising from
such person's position as an officer, director or other fiduciary capacity
with Regional or Bank of Alton. MBI has also agreed to advance to
indemnifiable persons expenses incurred in connection with indemnifiable
claims upon the receipt of certain undertakings by such persons. See
"TERMS OF THE PROPOSED MERGER - Interests of Certain Persons in the
Merger."
EFFECT ON BENEFIT PLANS
The Merger Agreement provides that MBI will cause Ameribanc to
honor all provisions for vested benefits earned or accrued through the
Effective Time under employee benefit plans of Regional and Bank of Alton
(the "Benefit Plans"); provided, however, that the provisions of any plan,
program or arrangement that provide for the issuance or grant of any other
interest in respect of the capital stock of Regional or Bank of Alton will
be terminated as of the date of the Merger Agreement. The Benefit Plans
will not be terminated by reason of the Merger but will continue after the
Merger as plans of Ameribanc until such time as the employees of Regional
and Bank of Alton are integrated into MBI's employee benefit plans that are
available to other employees of MBI. MBI will take such steps as are
necessary to integrate the former employees of Regional and Bank of Alton
into such MBI employee benefit plans as soon as practicable after the
Effective Time. See "TERMS OF THE PROPOSED MERGER - Effect on Benefit
Plans."
SPECIAL MEETING OF REGIONAL SHAREHOLDERS
The Special Meeting will be held on February __, 1997,
at 10:00 a.m. Central Time, at the offices of Bryan Cave LLP, 211 North
Broadway, Suite 3600, St. Louis, Missouri. Approval by the Regional
shareholders of the Merger Agreement requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Regional Common
Stock. Only holders of record of Regional Common Stock at the close of
business on January __, 1997 (the "Record Date") will be entitled to notice
of, and to vote at, the Special Meeting. At such date, there were 25,321
shares of Regional Common Stock issued and outstanding.
As of the Record Date, the executive officers and directors of
Regional and the controlling shareholder of Regional owned beneficially an
aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7%
of the issued and outstanding shares of Regional Common Stock entitled to
vote at the Special Meeting. Pursuant to his or her respective Voting
Agreement, each of such officers, directors and controlling shareholder
has committed to vote his or her shares of Regional Common Stock for the
approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER. THE BOARD HAS DETERMINED
THAT THE MERGER IS IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL
---
TO APPROVE THE MERGER AGREEMENT.
- 11 -
<PAGE> 15
REASONS FOR THE MERGER
REGIONAL. The Board of Directors of Regional believes that the
Merger is in the best interest of Regional and its shareholders. In
reaching the decision to recommend the Merger to the shareholders, the
Board of Directors, without assigning any relative or specific weights,
considered a number of factors, including (i) the Cash Consideration, Stock
Consideration, West Pointe Consideration and the other terms of the Merger,
(ii) the benefits expected to result from the combination of Regional and
MBI and (iii) recent federal and state legislative changes affecting the
banking industry in general. See "TERMS OF THE PROPOSED MERGER -
Background of and Reasons for the Merger; Board Recommendations."
MBI. The Board of Directors of MBI believes that the Merger will
enable MBI to (i) increase its presence in southwestern Illinois through
the acquisition of an established banking organization and (ii) enhance its
ability to compete in the increasingly competitive banking and financial
services industry. See "TERMS OF THE PROPOSED MERGER - Background of and
Reasons for the Merger; Board Recommendations."
FRACTIONAL SHARES
No fractional shares of MBI Common Stock or West Pointe Common
Stock will be issued to the shareholders of Regional in connection with the
Merger. Each holder of Regional Common Stock who otherwise would have been
entitled to receive a fraction of a share of MBI Common Stock shall receive
in lieu thereof cash, without interest, in an amount equal to the holder's
fractional share interest multiplied by $47.80, the average of the closing
stock price of MBI Common Stock on the NYSE Composite Tape as reported in
The Wall Street Journal for the five trading days prior to August 23, 1996,
the date of execution of the Merger Agreement (the "Average MBI Stock
Price"). Each holder of Regional Common Stock who otherwise would have
been entitled to receive a fraction of a share of West Pointe Common Stock
shall receive in lieu thereof cash, without interest, in an amount equal
to such holder's fractional share interest multiplied by $30.00. Cash
received by Regional shareholders in lieu of fractional shares of MBI
Common Stock or West Pointe Common Stock may give rise to taxable income.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
DISSENTERS' RIGHTS
Under the Illinois Act, each holder of Regional Common Stock may,
in lieu of receiving the Merger Consideration, seek the fair value of his
or her shares of Regional Common Stock and, if the Merger is consummated,
receive payment of such fair value in cash by following certain procedures
set forth in Section 11.70 of the Illinois Act, the text of which is
attached hereto as Annex A. Failure to follow such procedures may
-------
result in a loss of such shareholder's dissenters' rights. Any Regional
shareholder returning a blank executed proxy card will be deemed to have
approved the Merger Agreement, thereby waiving any such dissenters' rights.
See "DISSENTERS' RIGHTS OF SHAREHOLDERS OF REGIONAL."
- 12 -
<PAGE> 16
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Thompson Coburn, MBI's legal counsel, has delivered its opinion
to the effect that, assuming the Merger occurs in accordance with the
Merger Agreement and conditioned on the accuracy of certain representations
made by MBI, Regional and the majority shareholder of Regional, the Merger
will constitute a "reorganization" for federal income tax purposes.
Accordingly, no gain or loss will be recognized by Regional
shareholders with regard to the MBI Common Stock received solely in
exchange for shares of Regional Common Stock in the Merger. However, gain
(but not loss) or dividend income realized as a result of the receipt of
the Cash Consideration and the West Pointe Consideration (including cash
received in lieu of fractional shares, if any) will be recognized up to,
but not in excess of, the amount of the Cash Consideration and the fair
market value of the West Pointe Consideration received. Cash received in lieu
of fractional shares of MBI Common Stock also may give rise to taxable income.
EACH REGIONAL SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER,
INCLUDING THE APPLICABILITY OF VARIOUS STATE, LOCAL, AND FOREIGN TAX LAWS.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
REGULATORY APPROVALS
Applications regarding the Merger have been filed with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board")
and the Illinois Commissioner of Banks and Real Estate (the "Illinois
Commissioner") (the Federal Reserve Board, Illinois Commissioner and any
other regulatory authority that may be necessary or appropriate are
collectively referred to herein as the "Regulatory Authorities" and,
individually, as a "Regulatory Authority"). The Merger cannot be
consummated until receipt of approvals from such Regulatory Authorities.
In reviewing the Merger, the Regulatory Authorities will consider various
factors, including possible anticompetitive effects of the Merger, 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 MERGER - Regulatory Approval" and
"SUPERVISION AND REGULATION."
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of
accounting. See "TERMS OF THE PROPOSED MERGER - Accounting Treatment."
- 13 -
<PAGE> 17
MARKETS AND MARKET PRICES
MBI Common Stock is currently traded on the NYSE under the symbol
"MTL." The last sale price reported for MBI Common Stock on August 23,
1996, the last trading date preceding the public announcement of the
Merger, was $47.75.
As of the Record Date, Regional had eight shareholders of
record. There is no established public trading market for Regional
Common Stock; to the knowledge of management of Regional, there has never
been a sale of Regional Common Stock. In addition, there is no established
public trading market for West Pointe Common Stock. The last sale price
for West Pointe Common Stock known to management of West Pointe prior to
the public announcement of the Merger was $32.00 per share in 1996.
Because of this lack of established trading market for shares of Regional
Common Stock and West Pointe Common Stock, the respective managements of
Regional and West Pointe do not have knowledge of the prices paid in all
transactions involving their shares and have not necessarily verified the
prices indicated in the table with the parties to the relevant
transactions. Thus, the sale prices listed below may not reflect the
prices that would have been paid in an active market.
The following table sets forth for the periods indicated the high
and low prices per share of MBI Common Stock as reported on the NYSE, of
Regional Common Stock as known to management of Regional and of West Pointe
as known to management of West Pointe, along with the quarterly cash
dividends per share declared. The per share prices do not include
adjustments for retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
MBI REGIONAL WEST POINTE
----------------------------- ------------------------- -----------------------
SALES PRICE CASH SALES PRICE CASH SALES PRICE CASH
------------------- DIVIDEND ------------- DIVIDEND ------------- DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED HIGH LOW DECLARED
-------- ------- -------- ---- ----- -------- ---- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
- ----
First Quarter $34.125 $29.875 $.28 <F2> <F2> $ -- <F3> <F3> $.14
Second Quarter 38.125 31.125 .28 <F2> <F2> -- <F3> <F3> .14
Third Quarter 39.250 34.875 .28 <F2> <F2> -- <F3> <F3> .14
Fourth Quarter 36.875 29.500 .28 <F2> <F2> 5.93 <F3> <F3> .14
1995
- ----
First Quarter $37.250 $31.250 $.33 <F2> <F2> $ 7.10 <F3> <F3> $.14
Second Quarter 44.875 36.000 .33 <F2> <F2> 7.10 <F3> <F3> .14
Third Quarter 47.000 41.625 .33 <F2> <F2> 16.97 <F3> <F3> .14
Fourth Quarter 46.500 41.500 .33 <F2> <F2> 9.66 <F3> <F3> .14
1996
- ----
First Quarter $46.500 $41.500 $.41 <F2> <F2> $10.00 <F3> <F3> $.14
Second Quarter 47.875 43.500 .41 <F2> <F2> 10.00 <F3> <F3> .14
Third Quarter 52.875 43.375 .41 <F2> <F2> 10.00 <F3> <F3> .14
Fourth Quarter 54.000 49.000 .41 <F2> <F2> 10.00 32.00 32.00 .14
1997
- ----
First Quarter (through
January 17, 1997) <F1> $52.000 $50.000 -- <F2> <F2> -- <F3> <F3> --
<FN>
- --------------------
<F1> For recent sale prices of MBI Common Stock, see page 2 of this Proxy
Statement/Prospectus.
<F2> No trades known to management of Regional for the period indicated or
during any other period.
<F3> No trades known to management of West Pointe.
</TABLE>
- 14 -
<PAGE> 18
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated
selected historical per share data of MBI and Regional and the
corresponding pro forma and pro forma equivalent per share amounts,
giving effect to the proposed acquisition of Regional, the completed
acquisitions of First Financial and TODAY'S, and the proposed
acquisitions of First City, Mark Twain and Roosevelt. The data presented is
based upon the supplemental consolidated financial statements and consolidated
financial statements and related notes of MBI and the consolidated
financial statements and related notes of Regional, Mark Twain and
Roosevelt included in this Proxy Statement/Prospectus or in documents
incorporated herein by reference and the pro forma combined consolidated
balance sheet and income statements, including the notes thereto, appearing
elsewhere herein. This information should be read in conjunction with
such historical and pro forma financial statements and related notes
thereto. The assumptions used in the preparation of this table appear
in the notes to the pro forma financial information appearing elsewhere
in this Proxy Statement/Prospectus. See "PRO FORMA FINANCIAL
INFORMATION - Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)." These data are not necessarily indicative of
the results of the future operations of the combined organization or the
actual results that would have occurred if the proposed acquisition of
Regional, the completed acquisitions of TODAY'S and First Financial or
the proposed acquisitions of First City, Mark Twain and Roosevelt had been
consummated at the beginning of the periods indicated. All adjustments
consisting of only normal recurring adjustments necessary for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/All MBI/
Regional Regional Entities All Entities
MBI Regional 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:
September 30, 1996 $ 25.51 $924.77 $25.99 $616.23 $26.65 $631.93
December 31, 1995 26.04 913.16 26.49 628.14 28.39 673.19
Cash Dividends Declared per Share:
Nine months ended
September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17
Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30
Earnings per Share:
Nine months ended
September 30, 1996 $ 2.01 $ 79.37 $ 2.01 $ 47.66 $ 1.84 $ 43.63
Year ended December 31, 1995 3.74 108.93 3.75 88.92 2.85 67.58
Market Price per Share:
At August 23, 1996 <F4> $47.750 n/a n/a n/a n/a n/a
At January 17, 1997 <F4> 51.500 n/a n/a n/a n/a n/a
<FN>
- --------------------
<F1> Includes the effect of pro forma adjustments for Regional. See
"PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements (Unaudited)."
<F2> Based on the pro forma combined per share amounts multiplied by
23.7123, the Stock Consideration. Further explanation of the
assumptions used in the preparation of the pro forma combined
consolidated financial statements is included in the notes to the
pro forma financial statements. See "PRO FORMA FINANCIAL
INFORMATION - Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F3> Includes the effect of pro forma adjustments for Regional,
TODAY'S, First Financial, First City, Mark Twain and Roosevelt.
See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements (Unaudited)."
<F4> The market price per share of MBI Common Stock was determined as
of August 23, 1996 and January 17, 1997, the last trading day
preceding the public announcement of the proposed Merger and as of
the latest available date prior to the filing of the Registration
Statement, respectively, based on the last sale price as reported
on the NYSE Composite Tape. There are no publicly available
quotations of Regional Common Stock.
</TABLE>
- 15 -
<PAGE> 19
SUMMARY FINANCIAL DATA
The following table sets forth for the periods indicated
certain summary historical consolidated financial information for MBI
and Regional. The balance sheet data and income statement data of MBI
included in the summary financial data as of and for the five years
ended December 31, 1995 are taken from the audited supplemental
consolidated financial statements of MBI as of the end of and for each
such year. The balance sheet data and income statement data of Regional
included in the summary financial data as of and for the five years
ended December 31, 1995 are taken from the audited consolidated
financial statements of Regional as of and for the year ended December
31, 1995 and the unaudited consolidated financial statements of Regional
as of and for the years ended December 31, 1994, 1993, 1992 and 1991.
The balance sheet data and income statement data included in the summary
financial data as of and for the nine months ended September 30, 1996
and 1995 are taken from the unaudited consolidated financial statements
of MBI and the unaudited consolidated financial statements of Regional
as of and for the nine months ended September 30, 1996 and 1995. These
data include all adjustments which are, in the opinion of the respective
managements of MBI and Regional, necessary to present a fair statement
of these periods and are of a normal recurring nature. Results for the
nine months ended September 30, 1996 are not necessarily indicative of
results for the entire year. The following information should be read
in conjunction with the supplemental consolidated financial statements
of MBI and the consolidated financial statements of Regional, and the
related notes thereto, included herein or in documents incorporated
herein by reference, and in conjunction with the unaudited pro forma
combined consolidated financial information, including the notes
thereto, appearing elsewhere in this Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "PRO FORMA
FINANCIAL INFORMATION."
- 16 -
<PAGE> 20
<TABLE>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Nine Months Ended As of or for the
September 30 Year Ended December 31
--------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income<F1> $ 2.01 $ 2.85 $ 3.74 $ 3.19 $ 2.79 $ 2.41 $ 2.34
Dividends declared 1.23 .99 1.32 1.12 .99 .93 .93
Book value at period end 25.51 25.31 26.04 23.32 21.59 19.44 18.12
Average common shares
outstanding (thousands) 62,161 61,498 61,884 59,757 58,751 55,050 47,159
EARNINGS (THOUSANDS)
Interest income $987,701 $962,361 $1,293,944 $1,118,069 $1,094,611 $1,139,807 $1,156,821
Interest expense 465,821 459,432 620,534 450,950 444,573 549,642 668,578
-------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income 521,880 502,929 673,410 667,119 650,038 590,165 488,243
Provision for possible loan losses 55,915 29,177 36,530 43,265 64,302 79,551 64,028
Other income 211,929 199,616 273,653 236,561 245,589 224,456 195,237
Other expense 482,170 407,120 553,748 555,176 570,182 529,645 486,490
Income taxes 70,407 90,164 124,109 113,165 96,074 69,681 28,418
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income $125,317 $176,084 $ 232,676 $ 192,074 $ 165,069 $ 135,744 $ 104,544
======== ======== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET (MILLIONS)
Total assets $ 18,199 $ 18,007 $ 17,928 $ 16,724 $ 16,293 $ 16,033 $ 14,045
Earning assets 16,744 16,590 16,264 15,427 14,980 14,678 12,854
Investment securities 4,320 4,263 4,211 4,280 4,670 4,632 3,412
Loans and leases,
net of unearned income 12,166 11,948 11,731 10,904 9,809 9,570 8,809
Deposits 14,610 13,552 13,714 12,865 13,243 13,260 11,685
Long-term debt 303 344 325 330 316 336 238
Shareholders' equity 1,535 1,612 1,640 1,409 1,295 1,143 939
Reserve for possible loan losses 202 209 202 216 206 199 176
SELECTED RATIOS
Return on average assets .93% 1.35% 1.33% 1.17% 1.03% .89% .78%
Return on average equity 10.35 15.58 15.14 14.06 13.46 12.76 11.81
Net interest rate margin 4.29 4.29 4.28 4.53 4.52 4.33 4.12
Equity to assets 8.43 8.95 9.15 8.42 7.95 7.13 6.68
Reserve for possible loan losses to:
Outstanding loans 1.66 1.75 1.72 1.98 2.10 2.08 2.00
Non-performing loans 348.56 366.62 245.18 583.17 290.02 154.17 109.79
Dividend payout ratio 61.19 34.74 35.29 35.11 35.48 38.75 39.74
<FN>
<F1> Based on weighted average common shares outstanding.
</TABLE>
- 17 -
<PAGE> 21
<TABLE>
REGIONAL BANCSHARES, INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Nine Months Ended As of or for the
September 30 Year Ended December 31
--------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income $ 79.37 $ 78.94 $ 108.93 $ 100.55 $ 119.21 $ 105.92 $ 2.37
Dividends declared 30.00 31.17 40.83 5.93 -- -- --
Book value at period end 924.77 883.02 913.16 777.42 724.06 604.83 498.83
Average common shares
outstanding 25,321 25,321 25,321 25,321 25,321 25,321 25,321
EARNINGS (THOUSANDS)
Interest income $ 9,682 $ 8,707 $ 11,840 $ 10,311 $ 9,609 $ 10,594 $ 12,386
Interest expense 4,826 3,833 5,318 4,048 3,742 4,744 6,837
Net interest income 4,856 4,874 6,522 6,263 5,867 5,850 5,549
Provision for possible loan losses 75 42 42 (280) (960) 1,040 3,130
Other income 798 840 1,108 829 1,269 1,769 992
Other expense 3,128 2,973 3,897 4,030 4,437 3,390 3,397
Income taxes 441 700 933 796 1,158 507 (46)
Cumulative effect adjustment of
accounting change -- -- -- -- 518 -- --
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income $ 2,010 $ 1,999 $ 2,758 $ 2,546 $ 3,019 $ 2,682 $ 60
======== ======== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET (THOUSANDS)
Total assets $182,082 $162,268 $ 167,680 $ 148,140 $ 143,063 $ 133,149 $ 131,479
Earning assets 169,741 153,450 156,733 138,476 134,890 124,798 122,737
Investment and mortgage-backed
securities 66,077 55,991 56,424 45,735 55,068 44,807 46,088
Loans and leases,
net of unearned income 103,169 96,259 96,684 91,316 75,922 75,091 76,649
Borrowings and advances
from Federal Home Loan Bank 10,000 -- -- -- -- -- --
Shareholders' equity 23,416 22,359 23,122 19,685 18,334 15,315 12,631
Reserve for possible loan losses 1,473 1,383 1,350 1,825 1,897 2,322 1,600
SELECTED RATIOS
Return on average assets 1.54% 1.74% 1.74% 1.73% 2.24% 2.03% 0.04%
Return on average equity 11.53 12.85 11.93 12.77 16.47 17.51 0.48
Net interest rate margin<F1> 4.35 4.89 4.83 5.05 5.19 5.35 4.79
Equity to assets 12.86 13.78 13.79 13.29 12.82 11.50 9.61
Reserve for possible loan losses to:
Outstanding loans 1.43 1.44 1.40 2.00 2.50 3.09 2.09
Non-performing loans 162.05 131.59 130.31 73.74 69.77 186.51 173.91
Cash dividend payout 37.79 39.48 37.49 5.90 -- -- --
<FN>
<F1> Based on interest income on a fully tax-equivalent basis.
</TABLE>
- 18 -
<PAGE> 22
INFORMATION REGARDING SPECIAL MEETING
-------------------------------------
GENERAL
This Proxy Statement/Prospectus is being furnished to
holders of Regional Common Stock in connection with the
solicitation of proxies by the Board of Directors of Regional for
use at the Special Meeting and any adjournments or postponements
thereof at which the shareholders of Regional will consider and
vote upon a proposal to approve the Merger Agreement and each of
the transactions contemplated thereby and any other business
which may properly be brought before the Special Meeting or any
adjournments or postponements thereof. Each copy of this Proxy
Statement/Prospectus is accompanied by a Notice of Special
Meeting of Shareholders, a proxy card and a return envelope pre-
addressed to Regional for the proxy card.
This Proxy Statement/Prospectus is also furnished by
MBI to each holder of Regional Common Stock as a prospectus in
connection with the issuance by MBI of shares of MBI Common Stock
upon the consummation of the Merger. This Proxy Statement/
Prospectus and the Notice of Special Meeting and proxy card are
being first mailed to shareholders of Regional on January __,
1997.
DATE, TIME AND PLACE
The Special Meeting will be held at the offices of Bryan
Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri,
on ______, February __, 1997, at 10:00 a.m., Central Time.
RECORD DATE; VOTE REQUIRED; VOTING AGREEMENTS
On the Record Date, there were 25,321 shares of
Regional Common Stock outstanding and entitled to vote at the
Special Meeting. Each such share is entitled to one vote on each
matter properly brought before the Special Meeting. The
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Regional Common Stock is required to
approve the Merger Agreement.
As of the Record Date, certain of the executive
officers and directors of Regional and certain of the other
shareholders of Regional owned beneficially an aggregate of
23,987 shares of Regional Common Stock, or approximately 94.7% of
the outstanding shares of Regional Common Stock entitled to vote
at the Special Meeting. Such shareholders, pursuant to the terms
of their respective Voting Agreements, have committed to vote or
cause to be voted all of the shares of Regional Common Stock
beneficially owned or controlled or subsequently acquired in
favor of the approval of the Merger Agreement at the Special
Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of Regional Common Stock which are represented
by a properly executed proxy card received prior to the vote at
the Special Meeting will be voted at such Special Meeting in the
manner directed on the proxy card, unless such proxy designation
is revoked in the manner set forth herein in advance of the vote
at the Special Meeting. ANY REGIONAL SHAREHOLDER RETURNING AN
EXECUTED PROXY CARD WHICH DOES NOT PROVIDE INSTRUCTIONS TO VOTE
AGAINST THE APPROVAL OF THE MERGER AGREEMENT WILL BE DEEMED TO
HAVE APPROVED THE MERGER AGREEMENT. Failure to return a properly
executed proxy card or to vote in person at the Special Meeting
will have the practical effect of a vote against the approval of
the Merger Agreement.
- 19 -
<PAGE> 23
Shares subject to abstentions will be treated as shares
that are present and voting at the Special Meeting for purposes
of determining the presence of a quorum and as voted for the
purposes of determining the base number of shares voting on the
proposal. Such shares will, therefore, have the effect of votes
against the approval of the Merger Agreement. Broker "non-votes"
(i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners
or other persons entitled to vote shares with respect to which
such brokers or nominees do not have discretionary power to vote)
will be considered as present for purposes of determining the
presence of a quorum but will not be considered as voting at the
Special Meeting. Broker non-votes, therefore, will also have the
effect of votes against the approval of the Merger Agreement.
Any shareholder of Regional giving a proxy may revoke
it at any time prior to the vote at the Special Meeting.
Shareholders of Regional wishing to revoke a proxy prior to the
vote may do so by delivering to the Secretary of Regional at 1520
Washington Avenue, Alton, Illinois, 62002, at or before the
Special Meeting, a written notice of revocation bearing a later
date than the proxy or a later dated proxy relating to the same
shares, or by attending the Special Meeting and voting the same
shares in person. Attendance at the Special Meeting will not in
itself constitute the revocation of a proxy.
The Board of Directors of Regional is not currently
aware of any business to be brought before the Special Meeting
other than that described herein. If, however, other matters are
properly brought before such Special Meeting, or any adjournments
or postponements thereof, the persons appointed as proxies will
have discretionary authority to vote the shares represented by
duly executed proxies in accordance with their discretion and
judgment as to the best interest of Regional.
SOLICITATION OF PROXIES
Regional will bear its own costs of soliciting proxies,
except that MBI will pay printing and mailing expenses and
registration fees incurred in connection with preparing this
Proxy Statement/Prospectus. Proxies will initially be solicited
by mail, but directors, officers and selected other employees of
Regional may also solicit proxies in person or by telephone.
Directors, executive officers and any other employees of Regional
who solicit proxies will not be specially compensated for such
services. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward proxy materials to
beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial
owners.
HOLDERS OF REGIONAL COMMON STOCK ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT
TO REGIONAL PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
- 20 -
<PAGE> 24
TERMS OF THE PROPOSED MERGER
----------------------------
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS AND
CONDITIONS OF THE MERGER AGREEMENT, WHICH DOCUMENT IS
INCORPORATED BY REFERENCE HEREIN. THIS SUMMARY IS QUALIFIED IN
ITS ENTIRETY BY THE FULL TEXT OF THE MERGER AGREEMENT. MBI, UPON
WRITTEN OR ORAL REQUEST, WILL FURNISH A COPY OF THE MERGER
AGREEMENT, WITHOUT CHARGE, TO ANY PERSON WHO RECEIVES A COPY OF
THIS PROXY STATEMENT/PROSPECTUS. SUCH REQUESTS SHOULD BE
DIRECTED TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY,
MERCANTILE BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI
63166-0524, TELEPHONE (314) 425-2525.
GENERAL DESCRIPTION OF THE MERGER
Subject to the satisfaction or waiver of the terms and
conditions set forth in the Merger Agreement, which are described
below, Regional, an Illinois corporation, will be merged with and
into Ameribanc, a Missouri corporation. Upon consummation of the
Merger, Regional's corporate existence will terminate and
Ameribanc will continue as the surviving entity. Simultaneously
with the effectiveness of the Merger, each share of Regional
Common Stock (other than (a) a share held by MBI or any MBI
corporate affiliate, except a share held in a fiduciary capacity
or in satisfaction of a debt previously contracted in good faith,
or (b) a share as to which a Regional shareholder has perfected
dissenters' rights pursuant to Section 11.70 of the Illinois Act)
will be converted into the right to receive as consideration in
the Merger: (i) an amount in cash equal to $485.76; (ii)
23.7123 shares of MBI Common Stock; and (iii) 0.4838 of a share
of West Pointe Common Stock. Such consideration is subject to
certain anti-dilution protections but is not adjustable based on
the operating results, financial condition or other factors
affecting MBI, Regional or West Pointe prior to the consummation
of the Merger. The fair market value of the MBI Common Stock and
the West Pointe Common Stock received pursuant to the Merger may
fluctuate and at the consummation of the Merger may be more or
less than the current fair market value of such shares.
The amount and nature of the Merger Consideration was
established through arm's-length negotiations between MBI,
Ameribanc and Regional, and reflects the balancing of a number of
countervailing factors. The total amount of the Merger
Consideration reflects a price both parties concluded was
appropriate. See "- Background of and Reasons for the Merger;
Board Recommendations."
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET
VALUE OF MBI COMMON STOCK OR WEST POINTE COMMON STOCK WILL BE
EQUIVALENT TO THE FAIR MARKET VALUE OF MBI COMMON STOCK OR WEST
POINTE COMMON STOCK, RESPECTIVELY, ON THE DATE SUCH STOCK IS
RECEIVED BY A REGIONAL SHAREHOLDER OR AT ANY OTHER TIME. THE
FAIR MARKET VALUE OF MBI COMMON STOCK AND WEST POINTE COMMON
STOCK AT THE TIME IT IS RECEIVED BY A REGIONAL SHAREHOLDER MAY BE
GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF MBI COMMON
STOCK OR WEST POINTE COMMON STOCK, RESPECTIVELY, DUE TO NUMEROUS
MARKET FACTORS.
At the Effective Time of the Merger, each outstanding
share of Regional Common Stock will be converted into the right
to receive the Cash Consideration, the Stock Consideration and
the West Pointe Consideration. See "- Surrender of Regional
Stock Certificates and Receipt of Merger Consideration."
- 21 -
<PAGE> 25
CONDITIONS TO THE MERGER
The respective obligations of MBI, Ameribanc and
Regional to consummate the Merger are subject to the satisfaction
on or before the Closing Date of the following mutual conditions,
except as such parties may waive such conditions in writing:
(1) At the Special Meeting, the Merger and the
Merger Agreement shall have been duly approved by the
Regional shareholders.
(2) Orders, consents and approvals, in form and
substance reasonably satisfactory to MBI, Ameribanc and
Regional, shall have been entered by the Regulatory
Authorities and shall remain in force, granting the
authority necessary: (i) for consummation of the
transactions contemplated by the Merger Agreement
pursuant to the provisions of the Securities Act of
1933, as amended (the "Securities Act") and other
applicable laws; and (ii) to satisfy all other
requirements prescribed by applicable laws
and the rules and regulations of the Regulatory
Authorities.
(3) No judgment, order or decree of any court and
no order, notice, statute or regulation of any
government or governmental agency having jurisdiction
or authority over Regional, Bank of Alton, MBI or
Ameribanc shall be in effect which restrains or
prohibits, and no litigation, proceeding or
investigation shall be pending or threatened by or
before any such court or governmental agency attempting
to restrain or prohibit: (i) consummation of the
transactions contemplated by the Merger Agreement; or
(ii) the exercise of control by MBI or Ameribanc over
Regional or Bank of Alton following the Merger.
(4) The Registration Statement shall have become
effective under the Securities Act and as of the
Closing Date no stop order suspending the effectiveness
thereof shall have been issued or threatened.
(5) The MBI Common Stock shall be listed for
trading on the NYSE.
(6) MBI shall have delivered to Regional an
opinion of Thompson Coburn dated as of the Closing Date
or a mutually agreeable earlier date, reasonably
satisfactory in form and substance to Regional and its
legal counsel, to the effect that the Merger will
constitute a reorganization within the meaning of
Section 368 of the Code and that no gain or loss will
be recognized by Regional or the shareholders of
Regional or Bank of Alton to the extent that each
received shares of MBI Common Stock solely in exchange
for shares of Regional Common Stock in the Merger,
which opinion shall not have been withdrawn at or prior
to the Effective Time.
The obligation of MBI to consummate the Merger is
subject to the satisfaction on or before the Closing Date of the
following conditions, except as MBI may waive such conditions in
writing:
(1) All representations and warranties of
Regional contained in the Merger Agreement shall be
true and correct in all material respects on and as of
the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and
Regional shall have performed in all material respects
all agreements and covenants required by the Merger
Agreement to be performed by it on or prior to the
Closing Date.
- 22 -
<PAGE> 26
(2) Regional shall have furnished to MBI a
certificate dated as of the Closing Date, signed by an
executive officer of Regional to the effect that, to
his knowledge, the representations and warranties of
Regional contained in the Merger Agreement are true and
correct in all material respects as of the Closing Date
and Regional has performed all agreements, covenants
and obligations required to be performed by it in all
material respects.
(3) Since the date of the Merger Agreement, there
shall have been no material adverse change in the
financial condition of Regional and Bank of Alton,
taken as a whole, except as may have resulted from
changes to laws and regulations, GAAP or regulatory
accounting principles, interpretations thereof, other
conditions that affect the banking industry generally or
changes in the general level of interest rates.
(4) MBI shall have received from Bryan Cave LLP
an opinion as to certain legal matters.
The obligation of Regional to consummate the Merger
shall be subject to the satisfaction on or before the Closing
Date of all of the following conditions, except as Regional may
waive such conditions in writing:
(1) All representations and warranties of MBI and
Ameribanc contained in the Merger Agreement shall be
true and correct in all material respects on and as of
the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and
MBI shall have performed in all material respects all
agreements and covenants required by the Merger
Agreement to be performed by it on or prior to the
Closing Date.
(2) MBI shall have furnished to Regional a
certificate, dated as of the Closing Date, signed by an
executive officer of MBI and to the effect that, to the
knowledge of such officer, the representations and
warranties of MBI and Ameribanc contained in the Merger
Agreement are true and correct in all material respects
as of the Closing Date and MBI and Ameribanc have
performed all agreements, covenants and obligations
required to be performed by them.
(3) Since the date of the Merger Agreement, there
shall have been no material adverse change in the
financial condition of MBI or its subsidiaries (as
defined in the Merger Agreement), taken as whole,
except as may have resulted from changes to laws and
regulations, GAAP, interpretations thereof, other
conditions that affect the banking industry generally,
or changes in the general level of interest rates.
(4) Regional shall have received from Thompson
Coburn an opinion as to certain legal matters.
(5) The Registration Statement shall have become
effective under the Securities Act and, as of the
Effective Time, no stop order suspending the
effectiveness thereof shall have been issued or
threatened.
- 23 -
<PAGE> 27
EFFECTIVE TIME; CLOSING DATE
The Merger will be consummated and the Effective Time
will occur at the time of the issuance of a certificate of merger
by each of the Office of the Secretary of State of the State of
Missouri and the Office of the Secretary of State of the State of
Illinois. Pursuant to the Merger Agreement, unless MBI,
Ameribanc and Regional otherwise agree, the Effective Time shall
occur no later than forty-five days following satisfaction or
waiver of the conditions to the consummation of the Merger
provided in the Merger Agreement. See " - Conditions to the
Merger."
AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be amended at any time by
written agreement of the parties upon the approval of their
respective Boards of Directors; provided, however, that after
the approval of the Merger Agreement by the shareholders of
Regional at the Special Meeting, no such modification may,
without approval of the shareholders of Regional (i) alter or
change the amount or form of the Merger Consideration to be
received by such shareholders or (ii) otherwise materially
adversely affect such shareholders.
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by
the shareholders of Regional:
(1) by mutual consent of the Boards of Directors
of MBI and Regional;
(2) unilaterally by the Board of Directors of MBI
or the Board of Directors of Regional:
(i) at any time after August 23, 1997,
if the Merger has not been consummated by such date
(provided that the failure of such consummation to
occur is not a result of a willful and deliberate
breach, through action or failure to act, of any
representation, warranty, covenant or agreement
under the Merger Agreement by the terminating
party);
(ii) if there shall have been a final
judicial or regulatory determination that any of
the material provisions of the Merger Agreement
are illegal, invalid or unenforceable or denying
any regulatory application the approval of which
is a condition precedent to such party's
obligations under the Merger Agreement;
(iii) if the Merger Agreement is not
approved by the holders of the outstanding shares
of Regional Common Stock at the Special Meeting;
or
(iv) in the event of a material breach
by a party of any representation, warranty,
covenant or agreement contained in the Merger
Agreement, which breach cannot be or is not cured
within 30 days after written notice thereof is
given to the breaching party by the non-breaching
party; provided, however, that the departure of
any Executive Officer from the employ of Regional
will not be deemed a material breach of the Merger
Agreement; or
- 24 -
<PAGE> 28
(3) by the Executive Committee of the Board of
Directors of MBI in the event that: (i) an
environmental audit discloses the existence of certain
material environmental liabilities on the properties or
assets of Regional or Bank of Alton; (ii) Regional does
not choose to correct the condition leading to such
environmental liability and to otherwise indemnify MBI
from such liability; and (iii) MBI reasonably believes
the cost of such remediation or potential liability
exceeds $250,000.
No assurance can be given that the Merger will be
consummated on or before August 23, 1997 or that MBI or Regional
will not elect to terminate the Merger Agreement if the Merger
has not been consummated on or before such date. In the event of
the termination of the Merger Agreement, the Merger Agreement
shall become void and there shall be no continuing obligations on
the part of any party or their respective officers and directors,
except that: (i) confidentiality obligations shall survive
termination; (ii) MBI and Ameribanc shall pay all printing,
mailing and filing expenses with respect to the Registration
Statement, this Proxy Statement/Prospectus and the regulatory
applications; and (iii) in the case of termination due to the
intentional, deliberate and willful non-performance of any
covenant contained in the Merger Agreement after notice and
opportunity to cure, the breaching party shall not be relieved of
liability to the nonbreaching party arising from such
nonperformance.
VOTING AGREEMENTS
In addition to and contemporaneously with the Merger
Agreement, MBI executed separate Voting Agreements with certain
of the executive officers and directors of Regional and the
controlling shareholder of Regional, pursuant to which such
officers, directors and controlling shareholder agreed that they
will vote or cause to be voted all of the shares of Regional
Common Stock that they beneficially own, control or subsequently
acquire in favor of the approval of the Merger Agreement at the
Special Meeting. In addition, until the earliest to occur of the
Closing Date, the termination of the Merger Agreement or the
abandonment of the Merger by mutual agreement of Regional and MBI,
such officers, directors and controlling shareholder further
agreed that they will not vote or cause to be voted any such
shares in favor of the approval of any other agreement relating to
the merger or sale of all or substantially all the assets of
Regional to any person other than MBI or its affiliates. Such
officers, directors and controlling shareholder also agreed that
they will not transfer shares of Regional Common Stock unless,
prior to such transfer, the transferee executes an agreement with
respect to the transferred shares in substantially the same form
as the Voting Agreement and in a form reasonably satisfactory to
MBI. As of the Record Date, such officers, directors and
controlling shareholder together owned beneficially
an aggregate of 23,987 shares of Regional Common Stock, or
approximately 94.7% of the issued and outstanding shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
From and after the Effective Time, MBI and Ameribanc,
as applicable, subject to any limitations or other provisions of
applicable law and to the full extent provided in the respective
Articles of Incorporation, Bylaws and applicable indemnification
agreements of Regional and Bank of Alton as in effect on August
23, 1996, have agreed to indemnify and hold harmless each present
and former director, officer, employee and agent of Regional or
Bank of Alton, against any costs or expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative,
arising out of, relating to or in connection with any action or
omission occurring prior to the Effective Time including, without
limitation, acts or omissions arising from such person's position
as an officer, director or other fiduciary capacity with Regional
or Bank of Alton. MBI will also make advances of expenses
incurred prior to the final disposition of a civil, administrative or
investigative action, suit, proceeding or claim to
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any indemnifiable person upon the receipt of certain
undertakings from such person that such person shall repay such
amounts advanced in the event that it is ultimately determined
that such person is not entitled to such indemnification.
EFFECT ON BENEFIT PLANS
The Merger Agreement provides that MBI will cause
Ameribanc to honor all provisions for vested benefits earned or
accrued through the Effective Time under the Benefit Plans of
Regional and Bank of Alton; provided, however, that the
provisions of any plan, program or arrangement that provide for
the issuance or grant of any other interest in respect of the
capital stock of Regional or Bank of Alton will be terminated as
of the date of the Merger Agreement. The Benefit Plans will not
be terminated by reason of the Merger but will continue after the
Merger as plans of Ameribanc until such time as the employees of
Regional and Bank of Alton are integrated into MBI's employee
benefit plans that are available to other employees of MBI. MBI
will take such steps as are necessary to integrate the former
employees of Regional and Bank of Alton into such MBI employee
benefit plans as soon as practicable after the Effective Time,
with (i) full credit for prior service with Regional and Bank of
Alton for purposes of vesting and eligibility for participation
(but not benefit accruals under any defined benefit plan), and
co-payments and deductibles, and (ii) waiver of all waiting
periods and, to the extent met or satisfied by an affected
employee of Regional or Bank of Alton under the Benefit Plans,
all pre-existing condition exclusions or penalties.
BACKGROUND OF AND REASONS FOR THE MERGER; BOARD RECOMMENDATIONS
BACKGROUND OF THE MERGER. The Board of Directors of
Regional has periodically evaluated Regional's corporate strategy
based upon general conditions in the banking industry,
legislative changes and other developments affecting the industry
in general and Regional specifically. These developments have
included the ongoing consolidation of the banking industry, and
recent state and federal legislative changes that will facilitate
nationwide consolidation of the banking industry.
Beginning in the second quarter of 1996, the Board of
Directors of Regional began reviewing the desirability of a
business combination with a larger financial institution in light
of increased economic and competitive pressures on community
banks and the current trends in acquisitions and consolidations
of banking organizations within Regional's service areas. As a
result of this review, the Board of Directors determined that
pursuing such a business combination was in the best interests of
Regional and its shareholders.
Accordingly, in May 1996, the Board of Directors
solicited several institutions for preliminary expressions of
interest in such a transaction. Upon receipt of confidentiality
agreements, interested institutions were given access to a
limited collection of Regional's financial and business
documents. Initially, three large regional bank holding
companies, none of which was MBI, expressed a preliminary
interest and reviewed these documents. After completing their
review of the documents, these parties were asked to submit firm
expressions of interest along with the general terms of a
proposed transaction by May 31, 1996. Each of these three
companies submitted a firm expression of interest along with the
basic terms of a proposed transaction.
A fourth and fifth regional bank holding company, one
of which was MBI, later expressed a preliminary interest. After
representatives of Regional undertook discussions with these
additional regional bank holding companies, each chose to execute
a confidentiality agreement and examine the limited collection of
Regional's financial and business documents. After examining
these documents, MBI
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<PAGE> 30
chose to submit a firm expression of interest and the other party,
after discussions with representatives of Regional, chose not to
proceed with the bidding process.
All four remaining parties were provided, for their
comment and review, a form of merger agreement setting forth
proposed terms on which Regional would proceed with a transaction
and were asked for definitive proposals representing their
highest and best offers. After further discussion and due
diligence review, each of these four bank holding companies
submitted their highest and best offers to acquire all the
Regional Common Stock. Each final bid was made in terms of a
combination of cash and common stock in exchange for each share
of Regional Common Stock.
After further discussions between representatives of
Regional and the four bank holding companies, on June --, 1996,
Regional's Board of Directors considered the definitive proposals
submitted by the four regional bank holding companies. At that
meeting, the Board of Directors approved the bid submitted by MBI
and authorized certain directors to conduct final negotiations.
During June and July 1996, representatives of Regional's Board of
Directors, MBI and their respective counsel negotiated the
form of merger agreement. On August --, 1996 the board approved
the final terms of the Merger Agreement and approved the
execution of the Merger Agreement.
REGIONAL'S REASONS AND BOARD RECOMMENDATIONS. The
Board of Directors of Regional, after careful study and
evaluation of economic, financial, legal and market factors,
believes that the Merger Agreement and the Merger are in the best
interest of Regional and its shareholders.
The Board of Directors believes that the Stock
Consideration, in addition to the Cash Consideration and West
Pointe Consideration to be received by the shareholders of
Regional in the Merger, represents an opportunity for the
shareholders of Regional to exchange their shares of Regional
Common Stock for MBI Common Stock at a favorable exchange ratio
for a security with a greater market liquidity. Among the other
factors considered by the Board of Directors of Regional in
deciding to approve and recommend the execution of the Merger
Agreement were MBI's respective businesses, the results of
operations and financial condition (including asset quality and
capital levels), growth prospects, products available to
customers, historical dividend and market performance, and the
fact that MBI Common Stock is traded on the NYSE. Additionally,
the Board considered MBI's commitment to serving the banking and
other needs of the Bank of Alton's depositors, employees,
customers and community. Upon careful review and analysis of all
of the factors described above, no single factor being
substantially more important in the review process than any
other, the Board of Directors unanimously approved the Merger
Agreement as being in the best interests of Regional and its
shareholders.
The Board of Directors of Regional unanimously recommends
approval of the Merger Agreement. The Board believes that the
terms of the Merger Agreement are fair and that the Stock
Consideration, Cash Consideration, distribution of the West
Pointe Common Stock and the Merger are in the best interest of
Regional and its shareholders. See "INFORMATION REGARDING
SPECIAL MEETING - Record Date; Vote Required; Voting Agreements."
THE BOARD OF DIRECTORS OF REGIONAL CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING
IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS. THE BOARD
OF DIRECTORS OF REGIONAL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
OF REGIONAL VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT.
MBI'S REASONS AND BOARD RECOMMENDATIONS. The Executive
Committee of the Board of Directors of MBI considered a number of
factors, including, among other things, the financial condition
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<PAGE> 31
of Regional and projected synergies which MBI anticipates will
result from the Merger. The Executive Committee concluded that
the Merger presents an unique opportunity for MBI to increase its
presence in southwestern Illinois through the acquisition of an
established banking organization having significant operations in
the targeted area. MBI's decision to pursue discussions with
Regional was primarily a result of MBI's assessment of the value
of Regional banking franchise, its asset base within that area
and the compatibility of the businesses of the two banking
organizations.
FRACTIONAL SHARES
No fractional shares of MBI Common Stock or West Pointe
Common Stock will be issued to the shareholders of Regional in
connection with the Merger. Each holder of Regional Common Stock
who otherwise would have been entitled to receive a fraction of a
share of MBI Common Stock shall receive in lieu thereof cash,
without interest, in an amount equal to the holder's fractional
share interest multiplied by $47.80, the Average MBI Stock Price.
Each holder of Regional Common Stock who otherwise would have been
entitled to receive a fraction of a share of West Pointe Common
Stock shall receive in lieu thereof cash, without interest, in an
amount equal to the holder's fractional share interest multiplied by
$30.00. Cash received by Regional shareholders in lieu of fractional
shares of MBI Common Stock or West Pointe Common Stock may give
rise to taxable income. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
SURRENDER OF REGIONAL STOCK CERTIFICATES AND RECEIPT OF MERGER
CONSIDERATION
At the Effective Time of the Merger, each outstanding
share of Regional Common Stock will be converted into the right
to receive the Cash Consideration, the Stock Consideration and
the West Pointe Consideration. See "- General Description of
the Merger."
Within two business days following the Effective Time,
the Exchange Agent will mail to each former Regional shareholder
a form of letter of transmittal which shall specify instructions
for use in effecting the surrender of the certificate or
certificates which as of the Effective Time represented
outstanding shares of Regional Common Stock (each, a
"Certificate"). Upon the surrender to the Exchange Agent of a
Certificate for cancellation (or a lost certificate affidavit or
bond in a form reasonably acceptable to the Exchange Agent),
together with a duly executed letter of transmittal, the holder
of such Certificate shall be entitled to receive the cash, the
certificate representing MBI Common Stock and the certificate
representing West Pointe Common Stock to which such shareholder
is entitled as Merger Consideration. No interest will be accrued
or paid with respect to the cash component of the Merger
Consideration. No dividends or other distributions declared
after the Effective Time will be paid to a former Regional
shareholder with respect to the MBI Common Stock or West Pointe
Common Stock issuable as Merger Consideration until such
shareholder's letter of transmittal and Certificate(s) are
delivered to the Exchange Agent. Upon such delivery, all such
dividends or other distributions declared after the Effective
Time with respect to the whole number of shares of MBI Common
Stock and West Pointe Common Stock to which such shareholder is
entitled will be paid to such shareholder (without interest
thereon). No fractional shares of MBI Common Stock or West
Pointe Common Stock will be issued in the Merger. Cash, without
interest, determined by multiplying the holder's fractional share
interest by $47.80, the Average MBI Stock Price, will be paid in
lieu of fractional shares of MBI Common Stock. Cash, without
interest, determined by multiplying the holder's fractional share
interest by $30.00, will be paid in lieu of fractional shares of
West Pointe Common Stock. See "- Fractional Shares." The shares
of MBI Common Stock and West Pointe Common Stock issued as Merger
Consideration will be freely transferable, except that shares of
MBI Common Stock issued as Merger Consideration to certain
shareholders of Regional who are deemed to be "affiliates" of
Regional will be restricted in their transferability in
accordance with the rules and regulations promulgated by the
Commission. No such
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<PAGE> 32
restrictions on transfer exist with respect to the West Pointe Common
Stock. See "INFORMATION REGARDING MBI STOCK - Restrictions on Resale
of MBI Stock by Affiliates."
After the Effective Time, there will be no further
transfers of Regional stock certificates on the records of
Regional and, if any such certificates are presented to MBI or
the Exchange Agent for transfer, they will be cancelled against
delivery of the Merger Consideration.
REGULATORY APPROVALS
In addition to the approval of the Merger Agreement by
the shareholders of Regional, the obligations of the parties to
effect the Merger are subject to prior approval of the Federal
Reserve Board and the Illinois Commissioner. As a bank holding
company, MBI is subject to regulation under the BHCA. The Merger
is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHCA. The Federal Reserve Board may withhold
such approval if, among other things, the Federal Reserve Board
determines that the effect of the Merger would be to lessen
substantially competition in the relevant markets. In addition, the
Federal Reserve Board 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. The Federal Reserve Board must 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 Federal
Reserve Board has the authority to deny an application if it
concludes that the combined organization would have inadequate
capital. MBI must also file an application with the Illinois
Commissioner. The Illinois Commissioner will review the record
of MBI's subsidiary financial institutions in meeting the credit
needs of the communities they serve.
Applications for such approvals have been filed with
the Federal Reserve Board and the Illinois Commissioner. The
Merger cannot be consummated prior to receipt of such approvals
and the passage of any applicable waiting periods. MBI and
Regional are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as
described above. Should any other approval or action be
required, it is presently contemplated that such approval or
action would be sought. There can be no assurance that any
necessary regulatory approvals or actions will be timely received
or taken, that no action will be brought challenging any such
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 Merger. See "SUPERVISION AND REGULATION."
BUSINESS PENDING THE MERGER
The Merger Agreement provides that, during the period
from August 23, 1996 to the Effective Time, except as consented
to by MBI in writing, Regional will, and will cause Bank of Alton
to:
(1) maintain its tangible property and assets in
the present state of repair, order and condition,
reasonable wear and tear excepted;
(2) maintain its books, accounts and records in
accordance with GAAP or regulatory accounting
principles, as the case may be, consistently applied;
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<PAGE> 33
(3) comply in all material respects with all laws
applicable to the conduct of its business;
(4) conduct its business only in the usual,
regular and ordinary course consistent with prior
practice, and not make any purchase or sale or
introduce any method of management or operation in
respect of such business or property, except in a
manner consistent with prior practice;
(5) make no change in its Articles of
Incorporation, Charters or Bylaws;
(6) maintain and keep in full force and effect
all fire and other insurance on property and assets,
all of the liability and other casualty insurance, and
all bonds on personnel, presently carried by it;
(7) duly and timely file all reports, tax returns
and other documents required to be filed with federal,
state and local and other authorities;
(8) unless it is contesting the same in good
faith and have established reasonable reserves
therefor, pay when required to pay all taxes indicated
by such tax returns or otherwise lawfully levied or
assessed upon it, or any of its properties or assets,
or which it is otherwise legally obligated to pay and
withhold or collect and pay to the proper governmental
authorities or hold in separate bank accounts for such
payment all taxes and other assessments which it
believes in good faith to be required by law to be so
withheld or collected;
(9) not sell, mortgage, subject to lien, pledge
or encumber or otherwise dispose of any of its assets
other than in the ordinary course of business;
(10) not redeem, retire or otherwise acquire or
agree to redeem or otherwise acquire any of its capital
stock or any option, warrant or right to acquire shares
of its capital stock or any security convertible into
its capital stock, or redeem or otherwise acquire any
notes, or make any prepayment on account of or in
respect of any indebtedness for any borrowed money;
(11) make no change in the number of shares of its
capital stock issued and outstanding, and grant no
option or commitment relating to their capital stock or
any security convertible into its capital stock or any
security the value or return of which is measured by
capital stock or any security subordinated to the
claims of its general creditors;
(12) except as otherwise specifically provided in
the Merger Agreement, not enter into or amend any
employment or severance contract or agreement with or
employee plan covering, or grant any salary or wage
increase to, any director, officer, employee or agent
of Regional or Bank of Alton except for normal
increases in compensation to individual non-officer
employees in accordance with past practice, and not
increase in any amount the benefits or compensation, if
any, of any such directors, officers, employees or
agents under any Benefit Plan or other contract or
commitment, and not pay nor agree to pay any bonus or
commission to any such director, officer, employee or
agent;
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<PAGE> 34
(13) not declare, set aside or pay any dividends
or other distributions, directly or indirectly, in
respect of its capital stock (other than dividends from
Bank of Alton to Regional), except that Regional may
pay its regular quarterly dividend of $10.00 per share,
in accordance with its past practice; provided however,
that if the Effective Time shall not have occurred
prior to March 10, 1997, Regional may declare, set
aside or pay a dividend for each share of Regional
Common Stock for each quarter thereafter in which the
MBI Board of Directors shall declare a dividend on
shares of MBI Common Stock in an amount that equals the
product of (i) 164% of the Stock Consideration, and
(ii) the amount of the dividend per share declared by
the Board of Directors of MBI; provided further,
however, that Regional shall not declare or pay any
such regular quarterly dividend for any quarter in
which Regional shareholders will be entitled to receive
a regular quarterly dividend on the shares of MBI
Common Stock to be issued in the Merger;
(14) not merge or consolidate with any other
corporation or other entity, acquire any stock (except
in a fiduciary capacity or to realize upon collateral
obtained in the ordinary course of business), effect
any reorganization or recapitalization involving
Regional or Bank of Alton; not acquire any assets of
any other person, corporation or business organization
except in the ordinary course of business, or acquire any
assets (including, without limitation, deposits) of, or make
any investment in, any financial institution;
(15) not lease, sell or dispose of any material
part of its assets, make capital or fixed asset
expenditures in excess of $100,000 for any single item
or $250,000 in the aggregate, enter into any leases of
fixed assets, purchase any data processing equipment,
waive or release any right or cancel or compromise any
debt or claim except in the ordinary course of
business, enter into any management, maintenance,
servicing or similar contracts having a term of more
than one year or providing for fees in excess of a rate
of $250,000 per year, or otherwise enter into any
material contract, transaction or commitment except in
the ordinary course of business;
(16) not make any loans, discounts or commitments
to loan or discount in excess of the applicable legal
lending limits;
(17) not: (i) without first consulting with MBI,
enter into, renew or increase any loan or credit
commitment (including stand-by letters of credit) to,
or invest or agree to invest in any person or entity or
modify any of the material provisions or renew or
otherwise extend the maturity date of any existing loan
or credit commitment (collectively, "Lend to") in an
amount equal to or in excess of $200,000; (ii) without
first consulting with and obtaining the written consent
of MBI, Lend to any person or entity in an amount equal
to or in excess of $400,000; (iii) Lend to any person
other than in accordance with lending policies as in
effect on August 23, 1996, provided that in the case of
clauses (i) through (iii) Regional or Bank of Alton may
make any such loan in the event (A) Regional or Bank of
Alton has delivered to MBI or its designated
representative a notice of its intent to make such loan
and such information as MBI or its designated
representative may reasonably require in respect
thereof and (B) MBI or its designated representative
shall not have reasonably objected to such loan by
giving written or facsimile notice of such objection
within two business days following the delivery to MBI
or its designated representative of the notice of
intention and information as aforesaid; or (iv) Lend to
any person or entity any of the loans or other
extensions of credit to which
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<PAGE> 35
or investments in which are on a "watch list" or similar
internal report of Regional or Bank of Alton (except those
denoted "pass" thereon), in an amount equal to or in excess
of $50,000; provided, however, Regional and Bank of Alton
may honor any contractual obligation in existence on
August 23, 1996, or, with respect to loans made in
compliance with clauses (i) through (iii) above, make
such loans after consulting with MBI. Notwithstanding
clauses (i) and (ii), Regional or Bank of Alton shall
be authorized without first consulting with MBI or
obtaining MBI's prior written consent, to increase the
aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a
"Pre-Existing Facility"), provided that the aggregate
amount of any and all such increases shall not be in
excess of $25,000.
(18) not, directly or indirectly (including
through its officers, directors, employees or other
representatives) (i) initiate, solicit or encourage any
discussions, inquiries or proposals with any third
party (other than MBI) relating to the disposition of
any significant portion of the business or assets of
Regional or Bank of Alton or the acquisition of equity
securities of Regional or Bank of Alton or the merger
of Regional or Bank of Alton with any person (other
than MBI) or any similar transaction (each, an
"Acquisition Transaction"), or (ii) provide any such
person with information or assistance or negotiate with any
such person with respect to an Acquisition Transaction, and
Regional shall promptly notify MBI orally of all the
relevant details relating to all inquiries, indications of
interest and proposals which it may receive with respect to
any Acquisition Transaction;
(19) not take any action that would (A) materially
impede or delay the consummation of the transactions
contemplated by the Merger Agreement or the ability of
MBI or Regional to obtain any approval of any
regulatory authority required for the transactions
contemplated by the Merger Agreement or to perform
their respective covenants and agreements under the
Merger Agreement or (B) prevent or impede the
transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the
Code;
(20) not materially restructure or change its
investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the
portfolio is classified or reported, or execute
individual investment transactions of greater than
$500,000 for U.S. Treasury or Federal Agency Securities
and $100,000 for all other investment instruments; or
(21) not agree in writing or otherwise to take any
of the foregoing actions or engage in any activity,
enter into any transaction or intentionally take or
omit to take any other action which would make any of
its representations and warranties in the Merger
Agreement untrue or incorrect in any material respect
if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other
action.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase
method of accounting. Accordingly, data regarding the financial
condition and results of operations of Regional will be included
in MBI's consolidated financial statements on and after the
Closing Date.
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<PAGE> 36
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
-----------------------------------------------------
The following discussion is a general summary of the
material United States federal income tax ("federal income tax")
consequences of the Merger to certain Regional shareholders and
does not purport to be a complete analysis or listing of all
potential tax considerations or consequences relevant to a
decision whether to vote for the approval of the Merger. The
discussion does not address all aspects of federal income
taxation that may be applicable to Regional shareholders in light
of their status or personal investment circumstances, nor does it
address the federal income tax consequences of the Merger that
are applicable to Regional shareholders subject to special
federal income tax treatment including (without limitation)
foreign persons, insurance companies, tax-exempt entities,
retirement plans, dealers in securities, persons who acquired
their Regional Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation, and persons who hold
their Regional Common Stock as part of a "straddle," "hedge" or
"conversion transaction." In addition, the discussion does not
address the effect of any applicable state, local or foreign tax
laws, or the effect of any federal tax laws other than those
pertaining to the federal income tax. AS A RESULT, EACH REGIONAL
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
SHAREHOLDER. The discussion assumes that shares of Regional
Common Stock are held as capital assets (within the meaning of
Section 1221 of the Code) at the Effective Time.
Regional has received an opinion from Thompson Coburn
solely to the effect that, assuming the Merger occurs in
accordance with the Merger Agreement, the Merger will constitute
a "reorganization" for federal income tax purposes under Section
368 of the Code.
If the Merger constitutes a reorganization under the
Code, each holder of Regional Common Stock who exchanges, in the
Merger, shares of Regional Common Stock solely for shares of MBI
Common Stock and the Cash Consideration:
(i) will realize gain, determined separately as
to each block of Regional Common Stock (shares of
Regional Common Stock acquired at the same time in
a single transaction) exchanged, if (x) the sum of
the fair market value of the shares of MBI Common
Stock received and the amount of the Cash
Consideration received exceeds (y) the aggregate
adjusted tax basis of the Regional Common Stock
surrendered in exchange therefor, and will
recognize such gain, if any, up to but not in
excess of amount of Cash Consideration received;
(ii) will not recognize any loss realized
(determined separately as to each block of
Regional Common Stock exchanged);
(iii) will have basis for the shares of MBI
Common Stock received (including any fractional
share of MBI Common Stock deemed to be received,
as described below) equal to the aggregate
adjusted tax basis of the shares of Regional
Common Stock surrendered, increased by the amount
of gain, if any, recognized by such holder and
decreased by the amount of Cash Consideration
received; and
(iv) will have a holding period for the shares of
MBI Common Stock received (including any
fractional share of MBI Common Stock deemed to be
received, as described below) which includes the
holding period of the Regional Common Stock
surrendered.
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<PAGE> 37
The recognized gain described in clause (ii) above will
be capital gain or will be treated as the receipt of a taxable
dividend, depending on the facts and circumstances of each
Regional shareholder. Under Section 356 of the Code, the
determination of whether the receipt of the Cash Consideration
has the effect of the distribution of a dividend will be made
generally in accordance with the principles of Section 302 of the
Code, taking into account the stock ownership attribution rules
of Section 318 of the Code. Provided that the receipt of the
Cash Consideration by a Regional shareholder does not have the
effect of the distribution of a dividend, such gain will be
capital gain, and long-term or short-term depending on the
holder's holding period for each block of Regional Common Stock
surrendered. However, if the receipt of the Cash Consideration
does have the effect of the distribution of a dividend, such gain
generally will be taxable as a dividend.
The receipt of the Cash Consideration by a Regional
shareholder will be considered not to have the effect of the
distribution of a dividend under Section 302 of the Code and such
shareholder's recognized gain will be capital only if the receipt
of the Cash Consideration (i) results in a "substantially
disproportionate" reduction in such shareholder's actual and
constructive stock interest, or (ii) is "not essentially
equivalent to a dividend." These two tests will be applied as if
all Regional Common Stock exchanged for the Cash Consideration in
the Merger had instead been exchanged in the Merger solely for
shares of MBI Common Stock, and such shares of MBI Common Stock
were then redeemed by MBI in return for the Cash Consideration (a
deemed post-Merger redemption). Accordingly, the determination
of whether the receipt of the Cash Consideration by a Regional
shareholder satisfies either of the foregoing tests will be made by
comparing (i) such shareholder's actual and constructive stock
interest in MBI before the deemed post-Merger redemption (determined
as if such shareholder had received solely MBI Common Stock in the
Merger), with (ii) such shareholder's actual and constructive stock
interest in MBI after the deemed post-Merger redemption.
The receipt of the Cash Consideration will result in a
"substantially disproportionate" reduction in a Regional
shareholder's stock interest and such shareholder's recognized
gain will be capital if the percentage of outstanding MBI Common
Stock actually and constructively owned by such shareholder after
the deemed post-Merger redemption is less than four-fifths
(i.e., 80%) of the percentage of outstanding MBI Common Stock
----
actually and constructively owned by such shareholder immediately
prior to the deemed post-Merger redemption (determined as if such
shareholder had received solely MBI Common Stock in the Merger).
The receipt of the Cash Consideration will not be "essentially
equivalent to a dividend" and such shareholder's recognized gain
will be capital if the deemed post-Merger redemption results in a
meaningful reduction in the percentage of outstanding shares
actually and constructively owned by such shareholder. No
specific tests apply to determine whether a reduction in a
shareholder's ownership interest is meaningful; rather, such
determination will be made based on all the facts and
circumstances applicable to such Regional shareholder. No
general guidelines dictating the appropriate interpretation of
facts and circumstances have been announced by the courts or
issued by the Internal Revenue Service (the "Service"). However,
the Service has indicated in Revenue Ruling 76-385 that a
minority shareholder (i.e., a holder who exercises no control
----
over corporate affairs and whose proportionate stock interest is
minimal in relation to the number of shares outstanding)
generally is treated as having had a "meaningful reduction" in
interest if such holder's actual and constructive stock ownership is reduced
by even a small amount.
The determination of ownership for purposes of the
foregoing tests will be made by taking into account both shares
owned actually by such shareholder and shares owned
constructively by such shareholder pursuant to Section 318 of the
Code. Under Section 318 of the Code, a shareholder will be
deemed to own stock that is actually or constructively owned by
certain members of his or her family (spouse, children,
grandchildren, and parents) and other related parties including,
for example, certain entities in which such shareholder has a
direct or indirect interest (including partnerships, estates, trusts
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<PAGE> 38
and corporations), as well as shares of stock that such
shareholder (or a related person) has the right to acquire upon
exercise of an option or conversion right.
Because the determination of whether the receipt of the
Cash Consideration will be treated as having the effect of the
distribution of a dividend will generally depend upon the facts
and circumstances of each Regional shareholder, Regional
shareholders are strongly advised to consult their own tax
advisors regarding the tax treatment of the Cash Consideration
received in the Merger.
A Regional shareholder who receives cash in the Merger
in lieu of a fractional share of MBI Common Stock should be
treated as if the fractional share had been received by such
shareholder in the Merger and then redeemed by MBI in return for
the cash. The receipt of such cash will cause the recipient to
recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of such holder's
adjusted tax basis in the shares of MBI Common Stock allocable to
the fractional share.
The appropriate treatment of the West Pointe
Consideration (including cash received in lieu of fractional
shares thereof, if any) is unclear. The West Pointe
Consideration could be accorded the same treatment as the Cash
Consideration, in which case the West Pointe Consideration would
be taken into account in determining gain, loss and basis as
described above, and gain attributable to the West Pointe
Consideration would be characterized either as capital gain
or dividend income as described above. Alternatively,
the West Pointe Consideration could be treated as having been
received in a pre-Merger dividend. If such pre-Merger dividend
treatment were appropriate, each Regional shareholder would
recognize dividend income in an amount equal to the fair market
value of the West Pointe Consideration received, and the West
Pointe Consideration would not be taken into account in
determining gain, loss or basis as described in the foregoing
discussion.
Each Regional shareholder should consult his or her own
tax advisor as to the determination of basis and holding period
in any one share of MBI Common Stock, because several methods of
determination may be available. In this regard, the transmittal
letter to be received by each Regional shareholder from the
Exchange Agent after the Closing Date permits each Regional
shareholder to designate the number of MBI Common Stock
certificates he or she wishes to receive, in order to permit
tracing of basis and holding period. See "TERMS OF THE PROPOSED
MERGER - Surrender of Regional Stock Certificates and Receipt of
Merger Consideration."
Thompson Coburn's opinion is subject to the conditions
and assumptions that are stated therein and relies upon various
representations made by MBI, Regional and the majority
shareholder of Regional, the truth and accuracy of which are
assumed for purposes of rendering such opinion. If any of these
conditions, assumptions or representations is inaccurate, the
Merger may fail to qualify as a reorganization and the tax
consequences of the Merger could differ from those described
herein. In particular, the Merger must satisfy the "continuity
of interest" requirement to qualify as a reorganization.
To satisfy the "continuity of interest" requirement,
Regional shareholders must not, pursuant to a plan or intent
existing at or prior to the Effective Time of the Merger, dispose
of or transfer so much of the MBI Common Stock to be received in
the Merger ("Planned Dispositions"), such that the Regional
shareholders, as a group, would no longer retain a significant,
albeit indirect, equity interest in the former business of
Regional. Regional shareholders generally will be regarded as
having a significant equity interest as long as the MBI Common
Stock received in the Merger (after taking into account Planned
Dispositions), in the aggregate, represents a substantial portion
of the entire consideration received by the Regional shareholders
in the Merger. For advance ruling purposes, the IRS considers an
interest equal to 50% or more of the fair market value of the
outstanding shares of Regional held immediately
- 35 -
<PAGE> 39
before the Merger as a significant equity interest (the "IRS
Continuity Test"). Notwithstanding the IRS Continuity Test, case law
clearly supports less than the 50% threshold required for advance
ruling purposes. In rendering its opinion, Thompson Coburn has relied
upon a representation of the majority shareholder of Regional
that such shareholder has no plan or intention to sell, exchange
or otherwise dispose of shares of MBI Common Stock received in
the Merger. Based on such representation, which is the sole
representation that Thompson Coburn relied upon with regard to
the continuity of interest requirement, the IRS Continuity Test
should be satisfied. However, Regional shareholders should be
aware that the majority shareholder of Regional holds sufficient
Regional Common Stock such that Planned Dispositions by such
shareholder alone could cause the Merger to fail to satisfy the
continuity of interest test.
A successful IRS challenge to the Reorganization status
of the Merger (as a result of a failure of the "continuity of
interest" requirement or otherwise) would result in significant
tax consequences. A Regional shareholder would recognize capital
gain or loss with respect to each share of Regional Common Stock
surrendered equal to the difference between the shareholder's
basis in such share and the fair market value, as of the
Effective Time, of the Merger Consideration received with in
respect of such share of Regional Common Stock. In such event, a
shareholder's aggregate basis in the MBI Common Stock so received
would equal its fair market value, and the shareholder's holding
period for such stock would begin the day after the Merger.
Thompson Coburn's opinion is also based upon the Code,
regulations proposed or promulgated thereunder, judicial
precedent relating thereto, and current administrative rulings
and practice, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax
consequences discussed herein. The opinion is available without
charge upon written request to Jon W. Bilstrom, General Counsel
and Secretary, Mercantile Bancorporation Inc., P.O. Box 524, St.
Louis, Missouri 63166-0524. The receipt of Counsel's opinion
again as of the date of the closing of the Merger is a condition
to the consummation of the Merger. An opinion of counsel, unlike
a private letter ruling from the Service, has no binding effect
on the Service. The Service could take a position contrary to
Counsel's opinion and, if the matter were litigated, a court may
reach a decision contrary to the opinion. Neither MBI nor
Regional has requested an advance ruling as to the federal income
tax consequences of the Merger, and the Service is not expected
to issue such a ruling.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CERTAIN REGIONAL
SHAREHOLDERS AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH REGIONAL SHAREHOLDER'S TAX STATUS
AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES
ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH
REGIONAL SHAREHOLDER. ACCORDINGLY, EACH REGIONAL SHAREHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
- 36 -
<PAGE> 40
RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL
---------------------------------------------
Each holder of Regional Common Stock has the right to
dissent from the Merger and receive the fair value of such shares
of Regional Common Stock in cash if the shareholder follows the
procedures set forth in the Illinois Act, included as Annex A
-------
hereto and the material provisions of which are summarized below.
Pursuant to the Illinois Act, a holder of Regional
Common Stock may dissent and Ameribanc, as the surviving
corporation, will pay to such shareholder the fair value of such
shareholder's shares of Regional Common Stock, exclusive of any
appreciation or depreciation in anticipation of the Merger, as of
immediately before the consummation of the Merger if such
shareholder: (1) files with Regional prior to the vote being
taken a written demand for payment for his or her shares if the
Merger is consummated; and (2) does not vote in favor
---
thereof. MBI will include notice of the Effective Time in its
letter to all shareholders of Regional notifying them of the
procedures to exchange their shares of Regional Common Stock for
the Merger Consideration. Such letter shall be sent within two
business days following the Effective Time. Within 10 days after
the shareholder's vote is effective or 30 days after such
shareholder delivers to Regional a written demand for payment,
whichever is later, Ameribanc shall send each shareholder who has
delivered a written demand for payment a statement setting forth
the opinion of Ameribanc as to the estimated fair value of the
shares of Regional Common Stock, Regional's latest balance sheet
as of the end of a fiscal year ended not earlier than 16 months
before the delivery of the statement, together with the statement
of income for that year and the latest available interim
financial statements, and either (i) a commitment to pay for the
shares of the dissenting shareholder at the estimated fair value
thereof upon transmittal to Ameribanc of the certificate or
certificates, or other evidence of ownership, with respect to
such shares or (ii) instructions to the dissenting shareholder to
sell his or her shares within 10 days after the delivery of such
statement to the shareholder. A VOTE AGAINST THE MERGER, WHETHER BY
PROXY OR IN PERSON, WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN
DEMAND FOR PAYMENT FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
Upon consummation of the Merger, Ameribanc shall pay to
each dissenter who transmits to Ameribanc the certificate or
other evidence of ownership of the shares of Regional Common
Stock the amount Ameribanc estimates to be the fair value of such
shares, plus accrued interest, accompanied by a written
explanation of how the interest was calculated. Upon payment of
the agreed value, the dissenting shareholder shall cease to have
any interest in such shares of Regional Common Stock or in
Regional, Ameribanc or MBI.
If the dissenting shareholder does not agree with the
opinion of Ameribanc as to the estimated fair value of the shares
of Regional Common Stock or the amount of interest due, the
dissenting shareholder must, within 30 days from the delivery of
Ameribanc's statement of value, notify Ameribanc in writing, of
the shareholder's estimated fair value and interest due and
demand payment for the difference between the shareholder's
estimate of fair value and interest due and the amount of the
payment by Ameribanc. If, within 60 days from delivery to
Ameribanc of the shareholder notification of estimate of fair
value of shares of Regional Common Stock and interest due,
Ameribanc and the dissenting shareholder have not agreed in
writing upon the fair value of such shares and interest due,
Ameribanc shall either pay the difference in value demanded by
the shareholder, with interest, or file a petition in the circuit
court of the county in which either the registered office or the
principal office of Regional is located, requesting the court to
determine the fair value of such shares and interest due. The
"fair value" determined by the court may be more or less than the
amount offered to Regional shareholders under the Merger
Agreement. The judgment shall be payable only upon, and
simultaneously with, the surrender to MBI of the certificate or
certificates representing said shares of Regional Common Stock.
Upon the
- 37 -
<PAGE> 41
payment of the judgment, the dissenting shareholder shall cease to
have any interest in such shares of Regional Common Stock or in
Regional, Ameribanc or MBI.
FAILURE TO COMPLY STRICTLY WITH THESE PROCEDURES WILL
CAUSE THE SHAREHOLDER TO LOSE HIS OR HER DISSENTERS' RIGHTS.
CONSEQUENTLY, ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR HER
DISSENTERS' RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR BEFORE
ATTEMPTING TO EXERCISE SUCH RIGHTS.
THE PRECEDING DISCUSSION IS A COMPLETE DESCRIPTION OF
ALL THE MATERIAL PROCEDURES TO BE FOLLOWED BY REGIONAL SHAREHOLDERS
IN ORDER TO PERFECT THEIR DISSENTERS' RIGHTS UNDER SECTION 11.70 OF
THE ILLINOIS ACT, THE COMPLETE TEXT OF WHICH IS ATTACHED HERETO AS
ANNEX A. REGIONAL SHAREHOLDERS WHO ARE INTERESTED IN PERFECTING
- -------
DISSENTERS' RIGHTS PURSUANT TO THE ILLINOIS ACT IN CONNECTION WITH
THE MERGER SHOULD CONSULT WITH THEIR COUNSEL FOR ADVICE AS TO THE
PROCEDURES REQUIRED TO BE FOLLOWED.
- 38 -
<PAGE> 42
PRO FORMA FINANCIAL INFORMATION
-------------------------------
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods
indicated selected historical per share data of MBI and Regional
and the corresponding pro forma and pro forma equivalent per
share amounts, giving effect to the proposed acquisition of
Regional, the recent acquisitions of First Financial and TODAY'S
and the proposed acquisitions of First City, Mark Twain and
Roosevelt. The data presented is based upon the supplemental
consolidated financial statements and consolidated financial
statements and related notes of MBI and the consolidated financial
statements and related notes of Regional, Mark Twain and Roosevelt
included in this Proxy Statement/Prospectus or in documents
incorporated herein by reference, and the pro forma combined
consolidated balance sheet and income statements, including the
notes thereto, appearing elsewhere herein. This information should
be read in conjunction with such historical and pro forma financial
statements and related notes thereto. The assumptions used in the
preparation of this table appear in the notes to the pro forma
financial information appearing elsewhere in this Proxy Statement/
Prospectus. See "- Notes to Pro Forma Combined Consolidated
Financial Statements (Unaudited)." These data are not
necessarily indicative of the results of the future operations of
the combined organization or the actual results that would have
occurred if the proposed acquisition of Regional, the recent
acquisitions of First Financial and TODAY'S and the proposed
acquisitions of First City, Mark Twain and Roosevelt
had been consummated at the beginning of the periods indicated. All
adjustments consisting of only normal recurring adjustments for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/All MBI/
Regional Regional Entities All Entities
MBI Regional 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:
September 30, 1996 $ 25.51 $924.77 $25.99 $616.23 $26.65 $631.93
December 31, 1995 26.04 913.16 26.49 628.14 28.39 673.19
Cash Dividends Declared per Share:
Nine months ended
September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17
Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30
Earnings per Share:
Nine months ended
September 30, 1996 $ 2.01 $ 79.37 $ 2.01 $ 47.66 $ 1.84 $ 43.63
Year ended December 31, 1995 3.74 108.93 3.75 88.92 2.85 67.58
Market Price per Share:
At August 23, 1996 <F4> $47.750 n/a n/a n/a n/a n/a
At January 17, 1997 <F4> 51.500 n/a n/a n/a n/a n/a
<FN>
- --------------------
<F1> Includes the effect of pro forma adjustments for Regional.
See "- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F2> Based on the pro forma combined per share amounts
multiplied by 23.7123, the Stock Consideration. Further
explanation of the assumptions used in the preparation of
the pro forma combined consolidated financial statements is
included in the notes to pro forma financial statements.
See "- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F3> Includes the effect of pro forma adjustments for Regional,
TODAY'S, First Financial, First City, Mark Twain and Roosevelt.
See "- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F4> The market price per share of MBI Common Stock was
determined as of August 23, 1996 and January 17, 1997,
the last trading day preceding the public announcement of
the proposed Merger and as of the latest available date
prior to the filing of the Registration Statement,
respectively, based on the last sale price as reported on
the NYSE Composite Tape. There are no publicly available
quotations of Regional Common Stock.
</TABLE>
- 39 -
<PAGE> 43
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MBI HAS COMPLETED OR ANNOUNCED A NUMBER OF ACQUISITIONS
DURING THE YEARS COVERED BY THE PRO FORMA FINANCIAL STATEMENTS THAT
FOLLOW. SET FORTH BELOW IS A TABLE WHICH SUMMARIZES THE COMPLETED AND
PENDING ACQUISITIONS, INCLUDING THE NAME OF THE ACQUIRED ENTITY, THE
DATE OR EXPECTED DATE OF CONSUMMATION OF THE ACQUISITION, THE ASSETS
AND DEPOSITS OF THE ACQUIRED ENTITIES AT THE DATE OF CONSUMMATION FOR
THE COMPLETED ACQUISITIONS AND AS OF SEPTEMBER 30, 1996 FOR THE
PENDING ACQUISITIONS, THE CONSIDERATION PAID OR TO BE PAID IN CASH
AND SHARES OF MBI STOCK AND THE ACCOUNTING METHOD UTILIZED.
<TABLE>
<CAPTION>
Consideration Accounting
Date Assets Deposits Cash Shares Method
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Acquisitions Completed
Peoples State Bank Aug. 22, 1996 $ 95,657 $ 75,149 $ -- 325,837 Purchase
Metro Savings Bank, F.S.B. Mar. 7, 1996 80,857 73,843 5 197,902 Purchase
Security Bank of Conway, F.S.B. Feb. 9, 1996 102,502 89,697 1 321,964 Purchase
Hawkeye Bancorporation Jan. 2, 1996 1,987,540 1,739,811 80 7,892,196 Pooling
First Sterling Bancorp, Inc. Jan. 2, 1996 167,610 147,588 1 521,417 Pooling<F1>
Southwest Bancshares, Inc. Aug. 1, 1995 187,701 155,628 1 674,975 Pooling<F1>
AmeriFirst Bancorporation, Inc. Aug. 1, 1995 155,521 130,179 1 661,356 Pooling<F1>
Plains Spirit Financial Corporation July 7, 1995 400,754 276,887 6,697 1,301,180 Purchase
TCBankshares, Inc. May 1, 1995 1,422,798 1,217,740 -- 4,749,999<F2> Pooling
Central Mortgage Bancshares, Inc. May 1, 1995 654,584 571,105 8 2,537,723 Pooling
UNSL Financial Corp. Jan. 3, 1995 508,346 380,716 11 1,578,107 Pooling
Wedge Bank Jan. 3, 1995 195,716 152,865 1 969,954 Pooling<F1>
Acquisitions Pending
Today's Bancorp, Inc. Nov. 7, 1996 519,103 446,573 <F3> <F3> Purchase
First Financial Corporation of America Nov. 1, 1996 87,661 76,379 <F4> <F4> Purchase
Regional Bancshares, Inc. 1st Qtr. 1997 182,272 146,987 <F5> <F5> Purchase
Mark Twain Bancshares, Inc. 2nd Qtr. 1997 3,147,933 2,432,484 -- 17,200,000<F6> Pooling
Roosevelt Financial Group, Inc. 3rd Qtr. 1997 9,047,562 5,062,359 <F7> <F7> Purchase
<FN>
<F1> The historical financial statements of MBI were not restated for the
acquisition due to the immateriality of the acquiree's financial
condition and results of operations to those of MBI.
<F2> In addition to MBI Common Stock issued, MBI assumed, through an
exchange, the outstanding, non-convertible preferred stock of
TCBankshares, Inc. Such preferred stock was redeemed in the first
quarter of 1996.
<F3> The value of the consideration totals $87,250,000, which includes
up to 1,177,066 shares of MBI Common Stock.
<F4> The value of the consideration totals $14,980,000, which includes
up to 258,783 shares of MBI Common Stock.
<F5> The value of the consideration totals $41,000,000, which includes
up to 600,418 shares of MBI Common Stock.
<F6> Estimated shares to be issued in acquisition.
<F7> MBI will deliver up to 13,000,000 shares of common stock at an
exchange ratio of .4211 shares of MBI Common Stock, or $22.00
in cash, for each share of Roosevelt common stock.
</TABLE>
The following unaudited pro forma combined consolidated
balance sheet gives effect to the proposed Merger, the recent
acquisitions of First Financial and TODAY'S and the proposed
acquisitions of First City, Mark Twain and Roosevelt as if each of
the acquisitions were consummated on September 30, 1996.
The following pro forma combined consolidated income
statements for the nine months ended September 30, 1996 and 1995
and the year ended December 31, 1995 set forth the results of
operations of MBI combined with the results of operations of
Regional, First Financial, TODAY'S, First City, Mark Twain and
Roosevelt as if the proposed Merger, the recent acquisitions of First
Financial and TODAY'S and the proposed acquisitions of First City,
Mark Twain and Roosevelt had occurred as of the first day of the period
presented.
- 40 -
<PAGE> 44
The unaudited pro forma combined consolidated financial
statements should be read in conjunction with the accompanying
Notes to the Pro Forma Combined Consolidated Financial Statements
and with the historical financial statements of MBI, Regional,
Mark Twain and Roosevelt. These pro forma combined consolidated financial
statements may not be indicative of the results of operations
that actually would have occurred if the proposed acquisitions
had been consummated on the dates assumed above or of the results
of operations that may be achieved in the future.
- 41 -
<PAGE> 45
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(THOUSANDS)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Roosevelt<F19> Mark Twain
----------- -------- --------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 909,350 $ 7,452 $ (12,330)<F4> $ 904,472 $ 46,006 $ 169,916
Due from banks-interest bearing 74,713 -- 74,713 -- 16
Federal funds sold and repurchase
agreements 183,227 495 183,722 -- 15,879
Investments in debt and equity
securities
Trading 804 -- 804 -- 43,669
Available-for-sale 3,959,361 66,077 4,025,438 1,128,697 459,690
Held to maturity 359,682 -- 359,682 3,309,994 225,384
----------- -------- --------- ----------- ---------- ----------
Total 4,319,847 66,077 -- 4,385,924 4,438,691 728,743
Loans and leases 12,166,461 103,169 12,269,630 4,236,624 2,143,218
Reserve for possible loan losses (202,149) (1,473) (203,622) (21,471) (32,068)
----------- -------- --------- ----------- ---------- ----------
Net loans and leases 11,964,312 101,696 -- 12,066,008 4,215,153 2,111,150
Other assets 747,092 6,362 23,416 <F4> 771,038 347,712 122,229
17,584 <F4><F18>
(23,416)<F5>
----------- -------- --------- ----------- ---------- ----------
Total Assets $18,198,541 $182,082 $ 5,254 $18,385,877 $9,047,562 $3,147,933
=========== ======== ========= =========== ========== ==========
<CAPTION>
Roosevelt,
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated<F20>
---------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 5,864 $ 2,466 $ 14,461 $ (35,000)<F3> $ 910,540
(355,250)<F3>
(412,250)<F6>
617,500 <F8>
(10,310)<F10>
(3,335)<F14>
(34,000)<F16>
Due from banks-interest bearing -- -- 270 74,999
Federal funds sold and repurchase
agreements 11,279 -- 10,250 221,130
Investments in debt and equity
securities
Trading -- -- -- 44,473
Available-for-sale 9,988 34,328 89,223 5,747,364
Held to maturity 2,022 -- 25,139 3,922,221
-------- -------- -------- --------- -----------
Total 12,010 34,328 114,362 -- 9,714,058
Loans and leases 57,687 48,226 358,239 19,113,623
Reserve for possible loan losses (822) (651) (3,769) (262,403)
-------- -------- -------- --------- -----------
Net loans and leases 56,864 47,575 354,470 -- 18,851,220
Other assets 3,134 3,502 25,290 505,867 <F6> 1,887,802
566,133 <F6><F18>
(505,867)<F7>
289,433 <F9>
(289,433)<F11>
5,942 <F12>
4,517 <F12><F18>
(5,942)<F13>
10,831 <F14>
4,149 <F14><F18>
(10,831)<F15>
47,164 <F16>
40,098 <F16><F18>
(47,164)<F17>
-------- -------- -------- --------- -----------
Total Assets $ 89,151 $ 87,871 $519,103 $ 382,252 $31,659,749
======== ======== ======== ========= ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 42 -
<PAGE> 46
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(THOUSANDS)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Roosevelt<F19> Mark Twain
----------- -------- --------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $ 2,659,811 $ 13,717 $ 2,673,528 $ -- $ 449,001
Interest bearing 11,621,523 133,270 11,754,793 5,062,359 1,983,483
Foreign 328,717 -- 328,717 -- --
----------- -------- ------- ----------- ---------- ----------
Total deposits 14,610,051 146,987 -- 14,757,038 5,062,359 2,432,484
Federal funds purchased and
repurchase agreements 1,022,995 -- 1,022,995 405,344 --
Other borrowings 778,990 10,000 788,990 2,868,756 361,617
Other liabilities 251,633 1,679 253,312 205,236 64,399
----------- -------- ------- ----------- ---------- ----------
Total Liabilities 16,663,669 158,666 -- 16,822,335 8,541,695 2,858,500
SHAREHOLDERS' EQUITY
Preferred stock -- -- -- 13 --
Common stock 316,276 253 (253)<F5> 316,276 422 21,089
Capital surplus 232,873 2,907 1,933<F4> 234,806 264,274 67,077
(2,907)<F5>
Retained earnings 1,122,371 20,256 (20,256)<F5> 1,122,371 241,158 215,951
Treasury stock (136,648) -- 26,737<F4> (109,911) -- (14,684)
----------- -------- ------- ----------- ---------- ----------
Total Shareholders' Equity 1,534,872 23,416 5,254 1,563,542 505,867 289,433
----------- -------- ------- ----------- ---------- ----------
Total Liabilities and
Shareholders' Equity $18,198,541 $182,082 $ 5,254 $18,385,877 $9,047,562 $3,147,933
=========== ======== ======= =========== ========== ==========
<CAPTION>
Roosevelt,
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated<F20>
----------- --------- ------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $ 12,369 $ 7,520 $ 48,073 $ (10,310)<F10> $ 3,180,181
Interest bearing 64,234 67,783 398,500 19,331,152
Foreign -- -- -- 328,717
----------- -------- -------- ----------- -----------
Total deposits 76,603 75,303 446,573 (10,310) 22,840,050
Federal funds purchase and
repurchase agreements 0 1,076 8,938 1,438,353
Other borrowings 6,285 -- 10,833 617,500 <F8> 4,653,981
Other liabilities 321 661 5,595 529,524
----------- -------- -------- ----------- -----------
Total Liabilities 83,209 77,040 471,939 607,190 29,461,908
SHAREHOLDERS' EQUITY
Preferred stock -- -- -- (13)<F7> --
Common stock 17 8 13,809 30,000 <F6> 424,276
(422)<F7>
76,750 <F9>
(21,089)<F11>
1,250 <F12>
(17)<F13>
(8)<F15>
(13,809)<F17>
Capital surplus 1,259 771 6,627 274,500 <F6> 441,774
(264,274)<F7>
(78,345)<F9>
(67,077)<F11>
9,209 <F12>
(1,259)<F13>
215 <F14>
(771)<F15>
1,389 <F16>
(6,627)<F17>
Retained earnings 5,581 10,052 26,728 (241,158)<F7> 1,338,322
215,951 <F9>
(215,951)<F11>
(5,581)<F13>
(10,052)<F15>
(26,728)<F17>
Treasury stock (915) -- -- (35,000)<F3> (6,531)
(355,250)<F3>
355,250 <F6>
75,077 <F9>
14,684 <F11>
915 <F13>
11,430 <F14>
51,873 <F16>
----------- -------- -------- ----------- -----------
Total Shareholders' Equity 5,942 10,831 47,164 (224,938) 2,197,841
----------- -------- -------- ----------- -----------
Total Liabilities and Shareholders'
Equity $ 89,151 $ 87,871 $519,103 $ 382,252 $31,659,749
=========== ======== ======== =========== ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 43 -
<PAGE> 47
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Roosevelt Mark Twain
--------- -------- --------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 987,701 $9,682 $(1,465) $ 995,918 $489,011 $170,209
Interest expense 465,821 4,826 470,647 356,010 75,803
---------- ------ ------- ---------- -------- --------
Net interest income 521,880 4,856 (1,465) 525,271 133,001 94,406
Provision for possible
loan losses 55,915 75 55,990 900 2,001
---------- ------ ------- ---------- -------- --------
Net Interest Income after
provision for Possible
Loan Losses 465,965 4,781 (1,465) 469,281 132,101 92,405
Other Income
Trust 59,491 142 59,633 -- 4,976
Service charges 59,492 260 59,752 11,009 6,061
Credit card fees 18,515 18 18,533 -- 795
Securities gains (losses) (2,843) (11) (2,854) 15,978 234
Other 77,274 389 77,663 4,610 17,134
---------- ------ ------- ---------- -------- --------
Total Other Income 211,929 798 -- 212,727 31,597 29,200
Other Expense
Salaries and employee
benefits 237,447 1,528 238,975 31,821 36,968
Net occupancy and equipment 66,069 407 66,476 13,158 9,297
Other 178,654 1,193 879 180,726 53,025 14,173
---------- ------ ------- ---------- -------- --------
Total Other Expense 482,170 3,128 879 486,177 98,004 60,438
---------- ------ ------- ---------- -------- --------
Income Before Income Taxes 195,724 2,451 (2,344) 195,831 65,694 61,167
Income Taxes 70,407 441 (527) 70,321 22,441 22,197
---------- ------ ------- ---------- -------- --------
Income Before Extraordinary
Items 125,317 2,010 (1,817) 125,510 43,253 38,970
Extraordinary items,
net of tax -- -- -- -- (1,452) --
---------- ------ ------- ---------- -------- --------
Net Income $ 125,317 $2,010 $(1,817) $ 125,510 $ 41,801 $ 38,970
========== ====== ======= ========== ======== ========
Per Share Data
Average Common Shares
Outstanding 62,160,601 62,761,019
Net Income $ 2.01 $ 1.99
<CAPTION> Roosevelt,
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $5,214 $4,894 $28,985 $ (5,625) $1,682,017
(2,815)
(554)
(3,220)
Interest expense 2,692 2,174 14,730 31,260 <F8> 953,316
------ ------ ------- -------- ----------
Net interest income 2,522 2,720 14,255 (43,474) 728,701
Provision for possible loan losses 146 18 1,440 60,495
------ ------ ------- -------- ----------
Net Interest Income after provision
for Possible Loan Losses 2,376 2,702 12,815 (43,474) 668,206
Other Income
Trust -- -- 1,334 65,943
Service charges 226 154 1,246 78,448
Credit card fees -- -- 37 19,365
Securities gains (losses) -- -- 6 13,364
Other 1,688 175 960 102,230
------ ------ ------- -------- ----------
Total Other Income 1,914 329 3,583 -- 279,350
Other Expense
Salaries and employee benefits 975 1,177 5,598 315,514
Net occupancy and equipment 466 268 1,107 90,772
Other 594 360 6,254 28,307 285,877
226
207
2,005
------ ------ ------- -------- ----------
Total Other Expense 2,035 1,805 12,959 30,745 692,163
------ ------ ------- -------- ----------
Income Before Income Taxes 2,255 1,226 3,439 (74,219) 255,393
Income Taxes 271 390 1,148 (13,278) 101,118
(1,014)
(199)
(1,159)
------ ------ ------- -------- ----------
Income Before Extraordinary
Items 1,984 836 2,291 (58,569) 154,275
Extraordinary items, net of tax -- -- -- (1,452)
------ ------ ------- -------- ----------
Net Income $1,984 $ 836 $ 2,291 $(58,569) $ 152,823
====== ====== ======= ======== ==========
Per Share Data
Average Common Shares Outstanding 86,029,801
Net Income $ 1.77
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 44 -
<PAGE> 48
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Roosevelt Mark Twain
--------- -------- --------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 962,361 $8,707 $(1,465) $ 969,603 $482,932 $166,669
Interest expense 459,432 3,833 463,265 345,716 70,299
---------- ------ ------- ---------- -------- --------
Net interest income 502,929 4,874 (1,465) 506,338 137,216 96,370
Provision for possible
loan losses 29,177 42 29,219 900 3,344
---------- ------ ------- ---------- -------- --------
Net Interest Income after
provision for Possible
Loan Losses 473,752 4,832 (1,465) 477,119 136,316 93,026
Other Income
Trust 52,142 149 52,291 -- --
Service charges 56,331 252 56,583 8,078 5,220
Credit card fees 15,622 16 15,638 -- --
Securities gains (losses) 3,776 22 3,798 (11,283) 46
Mark to market of financial
future contracts -- -- -- (61,569) --
Other 71,745 401 72,146 7,490 22,123
---------- ------ ------- ---------- -------- --------
Total Other Income 199,616 840 200,456 (57,284) 27,389
Other Expense
Salaries and employee
benefits 219,540 1,366 220,906 25,887 36,300
Net occupancy and equipment 60,371 328 60,699 13,015 9,934
Other 127,209 1,279 879 129,367 25,206 18,386
---------- ------ ------- ---------- -------- --------
Total Other Expense 407,120 2,973 879 410,972 64,108 64,620
---------- ------ ------- ---------- -------- --------
Income Before Income Taxes 266,248 2,699 (2,344) 266,603 14,924 55,795
Income Taxes 90,164 700 (527) 90,337 3,742 20,579
---------- ------ ------- ---------- -------- --------
Net Income $ 176,084 $1,999 $(1,817) $ 176,266 $ 11,182 $ 35,216
========== ====== ======= ========== ========
Per Share Data
Average Common Shares
Outstanding 61,497,977 62,098,395
Net Income $ 2.85 $ 2.83
<CAPTION>
Roosevelt,
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $5,217 $4,490 $29,099 $ (5,625) $ 1,645,796
(2,815)
(554)
(3,220)
Interest expense 2,557 1,982 14,605 31,260 <F8> 929,684
------ ------ ------- -------- -----------
Net interest income 2,660 2,508 14,494 (43,474) 716,112
Provision for possible loan losses 146 -- 615 34,224
------ ------ ------- -------- -----------
Net Interest Income after provision
for Possible Loan Losses 2,514 2,508 13,879 (43,474) 681,888
Other Income
Trust -- 155 1,216 53,662
Service charges 241 -- 1,347 71,469
Credit card fees -- -- -- 15,638
Securities gains (losses) (18) (82) 140 (7,399)
Mark to market of financial
future contracts -- -- (61,569)
Other 264 290 1,188 103,501
------ ------ ------- -------- -----------
Total Other Income 487 363 3,891 -- 175,302
Other Expense
Salaries and employee benefits 951 1,137 5,783 290,964
Net occupancy and equipment 405 325 2,093 86,471
Other 729 500 4,518 28,307 209,451
226
207
2,005
------ ------ ------- -------- -----------
Total Other Expense 2,085 1,962 12,394 30,745 586,886
------ ------ ------- -------- -----------
Income Before Income Taxes 916 909 5,376 (74,219) 270,304
Income Taxes 336 286 1,874 (13,278) 101,504
(1,014)
(199)
(1,159)
------ ------ ------- -------- -----------
Net Income $ 580 $ 623 $ 3,502 $(58,569) $ 168,800
====== ====== ======= ======== ===========
Per Share Data
Average Common Shares Outstanding 85,252,494
Net Income $ 1.97
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 45 -
<PAGE> 49
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Roosevelt Mark Twain
--------- -------- --------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 1,293,944 $11,840 $(1,953) $ 1,303,831 $647,795 $223,173
Interest expense 620,534 5,318 625,852 466,433 94,932
----------- ------- ------- ----------- -------- --------
Net interest income 673,410 6,522 (1,953) 677,979 181,362 128,241
Provision for possible
loan losses 36,530 42 36,572 1,200 5,003
----------- ------- ------- ----------- -------- --------
Net Interest Income after
provision for Possible
Loan Losses 636,880 6,480 (1,953) 641,407 180,162 123,238
Other Income
Trust 70,751 198 70,949 -- 6,364
Service charges 75,408 341 75,749 10,706 7,051
Credit card fees 19,690 21 19,711 -- 676
Securities gains (losses) 4,042 10 4,052 (3,178) 296
Recognition of financial
futures losses -- -- -- (71,022) --
Other 103,762 538 -- 104,300 8,354 22,399
----------- ------- ------- ----------- -------- --------
Total Other Income 273,653 1,108 -- 274,761 (55,140) 36,786
Other Expense
Salaries and employee
benefits 298,625 1,811 300,436 34,780 47,531
Net occupancy and equipment 82,674 439 83,113 18,758 13,222
Other 172,449 1,647 1,172 175,268 34,128 25,769
----------- ------- ------- ----------- -------- --------
Total Other Expense 553,748 3,897 1,172 558,817 87,666 86,522
----------- ------- ------- ----------- -------- --------
Income Before Income Taxes 356,785 3,691 (3,125) 357,351 37,356 73,502
Income Taxes 124,109 933 (703) 124,339 10,258 25,789
----------- ------- ------- ----------- -------- --------
Net Income $ 232,676 $ 2,758 $(2,422) $ 233,012 $ 27,098 $ 47,713
=========== ======= ======= =========== ======== ========
Per Share Data
Average Common Shares
Outstanding 61,883,723 62,484,141
Net Income $ 3.74 $ 3.71
<CAPTION>
Roosevelt,
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $7,030 $6,104 $39,180 $ (7,500) $2,210,827
(3,754)
(738)
(4,294)
Interest expense 3,517 2,693 19,775 41,681 <F8> 1,254,883
------ ------ ------- -------- ----------
Net interest income 3,513 3,411 19,405 (57,967) 955,944
Provision for possible loan losses 311 -- 960 44,046
------ ------ ------- -------- ----------
Net Interest Income after provision
for Possible Loan Losses 3,202 3,411 18,445 (57,967) 911,898
Other Income
Trust -- -- 1,624 78,937
Service charges 347 264 1,655 95,772
Credit card fees -- -- -- 20,387
Securities gains (losses) (18) (37) 62 1,177
Recognition of financial
futures losses -- -- -- -- (71,022)
Other 348 484 1,640 137,525
------ ------ ------- -------- ----------
Total Other Income 677 711 4,981 -- 262,776
Other Expense
Salaries and employee benefits 1,221 1,569 7,318 392,855
Net occupancy and equipment 546 191 2,806 118,636
Other 2,209 934 5,836 37,742 285,137
301
277
2,673
------ ------ ------- -------- ----------
Total Other Expense 3,976 2,694 15,960 40,993 796,628
------ ------ ------- -------- ----------
Income Before Income Taxes (97) 1,428 7,466 (98,960) 378,046
Income Taxes (76) 430 2,587 (17,705) 142,459
(1,351)
(266)
(1,546)
------ ------ ------- -------- ----------
Net Income $ (21) $ 998 $ 4,879 $(78,092) $ 233,587
====== ====== ======= ======== ==========
Per Share Data
Average Common Shares Outstanding 86,176,965
Net Income $ 2.71
<FN>
See Notes to Pro Forma Combined Consolidated Financial Statements.
- 46 -
<PAGE> 50
MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<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 the immateriality of
the financial condition and results of operations of Sterling to
that of MBI, MBI did not restate its historical financial
statements to reflect the acquisition of Sterling. Each of
Sterling, Conway, Metro and Peoples is included in these pro forma
financial statements only from its acquisition date forward. The
full impact of these acquisitions is immaterial to the pro forma
combined consolidated financial statements.
<F2> The acquisition of Mark Twain will be accounted for as a pooling-
of-interests. The acquisitions of Roosevelt, Regional, First City,
First Financial and TODAY'S will be accounted for as purchase
transactions. Purchase accounting adjustments offset each other or
are believed to be immaterial at this time to the pro forma consolidated
financial condition and results of operations of MBI. Included herein
are the amortization of goodwill over a 15-year period (see footnote 18
below), the lost interest income/interest expense on the cash
consideration (for Roosevelt, Regional, First Financial and TODAY'S) and
stock buybacks. Goodwill is considered non-tax-deductible. The balance
sheet impact of goodwill amortization and lost interest income is ignored
due to immateriality. The income tax benefit associated with taxable
income statement adjustments is computed at an effective tax rate of 35%.
<F3> In conjunction with the proposed acquisition of Mark Twain, MBI plans on
delivering 900,000 shares of MBI Common Stock previously acquired in the
open market at an average price per share of $44.53. An additional
700,000 shares may be repurchased with an estimated price per share of
$50.00. In conjunction with the proposed acquisitions of Regional, First
Financial and TODAY'S, MBI repurchased 2,036,267 shares of MBI Common
Stock in the open market at an average price per share of $44.22. In
conjunction with the proposed acquisition of Roosevelt, MBI plans to
repurchase 7,000,000 shares of MBI Common Stock in the open market. The
assumed repurchase price per share is $50.75, the closing price of MBI
Common Stock on December 20, 1996, the last business date before the
announcement of the reorganization agreement between MBI and Roosevelt.
<F4> Purchase entry of Regional with assumed consideration consisting
of 600,418 reissued treasury shares at $47.75 per share, plus
$12,330,000 in cash. The closing price for MBI Common Stock on
August 23, 1996 (the date of execution of the Merger Agreement)
was $47.75. Exclusion of the West Pointe Consideration from the
purchase entry is not material to the financial condition or
results of operations reflected in the Pro Forma Combined
Consolidated Statements.
<F5> Elimination of MBI's investment in Regional.
<F6> Purchase entry of Roosevelt with assumed consideration consisting
of 7,000,000 reissued treasury shares at $50.75 per share, 6,000,000
shares of issued MBI Common Stock and $412,250,000 in cash. The closing
price for MBI Common Stock on December 20, 1996, the business date
preceding the announcement of the reorganization agreement between MBI and
Roosevelt, was $50.75. The pro forma financial statements assume that all
Roosevelt preferred shares are converted to common shares prior to or upon
consummation of the acquisition by MBI of Roosevelt. Roosevelt completed
three acquisitions in the fourth quarter of 1996. Roosevelt acquired
Community Charter Corporation, a commercial bank holding company, Mutual
- 47 -
<PAGE> 51
Bancompany, Inc., parent company of Mutual Savings Bank, and Sentinel
Financial Corporation, a thrift holding company. The impact of these
acquisitions is immaterial to the pro forma combined consolidated financial
statements.
<F7> Elimination of MBI's investment in Roosevelt.
<F8> Proposed subordinated debt of $617,500,000 to be issued to finance
the acquisition of Roosevelt. The assumed interest rate on such
subordinated debt is 6.75%.
<F9> Acquisition of Mark Twain with 16,950,000 shares of issued MBI Common
Stock, including 1,600,000 reissued treasury shares, based on the exchange
ratio of .952 shares of MBI Common Stock per share of Mark Twain common
stock. Mark Twain acquired Northland Bancshares, Inc., owner of First
National Bank of Platte County, in September 1996 in an acquisition
accounted for as a pooling-of-interests. However, due to the immateriality
of the financial condition and results of operations of Northland
Bancshares, Inc. to that of Mark Twain, Mark Twain did not restate its
historical financial statements to reflect this acquisition. The full
impact of the acquisition of Northland Bancshares, Inc. is immaterial to
the pro forma combined consolidated financial statements.
<F10>Elimination of non-interest bearing deposit balance of Mark Twain
subsidiary bank with MBI subsidiary bank.
<F11>Elimination of MBI's investment in Mark Twain.
<F12>The purchase of First City by Mark Twain is expected to be
completed prior to the acquisition of Mark Twain by MBI. Assumed
consideration of First City is 261,479 shares of Mark Twain common
stock valued at $40 per share. Based on the exchange ratio of
.952 shares of MBI Common Stock per share of Mark Twain common
stock, approximately 250,000 equivalent shares of MBI Common Stock
will be issued in the First City acquisition.
<F13>Elimination of MBI's investment in First City.
<F14>Purchase entry of First Financial with assumed consideration
consisting of 258,783 reissued treasury shares at $45.00 per
share, plus $3,335,000 in cash. The closing price for MBI Common
Stock on July 9, 1996 (the date of execution of the definitive
merger agreement between MBI and First Financial) was $45.00.
<F15>Elimination of MBI's investment in First Financial.
<F16>Purchase entry of TODAY'S with assumed consideration of 1,177,066
reissued treasury shares at $45.25 per share, plus $34,000,000 in
cash. The closing price for MBI Common Stock on March 19, 1996
(the date of the execution of the definitive merger agreement
between MBI and TODAY'S) was $45.25.
<F17>Elimination of MBI's investment in TODAY'S.
<F18>The pro forma excess of cost over fair value of net assets
acquired was $566,133,000, $4,517,000, $4,149,000, $40,098,000
and $17,584,000 as of September 30, 1996 for Roosevelt, Regional,
First City, First Financial and TODAY'S, respectively.
<F19>On January 2, 1997, Roosevelt announced that it will recognize in
the fourth quarter of 1996 approximately $80 million of pre-tax expenses,
previously deferred in accordance with GAAP,
- 48 -
<PAGE> 52
related to historical activities with interest rate exchange agreements.
The current charge results from the continuing balance sheet repositioning
associated with the execution of Roosevelt's retail strategy. The fourth
quarter extinguishment of short-term borrowings, which had been previously
synthetically altered by interest rate exchange agreements, dictates,
in accordance with GAAP, the recognition of any previously deferred
expenses. After a tax benefit of 35% is recorded, shareholders' equity
will be reduced by approximately $52 million. In addition, Roosevelt
announced that it intentionally reduced its assets by approximately
$1.2 billion to $7.8 billion at year end.
<F20>Upon consummation of the acquisition of Mark Twain, MBI expects
to record certain adjustments related to such acquisition at an
approximate pre-tax total of $30 million. Upon consummation of the
acquisition of Roosevelt, MBI expects to record certain adjustments
related to conform accounting and credit policies regarding loan
and other asset valuations to those of MBI. The pre-tax adjustment
for Roosevelt is expected to total between $38 and $45 million.
The Mark Twain and Roosevelt adjustments are MBI's estimate based
upon prior acquisitions, where amounts to standardize systems,
standardize procedures, accruals for severance and employee change
of control contracts and the writedown of fixed assets approximated
60 basis points of total assets. For the Mark Twain acquisition,
approximately $11 million was added for professional fees, and, as
the transaction is entirely in-market, additional charges for branch
closings and severance payments are expected to exceed the base 60
basis point estimate. As Roosevelt's asset base is three times that
of Mark Twain and includes a significant investment portfolio,
no additional amount was deemed necessary.
</TABLE>
- 49 -
<PAGE> 53
INFORMATION REGARDING REGIONAL
------------------------------
BUSINESS
Regional is a registered single bank holding company that was
incorporated in 1979 under the laws of the State of Illinois. As of
September 30, 1996, Regional had consolidated assets of $182,082,000,
deposits of $146,987,000, loans, net of unearned discount, of
$103,169,000 and shareholders' equity of $23,416,000 and employed
fifty full-time employees and fourteen part-time employees. Regional
owns 100% of the outstanding capital stock of Bank of Alton.
Bank of Alton is a full-service community bank that offers
banking services to commercial and residential customers throughout
Madison County, Illinois. Such banking services include commercial,
real estate and personal loans, money market accounts, checking,
savings and time deposit accounts and trust services. The lending
portion of Bank of Alton's business relates primarily to the activities
of small- to medium-sized businesses, local community residences and
other consumer purposes.
Regional is subject to vigorous competition from major
banking institutions, as well as other financial institutions in its
principal service area, such as savings and loan associations,
insurance companies, credit unions and finance companies.
Regional and Bank of Alton are subject to supervision,
regulation and examination by the Federal Reserve Board, the Illinois
Commissioner and the Federal Deposit Insurance Corporation (the
"FDIC"). The deposits of Bank of Alton are primarily insured by the
Bank Insurance Fund ("BIF") of the FDIC.
In the following pages, statistical information about
Regional is presented. Such information should be read in conjunction
with "--Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of
Regional included elsewhere herein.
- 50 -
<PAGE> 54
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
AND INTEREST RATES
The following tables show the condensed average balance
sheets for the periods presented and the percentage of each principal
category of assets, liabilities and shareholders' equity to total
assets. Also shown are the average yield on each category of interest-
earning assets and the average rate paid on interest-bearing
liabilities for each of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1996 1995
--------------------------------------- ---------------------------------------
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD
BALANCE ASSETS EXPENSE RATE<F1> BALANCE ASSETS EXPENSE RATE<F1>
------- ------ ------- -------- ------- ------ ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans<F2> $99,433 57.25% $ 6,679 8.96% $94,584 61.58% $6,285 8.86%
Taxable investment securities 43,757 25.19 2,018 6.15 30,229 19.68 1,426 6.29
Non-taxable investment securities<F3> 19,911 11.47 1,441 9.65 16,687 10.87 1,291 10.31
Federal funds sold 806 0.46 34 5.62 3,294 2.14 143 5.79
-------- ------ ------- ---- -------- ------ ------ -----
Total interest-earning assets 163,907 94.37 10,172 8.27 144,794 94.27 9,145 8.42
Noninterest earning assets:
Cash and due from banks 5,083 2.90 4,316 2.81
Premises and equipment 3,576 2.06 3,338 2.17
Other assets 2,589 1.49 2,738 1.78
Allowance for possible loan losses (1,422) (0.82) (1,580) (1.03)
-------- ------ -------- ------
Total assets $173,688 100.00% $153,606 100.00%
======== ====== ======== ======
Liabilities and shareholders' equity:
Interest-bearing liabilities:
Demand deposits $ 17,807 10.25% $ 272 2.04 $ 17,013 11.08% $ 263 2.06
Savings deposits 13,231 7.62 294 2.96 12,859 8.37 285 2.96
Money market 23,094 13.30 702 4.05 18,975 12.35 530 3.72
Time deposits 76,966 44.31 3,323 5.76 70,239 45.73 2,745 5.21
Federal funds purchased and
short-term borrowings 5,383 3.10 235 5.82 218 0.14 10 6.12
-------- ------ ------- ---- -------- ------ ------ -----
Total interest-bearing liabilities 136,481 78.58 4,826 4.71 119,304 77.67 3,833 4.28
Noninterest-bearing liabilities:
Demand deposits 12,195 7.02 12,153 7.91
Other liabilities 1,775 1.02 1,405 0.92
-------- ------ -------- ------
Total liabilities 150,451 86.62 132,862 86.50
Shareholders' equity 23,237 13.38 20,744 13.50
-------- ------ -------- ------
Total liabilities and shareholders' equity $173,688 100.00% $153,606 100.00%
======== ====== ======== ======
Net interest Income $ 5,346 $5,312
======= ======
Interest rate spread 3.56% 4.14%
==== =====
Net interest rate margin 4.35% 4.89%
==== =====
<FN>
- --------------------
<F1> Average yield/rate for the nine months ended September 30, 1996 and
1995 is annualized.
<F2> Average balances include non-accrual loans. The income on such
loans is included in interest but is recognized only upon receipt.
<F3> Non-taxable investment income presented on a fully tax-equivalent
basis. The tax effect resulted in an increase in interest income of
$490,000 and $439,000 for the nine months ended September 30, 1996 and
1995, respectively.
- 51 -
<PAGE> 55
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1995 1994
--------------------------------------- ---------------------------------------
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD
BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE
------- ------ ------- ---- ------- ------ ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans<F1> $ 95,077 60.12% $ 8,529 8.97% $ 84,372 57.19% $ 6,889 8.17%
Taxable investment securities 32,103 20.30 2,000 6.23 33,515 22.72 1,872 5.59
Non-taxable investment securities<F2> 17,065 10.79 1,723 10.10 20,307 13.77 2,264 11.15
Federal funds sold 3,017 1.91 173 5.73 1,171 0.79 55 4.70
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-earning assets 147,262 93.12 12,425 8.44 139,365 94.47 11,080 7.95
Noninterest earning assets:
Cash and due from banks 4,418 2.79 3,913 2.65
Premises and equipment 3,330 2.11 3,220 2.18
Other assets 4,673 2.95 3,127 2.12
Allowance for possible loan losses (1,527) (0.97) (2,097) (1.42)
-------- ------ -------- ------
Total assets $158,156 100.00% $147,528 100.00%
======== ====== ======== ======
Liabilities and shareholders' equity
Interest-bearing liabilities:
Demand deposits $ 17,265 10.92% $ 355 2.06 $ 15,800 10.71% $ 328 2.08
Savings deposits 12,848 8.12 381 2.97 12,731 8.63 381 2.99
Money market 19,692 12.45 752 3.82 20,737 14.06 553 2.67
Time deposits 71,277 45.07 3,810 5.35 61,508 41.69 2,688 4.37
Federal funds purchased and
short-term borrowings 322 0.20 20 6.21 2,167 1.47 98 4.52
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-bearing liabilities 121,404 76.76 5,318 4.38 112,943 76.56 4,048 3.58
Noninterest-bearing liabilities:
Demand deposits 12,143 7.68 13,049 8.85
Other liabilities 1,487 0.94 1,600 1.08
-------- ------ -------- ------
Total liabilities 135,034 85.38 127,592 86.49
Shareholders' equity 23,122 14.62 19,936 13.51
-------- ------ -------- ------
Total liabilities and shareholders' equity $158,156 100.00% $147,528 100.00%
======== ====== ======== ======
Net interest income $ 7,107 $ 7,032
======= =======
Interest rate spread 4.06% 4.37%
===== =====
Net interest rate margin 4.83% 5.05%
===== =====
<FN>
- --------------------
<F1> Average balances include non-accrual loans. The income on such
loans is included in interest but is recognized only upon receipt.
<F2> Non-taxable investment income presented on a fully tax-equivalent
basis. The tax effect resulted in an increase in interest income of
$585,000 and $770,000 for the years ended December 31, 1995 and 1994,
respectively.
</TABLE>
- 52 -
<PAGE> 56
INTEREST DIFFERENTIAL
The following table sets forth, on a tax-equivalent
basis for the periods presented, a summary of the changes in
interest income and expenses resulting from changes in yields/
rates. The change in interest due to both rate and volume
has been allocated to rate and volume changes in proportion to
the relationship of the absolute dollar amounts of the changes in
each.
<TABLE>
<CAPTION>
AMOUNT OF INCREASE (DECREASE)
1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO:
-------------------------------------------
VOLUME<F1> RATE<F2> NET
---------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest earned on:
Loans $ 926 $ 714 $1,640
Taxable investment securities (81) 209 128
Non-taxable investment securities<F3> (340) (201) (541)
Federal funds sold 104 14 118
----- ----- ------
Total interest-earning assets 609 736 1,345
----- ----- ------
Interest paid on:
Interest-bearing demand deposits 30 <F3> 27
Savings deposits 3 <F3> 0
Money market (29) 228 199
Time deposits 465 657 1,122
Federal funds purchased & other
short-term borrowings (105) 27 (78)
----- ----- ------
Total interest-bearing liabilities 364 906 1,270
----- ----- ------
Net interest income $ 245 $(170) $ 75
===== ===== ======
<FN>
- --------------------
<F1> Change in volume multiplied by yield/rate of prior period.
<F2> Change in yield/rate multiplied by volume of prior period.
<F3> Nontaxable investment securities are presented on a fully
tax-equivalent basis assuming a tax rate of 34%.
</TABLE>
INVESTMENT PORTFOLIO
The book value of investment securities is summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT SECURITIES AMOUNT SECURITIES
------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
U.S. government agencies and
corporations $27,775 49.2% $21,012 45.9%
State and municipal 27,070 48.0% 20,586 45.0
Other 1,579 2.8% 4,137 9.1
------- ----- ------- -----
Total $56,424 100.0% $45,735 100.0%
======= ===== ======= =====
</TABLE>
- 53 -
<PAGE> 57
The following table summarizes maturity and yield
information on investment securities at December 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
MATURING
-----------------------------------------------------------------------------------------
OVER ONE OVER FIVE
IN ONE THROUGH THROUGH OVER
YEAR OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
------------------ ------------------- ------------------ ------------------ -------
AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT
------ --------- ------ --------- ------ --------- ------ --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and other
U.S. government agencies and
corporations $1,008 6.80% $21,132 5.59% $2,229 6.76% $ -- --% $24,369
State and municipal 887 7.01 8,699 8.00 4,314 8.67 13,170 9.45 27,070
Other (includes MBS)<F2> 102 9.00 3,406 5.75 -- -- -- -- 3,508
------ ------- ------ ------- -------
Total $1,997 7.01% $33,237 6.24% $6,543 8.02% $13,170 9.45% $54,947
====== ==== ======= ==== ====== ==== ======= ==== =======
<FN>
- --------------------
<F1> Presented on a fully tax-equivalent basis assuming a tax
rate of 34%.
<F2> Equity securities of $1,035,000 in Federal Home Loan
Mortgage Corporation stock and $442,400 in Federal Home
Loan Bank of Chicago stock are not included in this table
as these equity securities have no stated maturity.
</TABLE>
LOAN PORTFOLIO
The composite of the loan portfolio is summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT LOANS AMOUNT LOANS
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $36,539 36.6% $35,410 37.7%
Real estate-mortgage 22,368 22.4 25,351 27.0
Installment 37,859 38.0 30,360 32.4
Consumer 3,004 3.0 2,513 2.7
Loans held for sale -- -- 214 0.2
------- ----- ------- -----
Total $99,770 100.0% $93,848 100.0%
======= ===== ======= =====
</TABLE>
- 54 -
<PAGE> 58
The following table sets forth the maturities and
sensitivities composition of total loans at December 31, 1995 and
summarizes maturity information for the loan portfolio as of
December 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------
AFTER ONE
IN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Rate Loans:
- ----------------
Commercial, financial and agricultural $12,111 $10,344 $ 259 $22,174
Real estate-mortgage 2,678 6,586 5,528 14,792
Installment 1,484 34,897 1,469 37,850
Consumer 225 -- -- 225
------- ------- ------- -------
Total $16,498 $51,827 $ 7,256 $75,581
======= ======= ======= =======
Variable Rate Loans:
- -------------------
Commercial, financial and agricultural $ 6,531 $ 6,949 $ 345 $13,825
Real estate-mortgage 1,108 -- 6,468 7,576
Installment 9 -- -- 9
Consumer 2,779 -- -- 2,779
------- ------- ------- -------
Total $10,427 $ 6,949 $ 6,813 $24,189
======= ======= ======= =======
Total Loans:
- -----------
Commercial, financial and agricultural $18,642 $17,293 $ 604 $36,539
Real estate-mortgage 3,786 6,586 11,996 22,368
Installment 1,493 34,897 1,469 37,859
Consumer 3,004 -- -- 3,004
------- ------- ------- -------
Total $26,925 $58,776 $14,069 $99,770
======= ======= ======= =======
</TABLE>
RISK ELEMENTS INVOLVED IN LENDING ACTIVITIES. The
following table details the nonperforming asset information for
the periods presented:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans $ 730 $1,031 $2,414
Loans past due 90 days or more 179 5 61
Restructured loans -- -- --
------ ------ ------
Total non-performing loans 909 1,036 2,475
Foreclosed property 631 960 719
------ ------ ------
Total non-performing assets $1,540 $1,996 $3,194
====== ====== ======
Non-performing loans to loans 0.88% 1.07% 2.71%
Non-performing assets to loans plus
foreclosed property 1.48% 2.04% 3.47%
Non-performing assets to total assets 0.85% 1.19% 2.16%
</TABLE>
It is generally the policy of Regional to discontinue
the accrual of interest on loans when principal or interest is
due and has remained unpaid for 90 days or more, unless the loan
is well secured and in the process of collection. If interest on
nonaccrual loans had been accrued, such income would have
amounted to $85,000 for 1995. Interest income on those loans,
representing cash payments received, amounted to $20 for 1995.
- 55 -
<PAGE> 59
POTENTIAL PROBLEM LOANS. Certain loans may require
frequent management attention and are reviewed on a monthly or
more frequent basis. Although payments on these loans are less
than 90 days past due or in many cases are current, the borrowers
have or have had a history of financial difficulties and
management has concern as to the borrower's ability to comply
with present loan repayment terms. As such, these loans may
result in classification at some future point as nonperforming.
At September 30, 1996 and December 31, 1995, such loans
(excluding all nonperforming loans described above) amounted to
$4,146,000 and $3,887,000, respectively.
FOREIGN OUTSTANDING. Regional had no loans to any
foreign countries on any of the dates specified in the tables.
LOAN CONCENTRATIONS. Regional does not have a
particular concentration of credit in any one economic
sector.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes changes in the allowance
for loan loss arising from loans charged off and recoveries on
loans previously charged off, by loan category and additions to
the allowance that have been charged to expense.
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1996 1995 1994
------------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $1,350 $1,825 $1,897
Loans charged off:
Commercial, financial and agricultural 29 800 7
Real estate-mortgage -- -- --
Installment and consumer 150 114 24
------ ------ ------
Total charge-offs 179 914 31
------ ------ ------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 194 384 231
Real estate-mortgage 2 -- --
Installment and consumer 31 13 8
------ ------ ------
Total recoveries 227 397 239
------ ------ ------
Net charge-offs (recoveries) (48) 517 (208)
------ ------ ------
Additions to allowance charged to (credited to) expense 75 42 (280)
------ ------ ------
Balance at end of period $1,473 $1,350 $1,825
====== ====== ======
Net charge-offs (recoveries) to average loans (0.05)% 0.54% (0.25)%
Allowance for loan losses to loans 1.43 % 1.40% 2.00 %
Allowance for loan losses to
non-performing loans 162.05 % 130.31% 73.74 %
</TABLE>
The level of the allowance for loan loss is reviewed
quarterly by the board of directors and management utilizing two
methods of analysis. The first method assigns specific
allocation percentages based on the loans' risk ratings and
includes unused loan commitments. These specific allocation
percentages are reviewed annually by the board of directors and
management. The second method utilizes a loss history for each
type of loan category while estimating the potential loss
exposure.
- 56 -
<PAGE> 60
Management views the allowance for loan losses as being
available for all potential or previously unidentified loan
losses which may occur in the future. The risk of future losses
that is inherent in the loan portfolio is not precisely
attributable to a particular loan or category of loans. Based on
its review of adequacy, Regional's management has estimated those
portions of the allowance that could be attributable to major
categories of loans as detailed in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1995 1994
------------------------------ --------------------------------
PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO
ALLOWANCE TOTAL LOANS ALLOWANCE TOTAL LOANS
--------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 848 36.6% $1,146 37.7%
Real estate-mortgage 89 22.4 120 27.0
Installment 356 38.0 482 32.4
Consumer 57 3.0 7 2.7
Loans held for sale -- -- -- 0.2
------ ----- ------ -----
Total $1,350 100.0% $1,825 100.0%
====== ===== ====== =====
</TABLE>
Allocations estimated for the loan categories do not
specifically represent that loan charge-offs of that magnitude
will necessarily be incurred. The allocation does not restrict
future loan losses attributable to other categories. The risk
factors considered when determining the overall level of the
allowance for loan losses are the same when estimating the
allocation by major category, as specified in the allowance
category.
DEPOSITS
The following table shows, for each type of deposit,
the average balance and rate paid on each type of deposit for the
years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1995 1994
--------------------------------------------------------------
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
-------------------------- --------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest bearing demand deposits $ 12,143 --% $ 13,049 --%
Interest-bearing demand deposits 36,956 3.00 36,537 2.41
Savings deposits 12,848 2.97 12,731 2.99
Time deposits 71,277 5.35 61,508 4.37
-------- --------
Total $133,224 3.98% $123,825 3.19%
======== ==== ======== ====
</TABLE>
The following table shows the maturity of time deposits of
$100,000 or more at December 31, 1995:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less $1,069
Over three through six months 3,940
Over six through twelve months 2,427
Over twelve months 1,727
------
$9,163
======
</TABLE>
- 57 -
<PAGE> 61
RETURN OF EQUITY AND ASSETS
The following ratios are among those commonly used in
analyzing the performance of banks and bank holding companies:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Return on average assets 1.74% 1.73%
Return on average equity 11.93% 12.77%
Dividend payout ratio 37.49% 5.90%
Equity to assets ratio 14.62% 13.51%
</TABLE>
PROPERTIES
Both Regional's and Bank of Alton's principal office is
located at 1520 Washington Avenue, Alton, Illinois 62002. Bank
of Alton also operates two branch facilities; one of which is
located at 2627 State Street, Alton, Illinois 62002 and the
other of which is located at One Terminal Drive, Bethalto,
Illinois 62010.
LEGAL PROCEEDINGS
During the normal course of business, various legal
claims have arisen which, in the opinion of the management of
Regional, will not result in any material liability to Regional.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION. The following discussion and analysis is
intended to review the significant factors affecting the
financial condition and results of operations of Regional for the
nine months ended September 30, 1996 and 1995 and the three-year
period ended December 31, 1995. It provides a more comprehensive
review of factors not otherwise apparent from the consolidated
financial statements of Regional alone. Reference should be made
to those financial statements and the selected financial data
presented elsewhere herein for an understanding of the following
review.
NET INCOME ANALYSIS. Regional's net income for 1995
was $2,758,000, compared to $2,546,000 for 1994 and $3,019,000
for 1993. The increase in net income for 1995 as compared to 1994
was due primarily to a decrease in non-interest expense offset by
an increase in provision for loan loss expense. The decrease in
net income for 1994 as compared to 1993 was due to both the
adoption of a new accounting standard for income taxes, which
added $518,000 to 1993 net income, and the change in the
provision for loan loss credit from $(960,000) in 1993 to
$(280,000) in 1994.
For the nine months ended September 30, 1996 and 1995,
net income was $2,010,000 and $1,999,000, respectively. The
increase was due primarily to a decrease in income tax expense.
NET INTEREST INCOME. Net interest income is the
largest component of earnings and is affected by the volume of
the sources and uses of funds, the respective rates earned and
paid on those funds, the mix of those funds and the volume of
non-performing assets. Regional's net interest income increased
4.1% to $6,522,000 for 1995 and increased 6.7% to $6,263,000 for
1994. The net interest margin, which is calculated by dividing
tax-equivalent net interest income by average interest-earning
assets, was 4.83% in 1995, compared to 5.05% and 5.19% in 1994
and 1993, respectively. Regional's yield on interest-earning
assets increased to 8.44% in 1995 from 7.95% in 1994 while the
cost of funds
- 58 -
<PAGE> 62
increased to 4.38% in 1995 from 3.58% in 1994. The decreases in
net interest margin were attributable to the increasing rate
environment and intense competition for deposits between local
financial institutions.
During 1995, increases in the average volume of loans
and federal funds sold resulted in an increase in interest income
of $1,030,000. This increase was partially offset by a $421,000
decrease in average volume of taxable and non-taxable investment
securities. Changes in interest rates on the average volume of
loans and federal funds sold increased interest income by
$728,000. Changes in interest rates on the average volume of
money markets and time deposits increased interest expense by
$885,000. The net effect of the volume and rate changes
associated with all categories of interest-earning assets during
1995 as compared to 1994 increased interest income by $1,345,000,
while the net effect of the volume and rate changes associated
with all categories of interest-bearing liabilities increased
interest expense by $1,270,000.
Net interest income was $4,856,000 for the first nine
months of 1996, a .3% decrease from the same period of 1995.
Interest income increased $975,000 for the first nine months of
1996 and interest expense increased $993,000. The net decrease
was primarily attributable to lower than expected loan demand and
strong local competition for deposits.
PROVISION FOR LOAN LOSSES. The provision for loan
losses charged to expense was $42,000 in 1995, compared to
credits of $(280,000) in 1994 and $(960,000) in 1993. The
negative provisions recorded by Regional in 1994 and 1993 were
due to significant performance improvements on several credits
which resulted in management's decision to reduce the level of
the allowance for loan losses in 1994 and 1993.
The allowance for loan losses is maintained at a level
considered adequate to provide for potential losses. The
provision for loan losses is based on a periodic analysis,
considering, among other factors, current economic conditions,
loan portfolio composition, past loan loss experience,
independent appraisals, loan collateral and payment experience.
In addition to the allowance for losses on identified problem
loans, an overall unallocated allowance is established to provide
for unidentified credit losses inherent in the portfolio. As
adjustments become necessary, they are reflected in the results
of operations in the periods in which they become known.
Management believes the allowance for loan losses is
adequate to absorb losses in the loan portfolio. While management
uses available information to recognize loan losses, future
additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as
an integral part of the examination process, periodically review
the allowance for loan losses. Such agencies may require Regional
to increase the allowance for loan losses based on their
judgments and interpretations about information available to them
at the time of their examinations.
The ratio of nonperforming loans to loans decreased
since 1993 as a result of a more aggressive approach to account
collections and the effectiveness of management in working with
the problem credits coupled with acquisitions of foreclosed real
estate.
The provision for loan losses was $75,000 in the first
nine months of 1996, compared to $42,000 in the same period for
1995.
NON-INTEREST INCOME. Regional's 1995 non-interest
income was $1,108,000, representing a 33.7% increase from 1994
results, while 1994 non-interest income represents a 34.7%
decrease from 1993 results. The increase in 1995 was due to an
increase of $35,000 in ATM switch income, a $10,000 increase in
gain on sale of investment securities, offset by a decrease of
$37,000 in gain on sale of other
- 59 -
<PAGE> 63
real estate. In addition, no security losses were recorded in
1995, compared to a loss of $250,000 in 1994 resulting from
repositioning the investment portfolio. The decrease in 1994
non-interest income was due primarily to a decrease of 80% on
gain on sale of mortgage loans due to a decrease of the volume of
loans sold from $13,356,000 in 1993 to $5,084,000 in 1994,
partially offset by a $85,000 increase in ATM switch income. In
addition, Regional recorded a gain on sale of investment
securities of $176,000 in 1993, compared to the loss of $250,000
in 1994.
Non-interest income for the first nine months of 1996
was $798,000, a 5.0% decrease from 1995. The decrease was due
primarily to a decrease in gains on sales of investment
securities, mortgage loans and other real estate.
NON-INTEREST EXPENSE. Non-interest expense decreased
3.3% in 1995 and 9.2% in 1994. FDIC insurance assessment
decreased 47.5% in 1995, primarily due to the FDIC's reduction of
deposit premiums charged to commercial banks, which resulted from
the BIF reaching its required reserve level of 1.25% of total
insured deposits during 1995. These decreases in non-interest
expense were offset by an increase in equipment and data
processing expense of 18.0% and 55.2%, respectively, due to
implementation of a new data processing system in August 1994.
The 1994 decrease was attributable to a decrease in occupancy
expense of 35.7% and a decrease in legal and professional fees of
27.8%. In 1993, the useful lives of many fixed assets were
evaluated and shortened, resulting in a one-time charge to
depreciation expense which inflated 1993 occupancy expense. In
addition, 1993 legal and professional fees contained expenses
associated with regulatory matters involving a former bank
officer. These decreases were offset by a 46.7% increase in data
processing expense, again due to implementation of a new data
processing system in August 1994.
Non-interest expense for the first nine months of 1996
was $3,128,000 compared to $2,973,000 in the first nine months of
1995. The addition of a new facility in Bethalto, Illinois
increased salaries and employee benefits 11.9%, increased
occupancy 34.4% and increased equipment expense 17.7%. These
increases were partially offset by a 99.5% decrease in FDIC
insurance assessment, again primarily due to the FDIC's reduction
in the deposit premium charged to commercial banks. Other non-
interest expense increased 12.0% partially due to a write-down on
other real estate of $50,000.
INCOME TAXES. Regional recorded income tax expense of
$933,000 for 1995, $796,000 for 1994 and $1,158,000 for 1993.
The effective income tax rates were 25.3%, 23.8% and 31.6% for
the years ended December 31, 1995, 1994 and 1993, respectively.
Income tax expense of $441,000 and $700,000 was
recorded for the nine months ended September 30, 1996 and 1995,
respectively.
In February 1992, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes ("SFAS 109"). SFAS 109 was
effective for fiscal years beginning after December 15, 1992 and
could have been applied through retroactive restatement of
previously issued financial statements, or through reporting the
cumulative effect of applying the changes in the period of its
initial application. Regional implemented SFAS 109 during 1993
and reported the cumulative effect of this change in the method
of accounting for income taxes resulting in an increase in
earnings of $518,000 in Regional's 1993 consolidated statement of
income.
LIQUIDITY AND INTEREST RATE SENSITIVITY. Liquidity is
provided to Regional through earning assets, including short-term
investments in federal funds sold, and through maturities in the
investment
- 60 -
<PAGE> 64
and loan portfolios. In addition, liquidity is provided by
advances from the Federal Home Loan Bank of Chicago.
The asset/liability management process, which involves
management of the components of the balance sheet to allow assets
and liabilities to reprice at approximately the same time, is a
dynamic process essential to minimizing the effect of interest
rate fluctuations on net interest income. The following tables
reflect Regional's GAP analysis (rate-sensitive assets minus
rate-sensitive liabilities) as of September 30, 1996 and December
31, 1995, respectively:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH 12 THROUGH OVER
OR LESS MONTHS 5 YEARS 5 YEARS TOTAL
-------- ---------- ------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ 155 $ 2,287 $ 36,937 $26,698 $ 66,077
Loans 21,408 15,701 48,733 20,685 106,527
Federal funds sold 495 -- -- -- 495
Interest-bearing deposits -- -- -- -- --
-------- -------- -------- ------- --------
Total interest-sensitive assets 22,058 17,988 85,670 47,383 173,099
-------- -------- -------- ------- --------
Liabilities:
Money market deposits
(interest-bearing demand) 41,797 -- -- -- 41,797
Savings 12,547 -- -- -- 12,547
Time deposits 30,757 23,944 24,225 -- 78,926
Short-term borrowings 4,000 5,000 1,000 -- 10,000
-------- -------- -------- ------- --------
Total interest-sensitive liabilities 89,101 28,944 25,255 -- 143,270
-------- -------- -------- ------- --------
Interest-sensitivity gap at September 30, 1996:
Incremental $(67,043) $(10,956) $ 60,445 $47,383 $ 29,829
======== ======== ======== ======= ========
Cumulative $(67,043) $(77,999) $(17,554) $47,383
======== ======== ======== =======
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH 12 THROUGH OVER
OR LESS MONTHS 5 YEARS 5 YEARS TOTAL
-------- ---------- ------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ -- $ 1,997 $ 33,237 $21,190 $ 56,424
Loans 19,661 12,178 49,355 18,576 99,770
Federal funds sold 3,625 -- -- -- 3,625
-------- ------- --------
Total interest-sensitive assets 23,286 14,175 82,592 39,766 159,819
-------- -------- -------- ------- --------
Liabilities:
Money market deposits
(interest-bearing demand) 43,013 -- -- -- 43,013
Savings 13,041 -- -- -- 13,041
Time deposits 22,062 33,502 19,286 -- 74,850
Total interest-sensitive liabilities 78,116 33,502 19,286 -- 130,904
-------- -------- -------- ------- --------
Interest-sensitivity gap at December 31, 1995:
Incremental $(54,830) $(19,327) $ 63,306 $39,766 $ 28,915
======== ======== ======== ======= ========
Cumulative $(54,830) $(74,157) $(10,851) $28,915
======== ======== ======== =======
</TABLE>
As indicated in the preceding tables, Regional was
liability sensitive on a cumulative basis in the near term (three
months or less) at September 30, 1996 and December 31, 1995,
based on contractual maturities and earliest repricing dates. In
this regard, an increase in the general level of interest rates
would generally have a negative effect on Regional's net interest
income as the repricing of the larger volume of interest-
sensitive liabilities would create a larger amount of interest
expense than
- 61 -
<PAGE> 65
the additional amount of interest income created by the repricing
of the smaller volume of interest-sensitive assets.
The following table summarizes certain trends in
Regional's consolidated balance sheet during the two-year period:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total assets $167,680 $148,140
Earning assets $156,733 $138,476
Deposits $142,714 $127,107
Loans to deposits (net loans) 67.75% 71.84%
Loans to total assets (net loans) 57.66% 61.64%
Debt securities to total assets 33.65% 30.87%
</TABLE>
The composition of total assets and earning assets
changed during 1995 as funds were shifted into investments due to
lower than expected loan growth. Regional's earning assets
increased $18,257,000 from December 31, 1994 to December 31,
1995. Investment securities were $56,424,000 at December 31,
1995 as compared to $45,375,000 at December 31, 1994. Loans, net
of unearned discount, were $96,684,000 at December 31, 1995,
compared to $91,316,000 at December 31, 1994. Deposits increased
$15,607,000 from December 31, 1994 to December 31, 1995.
Interest-bearing deposits increased $17,182,000, while non
interest-bearing deposits decreased $1,575,000.
CAPITAL ADEQUACY. Regional's equity capital was
$23,416,000, $23,122,000 and $19,685,000 at September 30, 1996,
December 31, 1995 and December 31, 1994, respectively. During
1996, equity capital increased $294,000 as a result of net income
of $2,010,000, offset by dividends paid of $760,000 and a net
unrealized loss on securities available-for-sale of $(956,000).
During 1995, equity capital increased $3,437,000. This increase
was attributable to net income of $2,758,000, and a $1,713,000
net unrealized gain on marketable equity securities, offset by
dividends paid of $1,034,000.
Risk-based capital guidelines for financial
institutions were adopted by regulatory authorities and were
effective January 1, 1991. These guidelines were designed to
relate regulatory capital requirements to the risk profile of the
specific institutions and to provide for uniform requirements
among the various regulators. Currently, the risk-based capital
guidelines require Regional to meet a minimum total capital ratio
of 8.0%, of which at least 4.0% must consist of Tier 1 capital.
Tier 1 capital generally consists of (a) common shareholders'
equity, (b) qualifying perpetual preferred stock and related
surplus subject to certain limitations specified by the FDIC and
(c) minority interests in the equity accounts of consolidated
subsidiaries less goodwill and any other intangible assets and
investments in subsidiaries that the FDIC determines should be
deducted from Tier 1 capital. The FDIC also requires a minimum
leverage ratio of 3.0%, defined as the ratio of Tier 1 capital
less purchased mortgage servicing rights to total assets, for
banking organizations deemed the strongest and most highly-rated
by banking regulators. A higher minimum leverage ratio is
required of less highly-rated banking organizations.
- 62 -
<PAGE> 66
The following tables summarize, on a consolidated
basis, Regional's risk-based capital and leverage ratios:
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIOS
-------------------------------------------------------------------------------------------------
TOTAL TIER 1
-------------------------------------------- -------------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
------------- ---------------------- ------------- ---------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C>
21.97% 22.43% 22.99% 20.72% 21.18% 21.74%
<CAPTION>
LEVERAGE RATIOS
--------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------
1996 1995 1994
---- ---- ----
<C> <C> <C>
12.86% 13.79% 13.29%
</TABLE>
Risk Management. Regional's management objective in
structuring the balance sheet is to maximize the return on
stockholders' equity while minimizing the associated risks. The
major risks involved in the banking industry are market, credit
and liquidity risks. The following is a discussion of Regional's
management of these risks.
Market Risk Management. Regional's management
----------------------
believes its loan and investment portfolios are sufficiently
diversified to minimize the effect of a downturn in any
particular industry or market. Regional does not have any
particular concentration of credit in any one economic
sector. Installment loans as of December 31, 1995 totaled
$37,859,000, or 38%, of the loan portfolio, while real
estate loans totaled $22,368,000, or 22.4%, of the loan
portfolio. Commercial loans as of December 31, 1995 totaled
$36,539,000, or 36.6%, of the loan portfolio. The commercial
loan portfolio, which includes loans made primarily to
businesses located in Madison County and served by Regional,
is generally secured by business assets such as inventory,
accounts receivable and equipment. At December 31, 1995 the
total investment portfolio was $56,424,000. Approximately
49.2% of the portfolio is comprised of U.S. Government
issues and approximately 48.0% is comprised of State and
Municipal Bonds.
Credit Risk Management. The risks Regional's
----------------------
management assumes in providing credit products to customers
is fundamental to its business operation. Credit risk
management includes defining an acceptable level of risk and
return, establishing policies and procedures to govern the
credit process and maintaining a thorough portfolio review
function. Credit policies are ultimately the responsibility
of Regional's Board of Directors and, as such, are reviewed
and approved by the Board of Directors. Of equal importance
in this risk management process are the ongoing monitoring
procedures performed by management.
Nonperforming loans represented .88% of total loans at
September 30, 1996, compared to 1.07% and 2.71% at December
31, 1995 and 1994, respectively. Other real estate owned by
Regional totaled $631,000 at September 30, 1996 and $960,000
and $719,000 at December 31, 1995 and 1994, respectively.
Liquidity Risk Management. Liquidity is a
-------------------------
measurement of Regional's ability to meet the borrowing
needs and the deposit withdrawal requirements of its
customers. Regional actively manages the composition of its
assets and liabilities to maintain the appropriate level of
liquidity in the balance sheet. Management is guided by
regularly reviewed policies when determining the
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<PAGE> 67
appropriate portion of total assets, which should be
comprised of readily marketable assets available to meet
future liquidity needs.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS. During May
1993, FASB issued Statement of Financial Accounting Standards No.
114, Accounting by Creditors for Impairment of a Loan ("SFAS
114") and SFAS 115, Accounting for Certain Investments in Debt
and Equity Securities ("SFAS 115"). During October 1994, the FASB
issued SFAS 118, Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures ("SFAS 118"), which amends
SFAS 114. During October 1994, the FASB issued SFAS 119,
Disclosure About Derivative Financial Instruments and Fair Value
of Financial Instruments ("SFAS 119"). In March 1995, the FASB
issued SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121").
In May 1995, the FASB issued SFAS 122, Accounting for Mortgage
Servicing Rights ("SFAS 122"), an amendment of FASB Statement No.
65. In June 1995, the FASB issued SFAS 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities ("SFAS 125").
SFAS 114, as amended by SFAS 118, amends SFAS 5,
Accounting for Contingencies, and SFAS 15, Accounting by Debtors
and Creditors for Troubled Debt Restructurings, and became
effective for Regional on January 1, 1995. SFAS 114 defines the
recognition criterion for loan impairment and the measurement
methods for certain impaired loans and restructured loans, loans
whose terms have been modified in troubled-debt restructurings.
Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all amounts due, including
both principal and interest, according to the contractual terms
of the loan agreement. When measuring impairment, the expected
future cash flows of an impaired loan will be discounted at the
loan's effective interest rate. Alternatively, impairment could
be measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-
dependent loan. Regardless of the measurement method used, SFAS
114 requires a creditor to measure impairment based on the fair
value of the collateral when the creditor determines foreclosure
is probable. Additionally, impairment of a restructured loan
will be measured by discounting the total expected future cash
flow at the loan's effective rate of interest as stated in the
original loan agreement.
SFAS 118 amends SFAS 114 to allow creditors to use
existing methods of recognizing interest income on impaired
loans. Regional has elected to continue to use its existing
nonaccrual methods of recognizing interest on impaired loans.
The impact of initially applying SFAS 114 and SFAS 118
was not reported as an accounting change; rather, it was reported
as a component of the provision for loan losses charged to
operations, and had no effect on Regional's consolidated results
of operation as a result of implementation. SFAS 114 and SFAS
118 are effective for fiscal years beginning after December 15,
1994.
SFAS 115 supersedes SFAS 12, Accounting for Certain
Marketable Securities and related interpretations, and
significantly amends SFAS 65, Accounting for Certain Mortgage
Banking Activities, and SFAS No. 60, Accounting and Reporting by
Insurance Enterprises. Regional adopted the provisions of SFAS
115 on January 1, 1994. SFAS 115 addresses the accounting and
reporting for investments in equity securities that have readily
determinable fair values, and all investments in debt securities.
Under SFAS 115, debt and equity securities are classified into
one of three categories; trading; available-for-sale and held-to-
maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity
securities are those securities in which Regional has the ability
and intent to hold until maturity. All other securities not
included in trading or held-to-maturity are classified as
available-for-sale. Regional has classified all securities as
available-for-sale.
- 64 -
<PAGE> 68
As previously mentioned, effective January 1, 1994,
Regional adopted SFAS 115, for which the cumulative effect was
recorded on the consolidated balance sheet on that date. On
January 1, 1994: (i) debt and marketable equity securities with
an amortized cost of $55,075,000 were classified as available-
for-sale securities; (ii) a market valuation account was
established for the available-for-sale securities of $2,713,000
to increase the recorded balance of such securities at January 1,
1994 to their fair value on that date; (iii) a deferred liability
of $922,000 was recorded to reflect the tax effect of the market
valuation account; and (iv) the net increase resulting from the
market valuation adjustment at January 1, 1994 was recorded as a
separate component of shareholders' equity. Regional did not
classify any securities as held-to-maturity or trading securities
at January 1, 1994. Prior to the adoption of SFAS 115,
marketable equity securities were carried at the lower of cost or
estimated market value. A deferred tax benefit was established
for the unrealized loss on marketable equity securities at
January 1, 1994.
SFAS 119 requires disclosures about the amounts, nature
and terms of derivative financial instruments that are not
subject to SFAS 105, Disclosure of Information about Financial
Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentrations of Credit Risk, because they do not result in
off-balance-sheet risk of accounting loss. SFAS 119 requires
that a distinction be made between financial instruments held or
issued for trading purposes and financial instruments held or
issued for purposes other than trading. SFAS 119 was effective
for financial statements issued for fiscal years ending after
December 15, 1994 and resulted in no effect on Regional's
consolidated financial statements, other than additional
disclosure requirements with respect to fixed rate loan
commitments.
Effective January 1, 1996, Regional adopted SFAS 121.
SFAS 121 provides guidance for recognition and measurement of
impairment on long-lived assets, certain identifiable intangibles
and goodwill related both to assets to be held and used and
assets to be disposed of. The statement requires entities to
perform separate calculations for assets to be held and used to
determine whether recognition of an impairment loss is required,
and, if so, to measure impairment. If the sum of the expected
future cash flows, undiscounted and without interest charges, is
less than the asset's carrying amount, an impairment loss can be
recognized. If the sum of the expected future cash flows is more
than the assets carrying amount, an impairment loss cannot be
recognized. Measurement of an impairment loss is based on the
fair value of the asset. SFAS 121 also requires long-lived
assets and certain identifiable intangibles to be disposed of to
be reported at the lower of carrying amount or fair value less
cost to sell. As of the adoption date January 1, 1996, Regional
had no impaired long-lived or intangible assets affected by SFAS
121.
SFAS 122 amends SFAS 65, Accounting for Certain
Mortgage Banking Activities, to require that a mortgage banking
enterprise recognize as separate assets rights to service
mortgage loans for others, regardless of how such servicing
rights are acquired. A mortgage banking enterprise that acquires
mortgage servicing rights through either the purchase or
origination of mortgage loans sells or securitizes those loans
with servicing rights and the loans (without mortgage servicing
rights) based on their relative fair values, if it is practicable
to estimate those fair values. If it is not practicable to
estimate the fair values of the mortgage servicing rights and the
mortgage loans (without the mortgage servicing rights), the
entire cost of purchasing or originating the loans should be
allocated to the mortgage loans and no cost should be allocated
to mortgage servicing rights. SFAS 122 also requires that a
mortgage banking enterprise assess its capitalized mortgage
servicing rights for impairment based on the fair value of those
rights. SFAS 122 must be applied prospectively for fiscal years
beginning after December 15, 1995, with earlier adoption
encouraged, to transactions in which a mortgage banking
enterprise sells or securitizes mortgage loans with servicing
rights retained and to impairment evaluations of all amounts
capitalized as mortgage servicing rights, including those
purchased before the adoption of SFAS 122. Retroactive
capitalization of mortgage servicing rights retained in
transactions in which a mortgage banking enterprise originates
mortgage loans and sells or securitizes those loans before the
- 65 -
<PAGE> 69
adoption of SFAS 122 is prohibited. Regional adopted the
provisions of SFAS 122 effective January 1, 1996. The adoption
of SFAS 122 had no impact on Regional's consolidated financial
position or results of operations.
SFAS 125 established accounting and reporting standards
for transfers and servicing of financial assets and
extinguishment of liabilities. The standards established by SFAS
125 are based on consistent applications of a "financial-
components" approach that focuses on control. Under such
approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities that it has incurred, derecognizes financial assets
when control has been surrendered and derecognizes liabilities
when extinguished. SFAS 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring
after December 31, 1996 and is to be applied prospectively.
Earlier or retroactive application is not permitted. Regional
does not believe that the implementation of SFAS 125 will have a
material effect on its consolidated financial position or results
of operation.
EFFECT OF INFLATION. Persistent high rates of
inflation can have a significant effect on the reported financial
condition and results of operations of all industries. However,
the asset and liability structure of commercial banks is
substantially different from that of an industrial company in
that virtually all assets and liabilities of commercial banks are
monetary in nature. Accordingly, changes in interest rates may
have a significant impact on a commercial bank's performance.
Interest rates do not necessarily move in the same direction or
in the same magnitude as the prices of goods and services.
Inflation does have an impact on the growth of total
assets in the banking industry, often resulting in a need to
increase equity capital at higher than normal rates to maintain
an appropriate equity-to-assets ratio.
- 66 -
<PAGE> 70
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date
the number of shares of Regional Common Stock beneficially owned
and the percentage of ownership of outstanding shares of Regional
Common Stock by (a) each director and executive officer of
Regional, (b) each person who is known by Regional to own
beneficially 5% or more of such stock and (c) all directors and
executive officers of Regional as a group:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
- ------------------- ----- -----
<S> <C> <C>
Paul E. Utterback<F1> 23,373 92.31%
94 Fairmount
Alton, IL 62002
David B. Utterback 267 1.05
President and Chairman
4305 S.W. 83rd Way
Gainesville, Florida 32608
Mark P. Utterback 38 .15
Vice President
4530 Pershing
St. Louis, MO 63108
Sarah E. Utterback 309 1.22
Secretary and Treasurer
7515 Parkdale, #1 West
St. Louis, MO 63105
Virgil D. Hook<F2> 1,334 5.27
All Directors and 614 2.42%
Executive Officers
as a Group (three persons)
<FN>
- --------------------
<F1> Includes shares held by the Paul E. Utterback Voting Trust,
of which Billy R. Summers is the trustee and Paul E.
Utterback is the sole beneficiary. Also includes shares held
by the Mary G. Utterback Family Trust and the Mary G. Utterback
Marital Trust; Paul E. Utterback is the trustee and sole
beneficiary for each.
<F2> Includes shares held by the Virgil D. Hook Living Trust and
the Margaret A. Hook Living Trust.
</TABLE>
For purposes of the above table, a person is deemed to
be a beneficial owner of shares of Regional Common Stock if the
person has or shares the power to vote or to dispose of such
shares. Unless otherwise indicated in the footnotes, each person
has sole voting and investment power with respect to shares shown
in the table as beneficially owned by such person.
- 67 -
<PAGE> 71
INFORMATION REGARDING MBI STOCK
-------------------------------
DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS
GENERAL. MBI has authorized 5,000,000 shares of MBI
Preferred Stock, no par value, and 100,000,000 shares of MBI
Common Stock, $5.00 par value. At September 30, 1996, MBI had no
shares of MBI Preferred Stock issued and outstanding and
60,163,042 shares of MBI Common Stock outstanding. Under
Missouri law, MBI's Board of Directors may generally approve the
issuance of authorized shares of Preferred Stock and Common Stock
without shareholder approval.
MBI's Board of Directors is also authorized to fix the
number of shares and determine the designation of any series of
Preferred Stock and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed
upon any series of MBI Preferred Stock. Except for the
designation and reservation of Series A Junior Participating
Preferred Stock pursuant to MBI's Preferred Share Purchase Rights
Plan described below, MBI's Board of Directors has not acted to
designate or issue any shares of MBI Preferred Stock. The
existence of a substantial number of unissued and unreserved
shares of MBI Common Stock and undesignated shares of MBI
Preferred Stock may enable the Board of Directors to issue shares
to such persons and in such manner as may be deemed to have an
anti-takeover effect.
The following summary of the terms of MBI's capital
stock does not purport to be complete and is qualified in its
entirety by reference to the applicable provisions of MBI's
Restated Articles of Incorporation and By-Laws and Missouri law.
DIVIDENDS. The holders of MBI Common Stock are
entitled to share ratably in dividends when, as and if declared
by the Board of Directors from funds legally available therefor,
after full cumulative dividends have been paid or declared, and
funds sufficient for the payment thereof set apart, on all series
of MBI Preferred Stock ranking superior as to dividends to MBI
Common Stock.
The Board of Directors of MBI intends to maintain its
present policy of paying quarterly cash dividends on MBI Common
Stock, when justified by the financial condition of MBI and its
subsidiaries. The declaration and amount of future dividends
will depend on circumstances existing at the time, including
MBI's earnings, financial condition and capital requirements as
well as regulatory limitations, note and indenture provisions and
such other factors as the Board of Directors may deem relevant.
The payment of dividends to MBI by subsidiary banks is subject to
extensive regulation by various state and federal regulatory
agencies. See "SUPERVISION AND REGULATION."
VOTING RIGHTS. Each holder of MBI Common Stock has one
vote for each share held on matters presented for consideration
by the shareholders, except that, in the election of directors,
each shareholder has cumulative voting rights which entitle each
such shareholder to the number of votes which equals the number
of shares held by the shareholder multiplied by the number of
directors to be elected. All such votes may be cast for one
candidate for election as a director or may be distributed among
two or more candidates.
PREEMPTIVE RIGHTS. The holders of MBI Common Stock
have no preemptive right to acquire any additional unissued
shares or treasury shares of MBI.
LIQUIDATION RIGHTS. In the event of liquidation,
dissolution or winding up of MBI, whether voluntary or
involuntary, the holders of MBI Common Stock will be entitled to
share ratably in
- 68 -
<PAGE> 72
any of its assets or funds that are available for distribution to
its shareholders after the satisfaction of its liabilities (or
after adequate provision is made therefor) and after preferences
on any outstanding MBI Preferred Stock.
ASSESSMENT AND REDEMPTION. Shares of MBI Common Stock
are and will be, when issued, fully paid and nonassessable. Such
shares do not have any redemption provisions.
PREFERRED SHARE PURCHASE RIGHTS PLAN. One preferred
share purchase right is attached to each share of MBI Common
Stock. The MBI Rights trade automatically with shares of MBI
Common Stock, and become exercisable and will trade separately
from the MBI Common Stock on the tenth day after public
announcement that a person or group has acquired, or has the
right to acquire, beneficial ownership of 20% or more of the
outstanding shares of MBI Common Stock, or upon commencement or
announcement of intent to make a tender offer for 20% or more of
the outstanding shares of MBI Common Stock, in either case
without prior written consent of the Board. When exercisable,
each MBI Right will entitle the holder to buy 1/100 of a share of
MBI Series A Junior Participating Preferred Stock at an exercise
price of $100 per MBI Right. In the event a person or group
acquires beneficial ownership of 20% or more of MBI Common Stock,
holders of MBI Rights (other than the acquiring person or group)
may purchase MBI Common Stock having a market value of twice the
then current exercise price of each MBI Right. If MBI is
acquired by any person or group after the Rights become
exercisable, each MBI Right will entitle its holder to purchase
stock of the acquiring company having a market value of twice the
current exercise price of each MBI Right. The MBI Rights are
designed to protect the interests of MBI and its shareholders
against coercive takeover tactics. The purpose of the MBI Rights
is to encourage potential acquirors to negotiate with MBI's Board
of Directors prior to attempting a takeover and to give the Board
leverage in negotiating on behalf of all shareholders the terms
of any proposed takeover. The MBI Rights may deter certain
takeover proposals. The MBI Rights, which can be redeemed by
MBI's Board of Directors in certain circumstances, expire by
their terms on June 3, 1998.
CLASSIFICATION OF BOARD OF DIRECTORS. The Board of
Directors of MBI is divided into three classes, and the
directors are elected by classes to three-year terms, so that one
of the three classes of the directors of MBI will be elected at
each annual meeting of the shareholders. While this provision
promotes stability and continuity of the Board of Directors,
classification of the Board of Directors may also have the effect
of decreasing the number of directors that could otherwise be
elected at each annual meeting of shareholders by a person who
obtains a controlling interest in the MBI Common Stock and
thereby could impede a change in control of MBI. Because fewer
directors will be elected at each annual meeting, such
classification also will reduce the effectiveness of cumulative
voting as a means of establishing or increasing minority
representation on the Board of Directors.
OTHER MATTERS. MBI's Restated Articles of
Incorporation and By-Laws also contain provisions which: (i)
require the affirmative vote of holders of at least 75% of the
voting power of all of the shares of outstanding capital stock of
MBI entitled to vote in the election of directors to remove a
director or directors without cause; (ii) require the affirmative
vote of the holders of at least 75% of the voting power of all
shares of the outstanding capital stock of MBI to approve certain
"business combinations" with "interested parties" unless at least
two-thirds of the Board of Directors first approves such business
combinations; and (iii) require an affirmative vote of at least
75% of the voting power of all shares of the outstanding capital
stock of MBI for the amendment, alteration, change or repeal of
any of the above provisions unless at least two-thirds of the
Board of Directors first approves such an amendment, alteration,
change or repeal. Such provisions may be deemed to have an anti-
takeover effect.
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<PAGE> 73
RESTRICTIONS ON RESALE OF MBI STOCK BY AFFILIATES
Under Rule 145 of the Securities Act, certain persons
who receive MBI Common Stock pursuant to the Merger and who are
deemed to be "affiliates" of Regional will be limited in their
right to resell the stock so received. The term "affiliate" is
defined to include any person who, directly or indirectly,
controls, or is controlled by, or is under common control with
Regional at the time the Merger is submitted to a vote of the
shareholders of Regional. Each affiliate of Regional (generally
each director and executive officer of Regional and each
shareholder who beneficially owns a substantial number of
outstanding shares of Regional Common Stock) who desires to
resell the MBI Common Stock received in the Merger must sell such
stock either pursuant to an effective Registration Statement or
in accordance with an applicable exemption, such as the
applicable provisions of Rule 145(d) under the Securities Act.
Rule 145(d) provides that persons deemed to be
affiliates may resell their stock received in the Merger pursuant
to certain of the requirements of Rule 144 under the Securities
Act if such stock is sold within the first two years after the
receipt thereof. After two years, if such person is not an
affiliate of MBI and if MBI is current with respect to its
required public filings, a former affiliate of Regional may
freely resell the stock received in the Merger without
limitation. After three years from the issuance of the stock, if
such person is not an affiliate of MBI at the time of sale and
for at least three months prior to such sale, such person may
freely resell such stock, without limitation, regardless of the
status of MBI's required public filings. The shares of MBI
Common Stock to be received by affiliates of Regional in the
Merger will be legended as to the restrictions imposed upon
resale of such stock.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF MBI AND REGIONAL
MBI is incorporated under the laws of the State of
Missouri, while Regional is incorporated under the laws of the
State of Illinois. The rights of the shareholders of MBI are
governed by MBI's Restated Articles of Incorporation and By-Laws
and the Missouri Act. The rights of Regional shareholders are
governed by Regional's Articles of Incorporation and By-Laws and
by the Illinois Act. The rights of Regional shareholders who
receive shares of MBI Common Stock in the Merger will thereafter
be governed by MBI's Restated Articles of Incorporation and
By-Laws and by the Missouri Act. The material rights of such
shareholders, and, where applicable, the differences between the
rights of MBI shareholders and Regional shareholders, are
summarized below.
PREFERRED SHARE PURCHASE RIGHTS PLAN. As described
above under "-- Preferred Share Purchase Rights Plan," MBI Common
Stock has attached Rights, which may deter certain takeover
proposals. Regional does not have a rights plan.
SUPERMAJORITY PROVISIONS. MBI's Restated Articles of
Incorporation and MBI's By-Laws contain provisions requiring a
supermajority vote of the shareholders of MBI to approve certain
proposals. Under both MBI's Restated Articles and By-Laws,
removal by the shareholders of the entire Board of Directors or
any individual director from office without cause requires the
affirmative vote of not less than 75% of the total votes entitled
to be voted at a meeting of shareholders called for the election
of directors. Amendment by the shareholders of MBI's Restated
Articles or By-Laws relating to (i) the number or qualification
of directors; (ii) the classification of the Board of Directors;
(iii) the filling of vacancies on the Board of Directors; or (iv)
the removal of directors, requires the affirmative vote of not
less than 75% of the total votes of MBI's then outstanding shares
of capital stock entitled to vote, voting together as a single
class, unless such amendment has previously been expressly
approved by at least two-thirds of the Board of Directors. The
Restated Articles of MBI additionally provide that, in addition
to any shareholder vote required under the Missouri Act, the
affirmative vote of the holders of not less than 75% of the total
votes to which all of the then outstanding shares of capital
stock of MBI
- 70 -
<PAGE> 74
are entitled, voting together as a single class (the "Voting
Stock"), shall be required for the approval of any Business
Combination. A "Business Combination" is defined generally to
include sales, exchanges, leases, transfers or other dispositions
of assets, mergers or consolidations, issuances of securities,
liquidations or dissolutions of MBI, reclassifications of
securities or recapitalizations of MBI, involving MBI on the one
hand, and an Interested Shareholder or an affiliate of an
Interested Shareholder on the other hand. An "Interested
Shareholder" is defined generally to include any person, firm,
corporation or other entity which is the beneficial owner of 5%
or more of the voting power of the outstanding Voting Stock. If,
however, at least two-thirds of the Board of Directors of MBI
approve the Business Combination, such Business Combination shall
require only the vote of shareholders as provided by Missouri law
or otherwise. The amendment of the provisions of MBI's Restated
Articles relating to the approval of Business Combinations
requires the affirmative vote of the holders of at least 75% of
the Voting Stock unless such amendment has previously been
approved by at least two-thirds of the Board of Directors.
To the extent that a potential acquiror's strategy
depends on the passage of proposals which require a supermajority
vote of MBI's shareholders, such provisions requiring a
supermajority vote may have the effect of discouraging takeover
attempts that do not have Board approval by making passage of
such proposals more difficult. Neither Regional's Articles of
Incorporation nor Regional's By-Laws require a supermajority vote
of shareholders with respect to any item.
VOTING FOR DIRECTORS. MBI's By-Laws provide for
cumulative voting in the election of directors. Cumulative
voting entitles each shareholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by
the number of directors to be elected. Each shareholder may cast
all such votes for one nominee or distribute them among two or
more nominees, thus permitting holders of less than a majority of
the outstanding shares of voting stock to achieve board
representation. Neither Regional's Articles of Incorporation or
By-Laws provide for cumulative voting.
CLASSIFIED BOARD. As described under "--
Classification of Board of Directors," the Board of Directors of
MBI is divided into three classes of directors, with each class
being elected to a staggered three-year term. By reducing the
number of directors to be elected in any given year, the
existence of a classified Board diminishes the benefits of the
cumulative voting rights to minority shareholders. Regional does
not have a classified Board of Directors.
ANTI-TAKEOVER STATUTES. The Missouri Act contains
certain provisions applicable to Missouri corporations such as
MBI which may be deemed to have an anti-takeover effect. Such
provisions include Missouri's business combination statute and
the control share acquisition statute.
The Missouri business combination statute protects
domestic corporations after hostile takeovers by prohibiting
certain transactions once an acquiror has gained control. The
statute restricts certain "Business Combinations" between a
corporation and an "Interested Shareholder" or affiliates of the
Interested Shareholder for a period of five years unless certain
conditions are met. A "Business Combination" includes a merger
or consolidation, certain sales, leases, exchanges, pledges and
similar dispositions of corporate assets or stock and certain
reclassifications and recapitalizations. An "Interested
Shareholder" includes any person or entity which beneficially
owns or controls 20% or more of the outstanding voting shares of
the corporation.
During the initial five-year restricted period, no
Business Combination may occur unless such Business Combination
or the transaction in which an Interested Shareholder becomes
"interested" (the "Acquisition Transaction") was approved by the
board of directors of the corporation on or before the date of
the Acquisition Transaction. Business Combinations may occur
after the five-year period
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<PAGE> 75
following the Acquisition Transaction only if: (i) prior to the
stock acquisition by the Interested Shareholder, the board of
directors approves the transaction in which the Interested
Shareholder became an Interested Shareholder or approves the
Business Combination in question; (ii) the holders of a majority
of the outstanding voting stock, other than stock owned by the
Interested Shareholder, approve the Business Combination; or
(iii) the Business Combination satisfies certain detailed
fairness and procedural requirements.
The Missouri Act exempts from its provisions: (i)
corporations not having a class of voting stock registered under
Section 12 of the Exchange Act; (ii) corporations which adopt
provisions in their articles of incorporation or bylaws expressly
electing not to be covered by the statute; and (iii) certain
circumstances in which a shareholder inadvertently becomes an
Interested Shareholder. MBI's Restated Articles of Incorporation
and By-Laws do not contain an election to "opt out" of the
Missouri business combination statute.
The Missouri Act also contains a "Control Share
Acquisition Statute" which provides that an "Acquiring Person"
who after any acquisition of shares of a publicly traded
corporation has the voting power, when added to all shares of the
same corporation previously owned or controlled by the Acquiring
Person, to exercise or direct the exercise of: (i) 20% but less
than 33 1/3%, (ii) 33 1/3% or more but less than a majority or (iii) a
majority, of the voting power of outstanding stock of such
corporation, must obtain shareholder approval for the purchase of
the "Control Shares." If approval is not given, the Acquiring
Person's shares lose the right to vote. The statute prohibits an
Acquiring Person from voting its shares unless certain disclosure
requirements are met and the retention or restoration of voting
rights is approved by both: (i) a majority of the outstanding
voting stock, and (ii) a majority of the outstanding voting stock
after exclusion of "Interested Shares." Interested Shares are
defined as shares owned by the Acquiring Person, by directors who
are also employees, and by officers of the corporation.
Shareholders are given dissenters' rights with respect to the
vote on Control Share Acquisitions and may demand payment of the
fair value of their shares.
A number of acquisitions of shares are deemed not to
constitute Control Share Acquisitions, including good faith
gifts, transfers pursuant to wills, purchases pursuant to an
issuance by the corporation, mergers involving the corporation
which satisfy the other requirements of the Missouri Act,
transactions with a person who owned a majority of the voting
power of the corporation within the prior year, or purchases from
a person who has previously satisfied the provisions of the
Control Share Acquisition Statute so long as the transaction does
not result in the purchasing party having voting power after the
purchase in a percentage range (such ranges are as set forth in
the immediately preceding paragraph) beyond the range for which
the selling party previously satisfied the provisions of the
statute. Additionally, a corporation may exempt itself from
application of the statute by inserting a provision in its
articles of incorporation or bylaws expressly electing not to be
covered by the statute. MBI's Restated Articles of Incorporation
and By-Laws do not contain an election to "opt out" of the
Control Share Acquisition Statute.
Illinois has a business combination statute similar to
Missouri's which generally prohibits a domestic corporation from
engaging in mergers or other business combinations with certain
"interested shareholders" for a period of three years from the
time that the person becomes an "interested shareholder." The
three year moratorium can be avoided if (i) the business
combination or transaction in which the shareholder became an
interested shareholder is approved by the Board of Directors
prior to the date on which the interested shareholder acquires
the requisite percentage of stock, (ii) as a result of the
transaction pursuant to which the shareholder became an
"interested shareholder," the interested shareholder owned 85% or
more of the voting shares of the corporation, excluding for
purposes of determining the number of shares outstanding those
shares owned by (A) persons who are directors and
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also officers, and (B) employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (iii) subsequent to becoming an
interested shareholder the transaction is approved by the Board
of Directors and authorized (but not by written consent) by 66
2/3% or more of the corporation's shareholders (other than the
interested shareholder).
DISSENTERS' RIGHTS. Under both Section 351.455 of the
Missouri Act and Section 11.65 of the Illinois Act, a shareholder
of any corporation which is a party to a merger or consolidation,
or which sells all or substantially all of its assets, has the
right to dissent from such corporate action and to demand payment
of the value of such shares. The provisions of the Illinois Act
are applicable to the shareholders of Regional.
SHAREHOLDERS' RIGHT TO INSPECT. Under Section 351.215
of the Missouri Act, any shareholder of MBI may inspect the
corporation's books and records for any reasonable and proper
purpose. Such inspection may be made at any reasonable time or
times. Shareholders of Regional have similar rights under
Section 7.75 of the Illinois Act.
SIZE OF BOARD OF DIRECTORS. As permitted under the
Missouri Act, the number of directors on the Board of Directors
of MBI is set forth in MBI's By-Laws, which provide that the
number of directors may be fixed from time to time at not less
than 12 nor more than 24 by an amendment of the By-Laws or by a
resolution of the Board of Directors, in either case, adopted by
the vote or consent of at least two-thirds of the number of
directors then authorized under the By-Laws. MBI's Board of
Directors currently has twelve members. Regional's Board of
Directors currently has three members. The supermajority vote
required for the amendment of MBI's By-Laws regarding a change in
the number of directors may have the effect of making it more
difficult to force an immediate change in the composition of a
majority of the Board of Directors and may be deemed to have an
anti-takeover effect.
SUPERVISION AND REGULATION
--------------------------
GENERAL
As a bank holding company, MBI is subject to regulation
under the BHCA and its examination and reporting requirements.
Under the BHCA, a bank holding company may not directly or
indirectly acquire the ownership or control of more than 5% of
the voting shares or substantially all of the assets of any
company, including a bank or savings and loan association,
without the prior approval of the Federal Reserve Board. In
addition, bank holding companies are generally prohibited under
the BHCA from engaging in nonbanking activities, subject to
certain exceptions.
MBI and its subsidiaries are subject to supervision and
examination by applicable federal and state banking agencies.
The earnings of MBI's subsidiaries, and therefore the earnings of
MBI, are affected by general economic conditions, management
policies and the legislative and governmental actions of various
regulatory authorities, including the Federal Reserve Board, the
Office of Thrift Supervision, the FDIC, the Office of the
Comptroller of the Currency (the "Comptroller") and various state
financial institution regulatory agencies. In addition, there
are numerous governmental requirements and regulations that
affect the activities of MBI and its subsidiaries.
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<PAGE> 77
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to
which a bank holding company and certain of its nonbank
subsidiaries can borrow or otherwise obtain credit from its bank
subsidiaries. In general, these restrictions require that any
such extensions of credit must be on non-preferential terms and
secured by designated amounts of specified collateral and be
limited, as to any one of the holding company or such nonbank
subsidiaries, to 10% of the lending bank's capital stock and
surplus, and as to the holding company and all such nonbank
subsidiaries in the aggregate, to 20% of such capital stock and
surplus.
PAYMENT OF DIVIDENDS
MBI is a legal entity separate and distinct from its
wholly owned financial institutions and other subsidiaries. The
principal source of MBI's revenues is dividends from its
financial institution subsidiaries. Various federal and state
statutory provisions limit the amount of dividends the affiliate
financial institutions can pay to MBI without regulatory
approval. The approval of the appropriate federal or state bank
regulatory agencies is required for any dividend if the total of
all dividends declared by the bank in any calendar year would
exceed the total of the institutions net profits, as defined by
regulatory agencies, for such year combined with its retained net
profits for the preceding two years. In addition, a national
bank or a state member bank may not pay a dividend in an amount
greater than its net profits then on hand. The payment of
dividends by any financial institution subsidiary may also be
affected by other factors, such as the maintenance of adequate
capital.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These
standards are designed to provide risk-responsive capital
guidelines and to incorporate a consistent framework for use by
financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks
that are similar to, but not identical with, the standards for
bank holding companies.
In general, the risk-related standards require
financial institutions and financial institution holding
companies to maintain capital levels based on "risk-adjusted"
assets, so that categories of assets with potentially higher
credit risk will require more capital backing than categories
with lower credit risk. In addition, financial institutions and
financial institution holding companies are required to maintain
capital to support off-balance sheet activities such as loan
commitments.
FDIC INSURANCE ASSESSMENTS
The subsidiary depository institutions of MBI are
subject to FDIC deposit insurance assessments. The FDIC has
adopted a risk-based premium schedule. Each financial institution
is assigned to one of three capital groups--well capitalized,
adequately capitalized or undercapitalized--and further assigned
to one of three subgroups within a capital group, on the basis of
supervisory evaluations by the institution's primary federal and,
if applicable, state supervisors, and on the basis of other
information relevant to the institution's financial condition and
the risk posed to the applicable insurance fund. The actual
assessment rate applicable to a particular institution will,
therefore, depend in part upon the risk assessment classification
so assigned to the institution by the FDIC. See "- FIRREA and
FDICIA."
The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), adopted in August 1989 to
provide for the resolution of insolvent savings associations,
required the FDIC
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<PAGE> 78
to establish separate deposit insurance funds -- the BIF for
banks and the Savings Association Insurance Fund ("SAIF") for
savings associations. FIRREA also required the FDIC to set
deposit insurance assessments at such levels as would cause BIF
and SAIF to reach their "designated reserve ratios" of 1.25
percent of the deposits insured by them within a reasonable
period of time. Due to low costs of resolving bank insolvencies
in the last few years, BIF reached its designated reserve ratio
in May 1995. As a result, effective January 1, 1996, the FDIC
eliminated deposit insurance assessments (except for the minimum
$2,000 payment required by law) for banks that are well
capitalized and well managed and reduced the deposit insurance
assessments for all other banks. As of January 1, 1996, the SAIF
had not reached the designated reserve ratio. MBI, which has
acquired substantial amounts of SAIF-insured deposits during the
years from 1989 to the present, is required to pay SAIF deposit
insurance premiums on these SAIF-insured deposits.
The Deposit Insurance Funds Act of 1996 (the "Funds
Act"), enacted on September 30, 1996, required the FDIC to take
immediate steps to recapitalize the SAIF and to change the basis
on which funds are raised to make the scheduled payments on the
FICO bonds issued in 1987 to replenish the Federal Savings and
Loan Insurance Corporation. The new legislation, combined with
regulations issued by the FDIC immediately after enactment of the
Funds Act, provides for the following:
(i) A special assessment in the amount of 65.7
basis points on SAIF-insured deposits held by
depository institutions on March 31, 1995 (the special
assessment was required by the Funds Act to
recapitalize the SAIF to the designated reserve ratio
of 1.25 percent of the deposits insured by SAIF).
Payments of this assessment were made in November 1996,
but were accrued by financial institutions in the third
calendar quarter of 1996. Institutions such as MBI
that have deposits insured by both the BIF and the SAIF
("Oakar Banks") were required to pay the special
assessment on 80% of their "adjusted attributable
deposit amounts" ("AADA"). In addition, for purposes
of future regular deposit insurance assessments, the
AADA on which Oakar Banks pay assessments to SAIF was
also reduced by 20%.
(ii) Commencing January 1, 1997, BIF insured
institutions will be responsible for a portion of the
annual carrying costs of the FICO bonds. Such
institutions will be assessed at 80% of the rate
applicable to SAIF-insured institutions until December
31, 1999. Additionally, pursuant to the Funds Act, if
the reserves in BIF at the end of any semiannual
assessment period exceed 1.25% of insured deposits, the
FDIC is required to refund the excess to the BIF-
insured institutions.
(iii) The merger of the BIF and the SAIF on
January 1, 1999 to create the Deposit Insurance Fund,
but only if no more savings associations are in
existence at that time. The Deposit Act also directs
the Secretary of the Treasury to conduct a study and
submit recommendations to Congress regarding the
establishment of a common charter for depository
institutions.
PROPOSALS TO OVERHAUL THE SAVINGS ASSOCIATION INDUSTRY
Proposals recently have been introduced in the U.S.
Congress that, if adopted, would overhaul the savings association
industry. The most significant of these proposals would merge
the Comptroller and the OTS, abolish the federal savings
association charter and require federal thrifts to convert to
commercial banks. MBI cannot predict whether these or any other
legislative proposals will be enacted, or, if enacted, the final
form of the law.
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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'
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<PAGE> 80
CAMEL rating system may be adequately capitalized if their ratios
of core capital to adjusted total assets were 3% or greater).
FDICIA also makes extensive changes in existing rules
regarding audits, examinations and accounting. It generally
requires annual on-site, full scope examinations by each bank's
primary federal regulator. It also imposes new responsibilities
on management, the independent audit committee and outside
accountants to develop or approve reports regarding the
effectiveness of internal controls, legal compliance and off-
balance sheet liabilities and assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a
preference for deposits and certain claims for administrative
expenses and employee compensation against an insured depository
institution, in the liquidation or other resolution of such an
institution by any receiver. Such obligations would be afforded
priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, as
well as any obligation to shareholders of such an institution in
their capacity as such.
THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION
In September 1994, legislation was enacted that is
expected to have a significant effect in restructuring the
banking industry in the United States. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-
Neal") facilitates the interstate expansion and consolidation of
banking organizations by permitting (i) bank holding companies
that are adequately capitalized and managed, one year after
enactment of the legislation, to acquire banks located in states
outside their home states regardless of whether such acquisitions
are authorized under the law of the host state, (ii) the
interstate merger of banks after June 1, 1997, subject to the
right of individual states to "opt in" or to "opt out" of this
authority before that date, (iii) banks to establish new branches
on an interstate basis provided that such action is specifically
authorized by the law of the host state, (iv) foreign banks to
establish, with approval of the regulators in the United States,
branches outside their home states to the same extent that
national or state banks located in the home state would be
authorized to do so, and (v) banks to receive deposits, renew
time deposits, close loans, service loans and receive payments on
loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same state or
a different state. One effect of Riegle-Neal is to permit MBI to
acquire banks located in any state and to permit bank holding
companies located in any state to acquire banks and bank holding
companies in Missouri. Overall, Riegle-Neal is likely to have
the effects of increasing competition and promoting geographic
diversification in the banking industry.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------
KPMG Peat Marwick LLP served as MBI's independent
accountants for the year ended December 31, 1995 and continues to
serve in such capacity. Services provided in connection with the
audit function included examination of the annual consolidated
financial statements, review and consultation regarding filings
with the Commission and other regulatory authorities and
consultation on financial accounting and reporting matters.
KPMG Peat Marwick LLP served as Regional's independent
accountants for the year ended December 31, 1995 and continues to
serve in such capacity. Services provided in connection with the
audit function included examination of the annual consolidated
financial statements, review and consultation regarding filings
with regulatory authorities and consultation on financial
accounting and reporting matters.
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LEGAL MATTERS
-------------
Certain legal matters will be passed upon for MBI by
Thompson Coburn, St. Louis, Missouri and for Regional by Bryan
Cave LLP, St. Louis, Missouri.
EXPERTS
-------
The consolidated financial statements of MBI as of
December 31, 1995, 1994 and 1993, and for each of the years in
the three-year period ended December 31, 1995, incorporated by
reference in MBI's Annual Report on Form 10-K, and the
supplemental consolidated financial statements of MBI as of
December 31, 1995, 1994 and 1993, and for each of the years in
the three-year period ended December 31, 1995, contained in MBI's
Current Report on Form 8-K dated March 11, 1996, have been
incorporated by reference herein in reliance upon the reports of
KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Mark Twain
incorporated by reference in Mark Twain's Annual Report on Form
10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated
herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of Roosevelt as of
December 31, 1995 and 1994 and for each of the years in the three-year
period ended December 31, 1995, included in Roosevelt's Annual Report
on Form 10-K for the year ended December 31, 1995, as amended, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Regional as of
and for the year ended December 31, 1995 have been included
herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, whose report is
included herein, and upon the authority of such firm as experts
in accounting and auditing.
OTHER MATTERS
-------------
The Board of Directors of Regional, at the date hereof,
is not aware of any business to be presented at the Special
Meeting other than that referred to in the Notice of Special
Meeting and discussed herein. If any other matter should
properly come before the Special Meeting, the persons named as
proxies will have discretionary authority to vote the shares
represented by proxies in accordance with their discretion and
judgment as to the best interests of Regional.
SHAREHOLDER PROPOSALS
---------------------
If the Merger is approved, the other conditions to the
Merger are satisfied and the Merger is consummated, shareholders
of Regional will become shareholders of MBI at the Effective
Time. MBI shareholders may submit to MBI proposals for formal
consideration at the 1997 and 1998 annual meetings of MBI's
shareholders and inclusion in MBI's proxy statements for such
meetings. The deadline for all such proposals to be considered
for inclusion in MBI's Proxy Statement and proxy for the 1997
annual
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<PAGE> 82
meeting was November 22, 1996. All such proposals to be considered for
inclusion in MBI's Proxy Statement and proxy for the 1998 annual meeting
must be received in writing by the Corporate Secretary at Mercantile
Bancorporation Inc., P.O. Box 524, St. Louis, Missouri 63166-0524 by
November 22, 1997.
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<PAGE> 83
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
-----
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . .F-1
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996
(UNAUDITED) AND DECEMBER 31, 1995
AND 1994 (UNAUDITED) . . . . . . . . . . . . . . . . . . .F-2
CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1995
(UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31,
1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995,
1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . . . . .F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
1995 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31,
1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . .F-6 TO F-14
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<PAGE> 84
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Regional Bancshares, Inc.:
We have audited the accompanying consolidated balance sheet of Regional
Bancshares, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Regional
Bancshares, Inc. and subsidiary as of December 31, 1995, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 1, 1996
F-1
<PAGE> 85
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1996, and December 31, 1995 and 1994
<CAPTION> December 31,
September 30, ---------------------------
Assets 1996 1995 1994
------ ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,452,252 6,068,895 4,810,081
Federal funds sold 495,000 3,625,000 1,425,000
------------ ----------- -----------
Cash and cash equivalents 7,947,252 9,693,895 6,235,081
------------ ----------- -----------
Investments in debt and marketable equity
securities available-for-sale, at estimated
market value 66,076,952 56,424,260 45,734,728
Loans 106,526,609 99,770,366 93,848,406
Less:
Unearned discount and fees 3,357,540 3,086,141 2,532,455
Allowance for loan losses 1,473,078 1,350,143 1,825,044
------------ ----------- -----------
Net loans 101,695,991 95,334,082 89,490,907
------------ ----------- -----------
Premises and equipment, net 3,702,882 3,303,592 3,361,715
Accrued interest receivable 1,317,682 1,361,231 1,226,868
Other real estate 630,600 960,100 718,600
Other assets 710,838 602,805 1,372,506
------------ ----------- -----------
Total assets $182,082,197 167,679,965 148,140,405
============ =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Non-interest-bearing 13,716,585 11,809,821 13,384,765
Interest-bearing 133,269,970 130,904,150 113,721,824
------------ ----------- -----------
Total deposits 146,986,555 142,713,971 127,106,589
Short-term borrowings 10,000,000 - -
Other liabilities 1,679,405 1,844,082 1,348,932
------------ ----------- -----------
Total liabilities 158,665,960 144,558,053 128,455,521
------------ ----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $10 par value; 30,000 shares
authorized, 25,321 shares issued and
outstanding 253,210 253,210 253,210
Surplus 2,906,963 2,906,963 2,906,963
Retained earnings 20,543,954 19,293,738 17,569,329
Net unrealized gains (losses) on securities
available-for-sale (287,890) 668,001 (1,044,618)
------------ ----------- -----------
Total stockholders' equity 23,416,237 23,121,912 19,684,884
------------ ----------- -----------
Total liabilities and
stockholders' equity $182,082,197 167,679,965 148,140,405
============ =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-2
<PAGE> 86
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Nine months ended September 30, 1996 and 1995 and
years ended December 31, 1995, 1994 and 1993
<CAPTION>
September 30, December 31,
------------------ -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $6,679,393 6,284,770 8,529,234 6,889,208 6,171,383
Interest on federal funds sold 34,068 143,317 173,471 54,733 86,873
Interest and dividends on debt and marketable equity
securities:
Taxable 2,017,769 1,426,393 2,000,033 1,872,382 2,002,935
Exempt from federal income taxes 950,790 852,160 1,137,487 1,494,383 1,347,806
---------- --------- ---------- ---------- ---------
Total interest income 9,682,020 8,706,640 11,840,225 10,310,706 9,608,997
---------- --------- ---------- ---------- ---------
Interest expense:
Interest on deposits 4,591,052 3,822,975 5,297,799 3,949,964 3,739,384
Other interest expense 234,837 10,345 20,402 98,015 2,207
---------- --------- ---------- ---------- ---------
Total interest expense 4,825,889 3,833,320 5,318,201 4,047,979 3,741,591
---------- --------- ---------- ---------- ---------
Net interest income 4,856,131 4,873,320 6,522,024 6,262,727 5,867,406
Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000)
---------- --------- ---------- ---------- ---------
Net interest income after provision for loan losses 4,781,134 4,831,655 6,480,359 6,542,727 6,827,406
---------- --------- ---------- ---------- ---------
Noninterest income:
Service charges on deposits 259,993 252,170 341,352 360,877 326,380
Trust income 142,497 150,000 198,028 208,194 218,790
ATM switch income 153,818 109,142 144,863 109,694 24,529
Gain on sale of mortgage loans 19,531 42,417 65,664 42,103 213,616
Gain (loss) on sale of debt and marketable equity
securities, net (11,513) 21,852 10,072 (249,608) 176,248
Gain on sale of other real estate, net 7,380 34,156 35,616 72,580 19,238
Other noninterest income 225,910 229,961 312,404 285,189 289,944
---------- --------- ---------- ---------- ---------
Total noninterest income 797,616 839,698 1,107,999 829,029 1,268,745
---------- --------- ---------- ---------- ---------
Noninterest expense:
Salaries and employee benefits 1,527,667 1,365,600 1,811,480 1,889,273 1,793,117
Occupancy 163,511 122,234 164,513 186,760 290,561
Equipment 253,440 214,968 287,587 244,427 268,560
Data processing 188,327 178,798 238,990 153,660 105,202
FDIC insurance assessment 800 193,899 146,213 278,547 276,002
Legal and professional fees 143,549 137,043 168,043 171,380 236,766
Other noninterest expense 850,614 760,009 1,080,617 1,105,773 1,467,135
---------- --------- ---------- ---------- ---------
Total noninterest expense 3,127,908 2,972,551 3,897,443 4,029,820 4,437,343
---------- --------- ---------- ---------- ---------
Income before income tax expense and cumulative
effect of change in accounting principle 2,450,842 2,698,802 3,690,915 3,341,936 3,658,808
Income tax expense 440,995 700,054 932,650 796,010 1,158,085
---------- --------- ---------- ---------- ---------
Income before cumulative effect of change in
accounting principle 2,009,847 1,998,748 2,758,265 2,545,926 2,500,723
Cumulative effect of change in accounting for income
taxes - - - - 517,850
---------- --------- ---------- ---------- ---------
Net income $2,009,847 1,998,748 2,758,265 2,545,926 3,018,573
========== ========= ========== ========== =========
Earnings per share (based on weighted average shares
outstanding of 25,321):
Income before cumulative effect of change in
accounting principle $ 79.37 78.94 108.93 100.55 98.76
Cumulative effect of change in accounting for
income taxes - - - - 20.45
---------- --------- ---------- ---------- ---------
Net income $ 79.37 78.94 108.93 100.55 119.21
========== ========= ========== ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 87
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Nine months ended September 30, 1996 and
years ended December 31, 1995, 1994, and 1993
<CAPTION>
Net unrealized
gains (losses)
on securities
Common Retained available-
stock Surplus earnings for-sale Total
----- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992
(unaudited) $253,210 2,906,963 12,154,982 - 15,315,155
Net income (unaudited) - - 3,018,573 - 3,018,573
-------- --------- ---------- ---------- ----------
Balance, December 31, 1993
(unaudited) 253,210 2,906,963 15,173,555 - 18,333,728
Cumulative effect of implementation
of change in accounting for debt and
marketable equity securities, net
of tax (unaudited) - - - 1,790,579 1,790,579
Net income (unaudited) - - 2,545,926 - 2,545,926
Cash dividends ($5.93 per
share) (unaudited) - - (150,152) - (150,152)
Net change in unrealized
gains (losses) on securities
available-for-sale (unaudited) - - - (2,835,197) (2,835,197)
-------- --------- ---------- ---------- ----------
Balance, December 31, 1994
(unaudited) 253,210 2,906,963 17,569,329 (1,044,618) 19,684,884
Net income - - 2,758,265 - 2,758,265
Cash dividends ($40.83 per share) - - (1,033,856) - (1,033,856)
Net change in unrealized gains (losses)
on securities available-for-sale - - - 1,712,619 1,712,619
-------- --------- ---------- ---------- ----------
Balance, December 31, 1995 253,210 2,906,963 19,293,738 668,001 23,121,912
Net income (unaudited) - - 2,009,847 - 2,009,847
Cash dividends ($30.00 per
share) (unaudited) - - (759,631) - (759,631)
Net change in unrealized
gains (losses) on securities
available-for-sale (unaudited) - - - (955,891) (955,891)
-------- --------- ---------- ---------- ----------
Balance, September 30, 1996
(unaudited) $253,210 2,906,963 20,543,954 (287,890) 23,416,237
======== ========= ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE> 88
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995 and
years ended December 31, 1995, 1994, and 1993
<CAPTION>
September 30, December 31,
------------------ -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,009,847 1,998,748 2,758,265 2,545,926 3,018,573
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000)
Depreciation and amortization 227,885 191,169 231,619 218,450 355,140
Loss (gain) on sale of debt and marketable
equity securities, net 11,513 (21,852) (10,072) 249,608 (176,248)
Gain on sale of other real estate, net (7,380) (34,156) (35,616) (72,580) (19,238)
Decrease (increase) in accrued interest receivable 43,549 (39,293) (134,363) 993 110,901
Origination of secondary market mortgage loans (1,753,210) (3,838,026) (7,003,556) (5,232,318) (13,336,807)
Proceeds from the sale of secondary market
mortgage loans 1,735,991 4,080,372 7,454,345 5,084,103 13,355,616
Other operating activities, net 277,328 639,004 502,662 268,197 (760,984)
------------ ----------- ----------- ----------- -----------
Net cash provided by operating activities 2,620,520 3,017,631 3,804,949 2,782,379 1,586,953
------------ ----------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from calls and maturities of and principal
payments on debt securities 4,797,330 5,273,079 7,340,948 8,433,681 5,245,399
Proceeds from sales of debt and marketable equity
securities 3,947,913 7,641,243 10,635,198 11,118,812 12,930,256
Purchase of debt and marketable equity securities (19,903,741) (20,941,923) (26,051,008) (12,089,885) (28,285,368)
Net (increase) decrease in loans (6,298,656) (6,440,935) (7,166,055) (15,056,625) 87,374
Purchase of premises and equipment (609,842) (132,061) (209,810) (372,911) (252,097)
Proceeds from sale of premises and equipment 1,500 19,200 26,600 35,467 -
Proceeds from sales of other real estate 185,380 456,006 504,466 241,498 359,595
------------ ----------- ----------- ----------- -----------
Net cash used in investing activities (17,880,116) (14,125,391) (14,919,661) (7,689,963) (9,914,841)
------------ ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net increase in deposits 4,272,584 11,050,916 15,607,382 3,385,333 7,494,289
Proceeds from short-term borrowings 10,000,000 - - - -
Cash dividends paid on common stock (759,631) (789,255) (1,033,856) (150,152) -
------------ ----------- ----------- ----------- -----------
Net cash provided by financing activities 13,512,953 10,261,661 14,573,526 3,235,181 7,494,289
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (1,746,643) (846,099) 3,458,814 (1,672,403) (833,599)
Cash and cash equivalents at beginning of period 9,693,895 6,235,081 6,235,081 7,907,484 8,741,083
------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 7,947,252 5,388,982 9,693,895 6,235,081 7,907,484
============ =========== =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowed funds $ 4,762,136 3,756,570 5,249,746 3,992,433 3,753,166
Income taxes 399,300 580,803 610,000 787,300 980,300
Noncash transactions:
Transfers to other real estate in settlement of
loans 2,500 813,458 813,458 140,600 39,079
Loans originated to facilitate sales of other real
estate 104,000 - 66,500 80,000 22,500
Unrealized gain (loss) on securities available-
for-sale (1,482,071) 2,219,258 2,594,877 (1,582,754) -
============ =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 89
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 (audited) and
December 31, 1994 and 1993 (unaudited)
NOTE 1 -- SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Regional Bancshares, Inc. and subsidiary (the Company) provides a full
range of banking services to individual and corporate customers through its
wholly owned subsidiary bank, Bank of Alton. The Company is subject to
competition from other financial and nonfinancial institutions providing
financial services in its customer service area, which is primarily the
Alton-Wood River area of Southwestern Illinois. Additionally, the Company
is subject to the regulations of certain federal and state agencies and
undergoes periodic examinations by those regulatory agencies.
The consolidated financial statements of the Company have been
prepared in conformity with generally accepted accounting principles and
conform to predominant practices within the banking industry. The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions, including the determination of the allowance for
loan losses, that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant accounting policies used by the Company in the preparation
and presentation of the consolidated financial statements are summarized
below:
CONSOLIDATION
The consolidated financial statements include the accounts of Regional
Bancshares, Inc. and Bank of Alton. All significant intercompany balances
and transactions have been eliminated.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash and due from banks and federal funds sold.
INVESTMENTS IN DEBT AND
MARKETABLE EQUITY SECURITIES
The Company classifies its debt and equity securities as
available-for-sale.
Available-for-sale securities are recorded at fair value. Unrealized
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and reported as a separate component
of stockholders' equity until realized.
A decline in the market value of any available-for-sale security below
cost that is deemed other than temporary results in a charge to earnings and
the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest method.
Amortization of premiums and accretion of discounts on mortgage-backed
securities are amortized in relation to the corresponding prepayment rates,
both historical and estimated, using a method which approximates the
interest method. Interest income is recognized when earned. Realized gains
and losses for securities are included in earnings using the specific
identification method for determining the cost of securities sold.
LOANS
Interest on commercial, real estate mortgage, and most consumer loans
is recognized using the simple-interest method. Interest on some consumer
loans is recognized using a method which approximates the interest method.
The accrual of interest on loans is discontinued when, in management's
judgment, the interest will not be collectible in the normal course of
business. Subsequent payments received on such loans are applied to
principal if doubt exists as to the collectibility of such principal;
otherwise, the portion of such receipts representing interest is recorded as
income. Loans are returned to accrual status when management believes full
collectibility of principal and interest is expected.
(Continued)
F-6
<PAGE> 90
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Net loan origination fees are deferred and recognized over the lives
of the related loans as a yield adjustment using a method approximating the
interest method.
The allowance for loan losses is available to absorb loan charge-offs.
The allowance is increased by provisions charged to operations and reduced
by loan charge-offs less recoveries. Management utilizes a systematic,
documented approach in determining the appropriate level of the allowance
for loan losses. Management's approach, which provides for general and
specific allocations of the allowance for loan losses, is based on current
economic conditions, past losses, collection experience, risk
characteristics of the portfolio, assessment of collateral values by
obtaining independent appraisals for significant properties, and such other
factors which, in management's judgment, deserve current recognition in
estimating loan losses.
Management believes the allowance for loan losses is adequate to
absorb losses in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the allowance may
be necessary based on changes in economic conditions. Additionally, various
regulatory agencies, as an integral part of the examination process,
periodically review Bank of Alton's allowance for loan losses. Such
agencies may require Bank of Alton to increase its allowance for loan losses
based on their judgments and interpretations about information available to
them at the time of their examinations.
On January 1, 1995, the Company adopted SFAS No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures (SFAS 118).
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for
loan impairment and the measurement methods for certain impaired loans and
loans for which terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when it is
probable a creditor will be unable to collect all amounts due - both
principal and interest - according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows of an
impaired loan is discounted at the loan's effective interest rate.
Alternatively, impairment could be measured by reference to an observable
market price, if one exists, or the fair value of the collateral for a
collateral-dependent loan. Regardless of the historical measurement method
used, SFAS 114 requires a creditor to measure impairment based on the fair
value of the collateral when the creditor determines foreclosure is
probable. Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's effective
rate of interest as stated in the original loan agreement.
SFAS 118 amends SFAS 114 to allow creditors to use existing methods of
recognizing interest income on impaired loans. The Company has elected to
continue to use its existing nonaccrual methods for recognizing interest on
impaired loans.
The adoption of SFAS 114 and SFAS 118 resulted in no prospective
adjustment to the provision for loan losses.
SECONDARY MORTGAGE MARKET OPERATIONS
The Bank of Alton originates mortgage loans for sale in the secondary
market to the Federal Home Loan Mortgage Corporation (FHLMC). Any such
mortgage loans held for sale are maintained on the Company's consolidated
balance sheets at the lower of cost or market as determined by outstanding
commitments from FHLMC to purchase such loans. Gains and losses on the sale
of these loans and loan origination fees are recognized upon sale of the
related loans and included in the consolidated statements of income as
noninterest income. Additionally, loan administration fees, representing
income earned from servicing these loans, are calculated on the outstanding
principal balances of the loans serviced and recorded as noninterest income
as earned.
In May 1995, the Financial Accounting Standards Board issued SFAS No.
122, Accounting for Mortgage Servicing Rights (SFAS 122) which
(Continued)
F-7
<PAGE> 91
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
requires that a mortgage banking enterprise recognize as separate assets the
rights to service mortgage loans for others at the origination or purchase
date of the loans when the enterprise has definitive plans to sell or
securitize the loans and retain the mortgage servicing rights, assuming the
fair value of the loans and servicing rights may be practically estimated.
Otherwise, servicing rights should be recognized when the underlying loans are
sold or securitized, using an allocation of total cost of the loans based on
the relative fair values at the date of sale. SFAS 122 also requires an
assessment of capitalized mortgage servicing rights for impairment to be
based on the current fair value of those rights. SFAS 122 is required to be
applied prospectively in fiscal years beginning after December 31, 1995.
The Company believes SFAS 122 will not have a material effect on its
financial position or results of operations.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization of premises
and equipment are provided using the straight-line method over the estimated
useful lives of the respective assets or the respective lease terms for
leasehold improvements. The estimated useful lives range from 30-40 years
for buildings and improvements and 3-10 years for furniture, fixtures and
equipment. Expenditures for major renewals and betterments of premises and
equipment are capitalized, and those for maintenance and repairs are
expensed as incurred.
INCOME TAXES
The Company and Bank of Alton file a consolidated federal income tax
return.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period which includes the enactment date.
OTHER REAL ESTATE
Other real estate represents property acquired through foreclosure or
deeded to the Company's banking subsidiary in lieu of foreclosure on loans
on which the borrowers have defaulted as to payment of principal and
interest. Other real estate is recorded on an individual asset basis at the
lower of fair value minus estimated selling costs or cost. If the fair
value minus estimated selling costs is less than cost, the deficiency is
recorded in a valuation reserve account through a provision charged to
income. Subsequent increases in the fair value minus estimated selling
costs are recorded through a reversal of the valuation reserve, but not
below zero.
TRUST OPERATIONS
Assets held in fiduciary or agency capacities for customers are not
included in the accompanying consolidated balance sheets since such items
are not assets of the Company. Trust income is recognized on the accrual
basis.
FINANCIAL INSTRUMENTS
Financial instruments are defined as cash, evidence of ownership
interest in an entity, or a contract that both:
* Imposes on one entity a contractual obligation to deliver cash or another
financial instrument to a second entity or to exchange other
financial instruments on potentially unfavorable terms with the
second entity; and
* Conveys to that second entity a contractual right to receive cash or
another financial instrument from the first entity or to exchange
other financial instruments on potentially favorable terms with the
first entity.
EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average shares
outstanding.
(Continued)
F-8
<PAGE> 92
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 2 -- REGULATORY RESTRICTIONS
Subsidiary bank dividends are the principal source of funds for
payment of dividends by the Company to its stockholders. Bank of Alton is
subject to regulations by regulatory authorities which require the
maintenance of minimum capital levels. As of December 31, 1995, there are
no regulatory restrictions, other than maintenance of minimum capital
standards, as to the amount of dividends Bank of Alton may pay.
Bank of Alton is required to maintain certain daily reserve balances
on hand in accordance with Federal Reserve Board requirements. The reserve
balance maintained in accordance with such requirements as of December 31,
1995 and 1994 was $771,000 and $722,000, respectively.
NOTE 3 -- INVESTMENTS IN DEBT
AND MARKETABLE EQUITY SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses,
and estimated market value for available-for-sale securities, by major
security type, at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities $ 9,484,634 130,583 16,932 9,598,285
Securities of U.S.
government
agencies and
corporations 15,426,541 30,329 685,315 14,771,555
Obligations of states
and political
subdivisions 25,494,784 1,575,616 720 27,069,680
Mortgage-backed
and other asset-
backed securities 3,464,233 - 58,623 3,405,610
Corporate debt
security 99,544 2,186 - 101,730
Federal Home
Loan Mortgage
Corporation
stock 1,000,000 35,000 - 1,035,000
Federal Home Loan
Bank stock 442,400 - - 442,400
----------- --------- ------- ----------
Total $55,412,136 1,773,714 761,590 56,424,260
=========== ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities $7,962,495 8,289 262,654 7,708,130
Securities of U.S.
government
agencies and
corporations 11,000,000 - 1,239,374 9,760,626
Obligations of states
and political
subdivisions 20,230,039 418,314 62,114 20,586,239
Mortgage-backed
and other asset-
backed securities 6,901,599 - 525,045 6,376,554
Corporate debt
security 98,996 1,070 - 100,066
Federal Home
Loan Mortgage
Corporation stock 1,000,000 - 20,000 980,000
Student Loan Mortgage
Association stock 124,352 98,761 - 223,113
----------- ------- --------- ----------
Total $47,317,481 526,434 2,109,187 45,734,728
=========== ======= ========= ==========
</TABLE>
As a member of the Federal Home Loan Bank System administered by the
Federal Housing Finance Board, Bank of Alton is required to maintain an
investment in the capital stock of the Federal Home Loan Bank of Chicago
(FHLB) in an amount equal to the greater of 1% of the aggregate outstanding
balance of loans secured by dwelling units at the beginning of each year or
.3% of the total assets of Bank of Alton. The stock is recorded at cost,
which represents redemption value.
The amortized cost and estimated market value of investments in debt
and marketable equity securities at December 31, 1995, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because borrowers have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
---- -----
<S> <C> <C>
Due in one year or less $ 1,979,887 1,997,240
Due after one year through
five years 29,963,223 29,831,571
Due after five years through
ten years 6,278,299 6,543,676
Due after ten years 12,284,094 13,168,763
Mortgage-backed securities 3,464,233 3,405,610
FHLMC stock 1,000,000 1,035,000
FHLB stock 442,400 442,400
----------- ----------
$55,412,136 56,424,260
=========== ==========
</TABLE>
(Continued)
F-9
<PAGE> 93
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Proceeds from sales of debt and marketable equity securities during
1995, 1994, and 1993 were $10,635,198, $11,118,812, and $12,930,256,
respectively. Gross gains of $511,353, $341,867, and $212,895 and gross
losses of $501,281, $591,475, and $36,647 were realized on these sales
during 1995, 1994, and 1993, respectively.
Debt securities with a carrying value of $15,230,641 and $15,807,188
at December 31, 1995 and 1994, respectively, were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes required or permitted by law.
NOTE 4 -- LOANS
The composition of the loan portfolio at December 31, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial, financial,
and agricultural $36,539,413 35,410,169
Real estate mortgage 22,367,669 25,565,124
Consumer 40,863,284 32,873,113
----------- ----------
Total $99,770,366 93,848,406
=========== ==========
</TABLE>
The Company grants commercial, financial, agribusiness, residential,
and consumer loans to customers throughout their service area, which is
primarily in the Alton-Wood River area of Southwestern Illinois. The
Company has a diversified loan portfolio, with no particular concentration
of credit in any one economic sector; however, a substantial portion of the
portfolio is concentrated in and secured by real estate. The ability of the
Company's borrowers to honor their contractual obligations is dependent upon
the local economy and its effect on the real estate market.
The Company's management has determined that no loans other than those
on nonaccrual status were impaired during 1995. A summary of impaired loans
at December 31, 1995 follows:
<TABLE>
<CAPTION>
Impaired
loans with
Total Allowance no related
impaired/ for losses on allowance
nonaccrual impaired for loan
loans loans losses
----- ----- ------
<C> <C> <C>
$1,030,205 200,000 668,638
========== ======= =======
</TABLE>
The average balance of impaired loans during 1995 was $1,593,228.
If interest on impaired loans, consisting only of nonaccrual loans,
had been accrued, such income would have amounted to $85,401 for 1995.
Interest income on those loans, representing cash payments received,
amounted to $20 for 1995.
At December 31, 1994, the Company had loans on a nonaccrual basis
totaling $2,413,832. If interest on these loans had been accrued, such
additional income would have been $453,934 for the year ended December 31,
1994.
Bank of Alton is an authorized seller of residential real estate
mortgage loans to the FHLMC. Loans sold in this capacity are sold without
recourse, with Bank of Alton servicing all loans sold in exchange for a
servicing fee. Loans serviced for others totaled $22,059,196 and
$17,135,000 at December 31, 1995 and 1994, respectively. Servicing fees
received on loans serviced for others and included in other noninterest
income were $50,064, $50,123, and $19,373 for the years ended December 31,
1995, 1994, and 1993, respectively.
(Continued)
F-10
<PAGE> 94
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Transactions in the allowance for loan losses for the years ended December
31, 1995, 1994, and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $1,825,044 1,896,942 2,321,897
Provision charged to
operations 41,665 (280,000) (960,000)
Loans charged off (913,499) (31,735) (660,795)
Recoveries on loans
previously charged off 396,933 239,837 1,195,840
---------- --------- ---------
Net (charge-offs)
recoveries (516,566) 208,102 535,045
---------- --------- ---------
Balance, end of year $1,350,143 1,825,044 1,896,942
========== ========= =========
</TABLE>
Certain officers and directors of the Company (including associates of
officers and directors) and certain corporations in which officers and
directors had substantial beneficial interest or corporations in which
officers and directors serve as trustees or in a similar capacity incurred
indebtedness, in the form of loans, as customers, in the aggregate amount of
$2,888,459 and $2,515,669 at December 31, 1995 and 1994, respectively.
These loans were made in the normal course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and did not
involve more than the normal risk of collectibility.
NOTE 5 -- PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 871,524 853,232
Buildings and improve-
ments 2,370,545 2,378,451
Furniture, fixtures and
equipment 1,957,596 1,799,729
---------- ---------
5,199,665 5,031,412
Less accumulated deprecia-
tion 1,896,073 1,669,697
---------- ---------
$3,303,592 3,361,715
========== =========
</TABLE>
Amounts charged to occupancy and equipment expense for depreciation
aggregated $241,341, $180,049, and $330,216 for the years ended December 31,
1995, 1994, and 1993, respectively.
NOTE 6 -- INTEREST-BEARING DEPOSITS
A summary of interest-bearing deposits at December 31, 1995 and 1994
is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NOW, super NOW,
and money market
demand accounts $ 43,013,204 32,646,370
Savings accounts 13,041,075 13,057,398
Time deposits:
Less than $100,000 65,686,704 60,312,982
$100,000 or more 9,163,167 7,705,074
------------ -----------
$130,904,150 113,721,824
============ ===========
</TABLE>
A summary of interest on deposits for the years ended December 31,
1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NOW, super NOW,
and money market
demand accounts $1,107,416 881,415 953,827
Savings accounts 381,358 381,382 378,328
Time deposits:
Less than $100,000 3,320,364 2,255,619 2,004,989
$100,000 or more 488,661 431,548 402,240
---------- --------- ---------
$5,297,799 3,949,964 3,739,384
========== ========= =========
</TABLE>
NOTE 7 -- INCOME TAXES
The components of income tax expense for the year ended December 31,
1995 are as follows:
<TABLE>
<S> <C>
Current $619,085
Deferred 313,565
--------
$932,650
========
</TABLE>
A reconciliation of expected income tax expense, computed by applying
the federal statutory rate of 34% to income before applicable income tax
expense for the year ended December 31, 1995 to reported income tax expense,
is as follows:
<TABLE>
<S> <C>
Expected statutory federal income tax $1,254,911
Tax-exempt interest income (341,267)
State tax expense, net of federal tax benefit 63,442
Other, net (44,436)
----------
$ 932,650
==========
(Continued)
F-11
<PAGE> 95
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The tax effects of temporary differences which give rise to
significant portions of the deferred tax assets and deferred tax liabilities
at December 31, 1995 are as follows:
</TABLE>
<TABLE>
<S> <C>
Deferred tax assets:
Other real estate $ 18,595
Deferred directors' fees 21,234
State income tax 83,211
Deferred loan fees 21,810
---------
Total deferred tax assets 144,850
---------
Deferred tax liabilities:
Allowance for loan losses (345,917)
Investments in debt and
marketable equity securities (25,627)
Premises and equipment (114,448)
Unrealized losses on securities
available-for-sale (344,122)
---------
Total deferred tax
liabilities (830,114)
---------
Net deferred tax
liabilities $(685,264)
=========
</TABLE>
A valuation allowance would be provided on deferred tax assets when it
is more likely than not that some portion of the assets will not be
realized. The Company has not established a valuation allowance as of
December 31, 1995 due to management's belief that all criteria for
recognition have been met, including the existence of a history of taxes
paid sufficient to support the realization of the deferred tax assets.
Income tax expense was $796,010 and $1,158,085 at December 31, 1994
and 1993, respectively.
The Company adopted Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes (SFAS 109), during 1993. The cumulative
effect of this change in accounting for income taxes was $517,850 as of
December 31, 1993.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
The Company maintains an employee savings plan formed in accordance
with Section 401(k) of the Internal Revenue Code. This plan covers
substantially all employees of the Company. The Company's contribution to
this plan was $116,400, $98,717, and $80,004 for the years ended December
31, 1995, 1994, and 1993, respectively.
NOTE 9 -- COMMITMENTS AND
CONTINGENT LIABILITIES
During the normal course of business, various legal claims have arisen
which, in the opinion of management, will not result in any material
liability to the Company.
NOTE 10 -- DISCLOSURES ABOUT
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amounts recognized in the
consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit written is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
financial instruments included in the consolidated balance sheets.
Off-balance-sheet financial instruments whose contractual amount
represents credit risk as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commitments to extend
credit $9,768,184 6,807,000
Standby letters of
credit 964,288 1,221,000
========= =========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Of the total
commitments to extend credit at December 31, 1995 and 1994,
(Continued)
F-12
<PAGE> 96
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
$926,165 and $308,563, respectively, represents fixed-rate loan commitments.
Commitments to extend credit and standby letters of credit generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since certain of the commitments may expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Company upon extension of credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but is generally
residential or income-producing property, inventory, accounts receivable, or
equipment.
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
amount value
------ -----
<S> <C> <C>
Balance sheet assets:
Cash and due from
banks $ 6,068,895 6,068,895
Federal funds sold 3,625,000 3,625,000
Investments in debt
and marketable
equity securities
available-for-sale 56,424,260 56,424,260
Loans, net 95,334,082 96,794,054
Accrued interest
receivable 1,361,231 1,361,231
------------ -----------
$162,813,468 164,273,440
============ ===========
Balance sheet liabilities:
Deposits 142,713,971 138,216,402
Accrued interest
payable 486,262 486,262
------------ -----------
$143,200,233 138,702,664
============ ===========
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate such value:
CASH AND OTHER SHORT-TERM INSTRUMENTS
For cash and due from banks, federal funds sold, accrued interest
receivable, and accrued interest payable, the carrying amount is a
reasonable estimate of fair value, as such instruments are payable upon
demand or reprice in a short time.
INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES
For debt and marketable equity securities, fair values are based on
quoted market prices or dealer quotes.
LOANS
The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of demand accounts, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
COMMITMENTS TO EXTEND CREDIT
AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and irrevocable letters
of credit is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements, the likelihood of the counter-parties drawing on such financial
instruments, and the present creditworthiness of such counterparties. The
Company believes such commitments have been made on terms which are
competitive in the markets in which it operates and, accordingly, the
Company has not assigned a value to such instruments for purposes of this
disclosure.
(Continued)
F-13
<PAGE> 97
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 11 -- PARENT COMPANY ONLY
FINANCIAL INFORMATION
Following are condensed balance sheets of Regional Bancshares, Inc.
(parent company only) as of December 31, 1995 and 1994, and condensed
schedules of income and cash flows for the years ended December 31, 1995,
1994, and 1993:
<TABLE>
Condensed Balance Sheets
(dollars expressed in thousands)
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash $ 54 106
Investment in Bank of Alton, at equity 22,848 19,047
Other assets 245 662
------- ------
Total assets $23,147 19,815
======= ======
Liabilities and Stockholders' Equity
------------------------------------
Other liabilities 25 130
Stockholders' equity:
Common stock 253 253
Surplus 2,907 2,907
Retained earnings 19,294 17,569
Net unrealized gains (losses) on
securities available-for-sale 668 (1,044)
------- ------
Total stockholders' equity 23,122 19,685
------- ------
Total liabilities and stock-
holders' equity $23,147 19,815
======= ======
</TABLE>
<TABLE>
Condensed Schedules of Income
(dollars expressed in thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from Bank of Alton $ 720 150 695
Other 7 24 42
------ ----- -----
Total income 727 174 737
------ ----- -----
Expenses:
Salaries and employee benefits 32 125 75
Legal and professional fees 21 1 14
Other noninterest expense 39 17 426
------ ----- -----
Total expenses 92 143 515
------ ----- -----
Income before income tax
benefit and equity in
undistributed earnings
of Bank of Alton 635 31 222
Income tax benefit 34 54 37
------ ----- -----
Income before equity in
undistributed earnings of
Bank of Alton 669 85 259
Equity in undistributed earnings of
Bank of Alton 2,089 2,461 2,760
------ ----- -----
Net income $2,758 2,546 3,019
====== ===== =====
</TABLE>
<TABLE>
Condensed Schedules of Cash Flows
(dollars expressed in thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $2,758 2,546 3,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed earnings
of Bank of Alton (2,089) (2,461) (2,760)
Other, net 313 (24) (96)
------ ------ ------
Net cash provided by operating
activities 982 61 163
Cash flows from financing activities -
cash dividends paid on common stock (1,034) (150) -
------ ----- -----
Net increase (decrease) in cash
and cash equivalents (52) (89) 163
Cash and cash equivalents at beginning of year 106 195 32
------ ----- -----
Cash and cash equivalents at end of year $ 54 106 195
====== ===== =====
</TABLE>
NOTE 12 -- UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The unaudited consolidated financial statements as of and for the nine
months ended September 30, 1996 and 1995 and years ended December 31, 1994
and 1993 include the accounts of Regional Bancshares, Inc. and its
subsidiary after elimination of material intercompany transactions. This
unaudited data, in the opinion of the management of the Company, includes
all adjustments necessary for the fair presentation thereof. All
adjustments made were of a normal and recurring nature.
NOTE 13 -- EVENT (UNAUDITED) SUBSEQUENT
TO DATE OF INDEPENDENT AUDITORS'
REPORT
On August 23, 1996, the Company entered into an Agreement and Plan of
Merger with Mercantile Bancorporation Inc. (MBI) to merge (the Merger) the
Company into a wholly owned subsidiary of MBI (the Merger Agreement). As of
September 30, 1996, MBI, which is headquartered in St. Louis, Missouri, had
total assets of approximately $18.2 billion. The Merger Agreement with MBI
will be effected by converting the Company's common stock into the right to
receive as consideration in the Merger, on a per share basis, an amount in
cash equal to $485.76; 23.7123 shares of MBI common stock; and 0.4838 of a
share of West Pointe Bank And Trust Company common stock. The Merger is
contingent upon approval of various regulatory agencies and the affirmative
vote of the holders of at least two-thirds of the outstanding Company
common stock.
F-14
<PAGE> 98
ANNEX A
-------
Following is the text of the statutory dissenters' right as
set forth at Section 11.70 of the Illinois Business Corporation
Act of 1983, as amended:
5/11.70 PROCEDURE TO DISSENT.
(a) If the corporate action giving rise to the right to
dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to
dissent and the procedure to dissent. If, prior to the meeting,
the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively
enable a shareholder to vote on the transaction that will
objectively enable a shareholder to vote on the transaction and
to determine whether or not to exercise dissenters' rights, a
shareholder may assert dissenters' rights only if the shareholder
delivers to the corporation before the vote is taken a written
demand for payment for his or her shares if the proposed action
is consummated, and the shareholder does not vote in favor of the
proposed action.
(b) If the corporate action giving rise to the right to
dissent is not to be approved at a meeting of shareholders, the
notice to shareholders describing the action taken under Section
11.30 or Section 7.10 shall inform the shareholders of their
right to dissent and the procedure to dissent. If, prior to or
concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction
that will objectively enable a shareholder to determine whether
or not to exercise dissenters' rights, a shareholder may assert
dissenter's rights only if he or she delivers to the corporation
within 30 days from the date of mailing the notice a written
demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate
action giving rise to the right to dissent is effective or 30
days after the shareholder delivers to the corporation the
written demand for payment, whichever is later, the corporation
shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the
corporation as to the estimated fair value of the shares, the
corporation's latest balance sheet as of the end of a fiscal year
ending not earlier than 16 months before the delivery of the
statement, together with the statement of income for that year
and the latest available interim financial statements, and either
a commitment to pay for the shares of the dissenting shareholder
at the estimated fair value thereof upon transmittal to the
corporation of the certificate or certificates, or other evidence
of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days
after delivery of the corporation's statement to the shareholder.
The corporation may instruct the shareholder to sell only if
there is a public market for the shares at which the shares may
be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for
purposes of this Section the shareholder shall be deemed to have
sold his or her shares at the average closing price of the
shares, if listed on a national exchange, or the average of the
bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange,
during that 10 day period.
(d) A shareholder who makes written demand for payment
under this Section retains all other rights of a shareholder
until those rights are cancelled or modified by the consummation
of the proposed corporate action. Upon consummation of that
action, the corporation shall pay to each dissenter who transmits
to the corporation the certificate or other evidence of ownership
of the shares the amount the corporation estimates to be the fair
value of the shares, plus accrued interest, accompanied by a
written explanation of how the interest was calculated.
A-1
<PAGE> 99
(e) If the shareholder does not agree with the opinion of
the corporation as to the estimated fair value of the shares or
the amount of interest due, the shareholder, within 30 days from
the delivery of the corporation's statement of value, shall
notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the
difference between the shareholder's estimate of fair value and
interest due and the amount of the payment by the corporation or
the proceeds of sale by the shareholder, whichever is applicable
because of the procedure for which the corporation opted pursuant
to subjection (c).
(f) If, within 60 days from the delivery to the corporation
of the shareholder notification of estimate of fair value of the
shares and interest due, the corporation and the dissenting
shareholder have not agreed in writing upon the fair value of the
shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest,
or file a petition in the circuit court of the county in which
either the registered office or the principal office of the
corporation is located, requesting the court to determine the
fair value of the shares and interest due. The corporation shall
make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an
action against their shares and all parties shall be served with
a copy of the petition. Nonresidents may be served by registered
or certified mail or by publication as provided by law. Failure
of the corporation to commence an action pursuant to this Section
shall not limit or affect the right of the dissenting
shareholders to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding
is commenced under subsection (f) by a corporation is plenary and
exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is
entitled to judgment for the amount, if any, by which the court
finds that the fair value of his or her shares, plus interest,
exceeds the amount paid by the corporation or the proceeds of
sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection
(f), shall determine all costs of the proceeding, including the
reasonable compensation and expenses of the appraisers, if any,
appointed by the court under subsection (g), but shall exclude
the fees and expenses of counsel and experts for the respective
parties. If the fair value of the shares as determined by the
court materially exceeds the amount which the corporation
estimated to be the fair value of the shares or if no estimate
was made in accordance with subsection (c), then all or any part
of the costs may be assessed against the corporation. If the
amount which any dissenter estimated to be the fair value of the
shares materially exceeds the fair value of the shares as
determined by the court, then all or any part of the costs may be
assessed against that dissenter. The court may also assess the
fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or
all dissenters if the court finds that the corporation did
not substantially comply with the requirements of
subsections (a), (b), (c), (d) or (f).
(2) Against either the corporation or a dissenter and
in favor of any other party if the court finds that the
party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly
situated and that the fees for those services should not be
assessed against the
A-2
<PAGE> 100
corporation, the court may award to that counsel reasonable fees
to be paid out of the amounts awarded to the dissenters who are
benefited. Except as otherwise provided in this Section, the
practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this section:
(1) "Fair value", with respect to a dissenter's
shares, means the value of the shares immediately before the
consummation of the corporate action to which the dissenter
objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would
be inequitable.
(2) "Interest" means interest from the effective date
of the corporate action until the date of payment, at the
average rate currently paid by the corporation on its
principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
A-3
<PAGE> 101
REGIONAL BANCSHARES, INC.
1520 WASHINGTON AVENUE
ALTON, ILLINOIS
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
FEBRUARY __, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of REGIONAL BANCSHARES, INC.
("Regional"), does hereby nominate, constitute and appoint
Mark P. Utterback and Sarah E. Utterback, or each of them
(with full power to act alone), true and lawful attorney(s), with
full power of substitution, for the undersigned and in the name,
place and stead of the undersigned to vote all of the shares of
Common Stock, $10.00 par value, of Regional standing in the name
of the undersigned on its books at the close of business on
January __, 1997 at the Special Meeting of Shareholders
to be held at the offices of Bryan Cave LLP, 211 North Broadway,
Suite 3600, St. Louis, Missouri, on ______, February __, 1997,
at 10:00 a.m., Central Time, and at any adjournments or postponements
thereof, with all the powers the undersigned would possess if
personally present, as follows:
1. A proposal to approve the Agreement and Plan of Merger,
dated as of August 23, 1996 (the "Merger Agreement"), and each of
the transactions contemplated thereby, pursuant to which Regional
will be merged with and into a wholly owned subsidiary of
Mercantile Bancorporation Inc. ("MBI") and whereby, upon
consummation of the merger, each share (other than shares owned
by MBI or as to which a Regional shareholder has perfected
dissenters' rights) of Regional common stock will be converted
into the following as consideration in the merger: (i) an amount
in cash equal to $485.76; (ii) 23.7123 shares of MBI common
stock; and (iii) 0.4838 shares of West Pointe Bank And Trust
Company common stock, all as determined by the election
procedures and exchange ratio set forth in detail in the
accompanying Proxy Statement/Prospectus, and subject to certain
adjustments as provided in the Merger Agreement.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO
DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" EACH OF
THE PROPOSALS LISTED ABOVE.
Dated:-----------------------------
-----------------------------------
Signature of Shareholder
-----------------------------------
Signature of Shareholder
(When signing as an attorney,
executor, administrator,
trustee or guardian, please
give full title. If more than
one person holds the power to
vote the same shares, all must
sign. All joint owners must
sign.)
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 102
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
------------------------------------------
Item 20. Indemnification of Officers and Directors
- ---------------------------------------------------
Sections 351.355(1) and (2) of The General and Business
Corporation Law of the State of Missouri provide that a
corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that
he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful, except that, in the
case of an action or suit by or in the right of the corporation,
the corporation may not indemnify such persons against judgments
and fines and no person shall be indemnified as to any claim,
issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of
his duty to the corporation, unless and only to the extent that
the court in which the action or suit was brought determines upon
application that such person is fairly and reasonably entitled to
indemnity for proper expenses. Section 351.355(3) provides that,
to the extent that a director, officer, employee or agent of the
corporation has been successful in the defense of any such
action, suit or proceeding or any claim, issue or matter therein,
he shall be indemnified against expenses, including attorneys'
fees, actually and reasonably incurred in connection with such
action, suit or proceeding. Section 351.355(7) provides that a
corporation may provide additional indemnification to any person
indemnifiable under subsection (1) or (2), provided such
additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a
shareholder-approved bylaw or agreement, and provided further
that no person shall thereby be indemnified against conduct which
was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct or which involved an
accounting for profits pursuant to Section 16(b) of the
Securities Exchange Act of 1934.
Article 12 of the Restated Articles of Incorporation of
the Registrant provides that the Registrant shall extend to its
directors and executive officers the indemnification specified in
subsections (1) and (2) and the additional indemnification
authorized in subsection (7) and that it may extend to other
officers, employees and agents such indemnification and
additional indemnification.
Pursuant to directors' and officers' liability
insurance policies, with total annual limits of $30,000,000, the
Registrant's directors and officers are insured, subject to the
limits, retention, exceptions and other terms and conditions of
such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect
or breach of duty by the directors or officers of the Registrant,
individually or collectively, or any matter claimed against them
solely by reason of their being directors or officers of the
Registrant.
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
A. Exhibits. See Exhibit Index.
---------
B. Financial Statement Schedules. Not Applicable.
-----------------------------
II-1
<PAGE> 103
Item 22. Undertakings
- ----------------------
(1) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(2) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other Items of the applicable form.
(4) The Registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (3) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 (Section 230.415 of
this chapter), will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) The undersigned Registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13
of this Form, within one business day of receipt of such request
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained
in the documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the
request.
(6) The undersigned Registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-2
<PAGE> 104
(7) The undersigned Registrant hereby undertakes:
(a) To file during any period in which offers and
sales are being made, a post-effective amendment
to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof),
which individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement.
(b) That for the purpose of determining any
liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to
be a new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 105
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement
relating to the acquisition of Regional Bancshares, Inc. to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Louis,
State of Missouri, on January 21, 1997.
MERCANTILE BANCORPORATION INC.
By /s/ John Q. Arnold
----------------------------------------
Senior Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
<F*> Chairman of the Board January 21, 1997
- ------------------------------ President, Chief Executive
Thomas H. Jacobsen Officer and Director
Principal Executive Officer
/s/ John Q. Arnold Senior Executive Vice President and January 21, 1997
- ------------------------------ Chief Financial Officer
John Q. Arnold
Principal Financial Officer
<F*> Senior Vice President - Finance January 21, 1997
- ------------------------------ and Control
Michael T. Normile
Principal Accounting Officer
<F*> Director January 21, 1997
- ------------------------------
Harry M. Cornell, Jr.
<F*> Director January 21, 1997
- ------------------------------
William A. Hall
<F*> Director January 21, 1997
- ------------------------------
Thomas A. Hays
II-4
<PAGE> 106
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
<F*> Director January 21, 1997
- ------------------------------
Frank Lyon, Jr.
<F*> Director January 21, 1997
- ------------------------------
Edward A. Mueller
<F*> Director January 21, 1997
- ------------------------------
Robert W. Murray
<F*> Director January 21, 1997
- ------------------------------
Harvey Saligman
<F*> Director January 21, 1997
- ------------------------------
Craig D. Schnuck
<F*> Director January 21, 1997
- ------------------------------
Robert L. Stark
<F*> Director January 21, 1997
- ------------------------------
Patrick T. Stokes
<F*> Director January 21, 1997
- ------------------------------
John A. Wright
<FN>
<F*>By /s/ John Q. Arnold
----------------------------------------
John Q. Arnold
John Q. Arnold, by signing his name hereto, does sign this document on behalf
of the persons named above, pursuant to a power of attorney duly executed
by such persons and previously filed.
</TABLE>
II-5
<PAGE> 107
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of August 23, 1996,
by and among MBI, Ameribanc and Regional.<F*>
2.2 Form of Voting Agreement, dated as of August 23, 1996,
executed by MBI and certain of the shareholders of
Regional.<F*>
3.1 MBI's Restated Articles of Incorporation, as amended and
currently in effect, filed as Exhibit 3(i) to MBI's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, are incorporated herein by reference.
3.2 MBI's By-Laws, as amended and currently in effect, filed as
Exhibit 3-2 to MBI's Annual 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.<F*>
8.1 Opinion of Thompson Coburn regarding certain tax matters in
the Merger.<F*>
10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan,
as amended, filed as Exhibit 10-3 to MBI's Report on Form
10-K for the year ended December 31, 1989 (File No. 1-
11792), is incorporated herein by reference.
10.2 The Mercantile Bancorporation Inc. Executive Incentive
Compensation Plan, filed as Appendix C to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of Shareholders
is incorporated herein by reference.
10.3 The Mercantile Bancorporation Inc. Employee Stock Purchase
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K
for the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.
10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K
for the year ended December 31, 1990 (File No. 1-11792), is
incorporated herein by reference.
II-6
<PAGE> 108
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
10.5 Amendment Number One to the Mercantile Bancorporation Inc.
1991 Employee Incentive Plan, filed as Exhibit 10-6 to
MBI's Report on Form 10-K for the year ended December 31,
1994, is incorporated herein by reference.
10.6 The Mercantile Bancorporation Inc. 1994 Stock Incentive
Plan, filed as Appendix B to MBI's definitive Proxy
Statement for the 1994 Annual Meeting of Shareholders, is
incorporated herein by reference.
10.7 The Mercantile Bancorporation Inc. 1994 Stock Incentive
Plan for Non-Employee Directors, filed as Appendix E to
MBI's definitive Proxy Statement for the 1994 Annual
Meeting of Shareholders, is incorporated herein by
reference.
10.8 The Mercantile Bancorporation Inc. Voluntary Deferred
Compensation Plan, filed as Appendix D to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of
Shareholders, is incorporated herein by reference.
10.9 Form of Employment Agreement for Thomas H. Jacobsen, as
amended, filed as Exhibit 10-8 to MBI's Report on Form 10-K
for the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.
10.10 Form of Change of Control Employment Agreement for John W.
McClure, W. Randolph Adams, John Q. Arnold and Certain
Other Executive Officers, filed as Exhibit 10-10 to MBI's
Report on Form 10-K for the year ended December 31, 1989
(File No. 1-11792), is incorporated herein by reference.
10.11 Amended and Restated Agreement and Plan of Reorganization
dated as of December 2, 1994 by and among MBI and
TCBankshares, Inc., filed as Exhibit 2.1 to MBI's Report on
Form 8-K dated December 21, 1994, is incorporated herein by
reference.
10.12 Agreement and Plan of Reorganization dated August 4, 1995,
by and between MBI and Hawkeye Bancorporation, filed as
Exhibit 2.1 to MBI's Registration Statement No. 33-63609,
is incorporated herein by reference.
10.13 The Mercantile Bancorporation Inc. Supplemental Retirement
Plan, filed as Exhibit 10-12 to MBI's Report on Form 10-K
for the year ended December 31, 1992 (File No. 1-11792), is
incorporated herein by reference.
10.14 Agreement and Plan of Merger, dated October 27, 1996, among
MBI, Ameribanc and Mark Twain Bancshares, Inc., filed as
Exhibit 2.1 to MBI's Current Report on Form 8-K, dated
November 6, 1996, is incorporated herein by reference.
10.15 Agreement and Plan of Reorganization, dated December 22, 1996,
by and between MBI and Roosevelt Financial Group, Inc., filed
as Exhibit 2.1 to MBI's Current Report on Form 8-K, dated
December 22, 1996, is incorporated herein by reference.
II-7
<PAGE> 109
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
23.1 Consent of Thompson Coburn (included in Exhibit 5.1).<F*>
23.2 Consent of KPMG Peat Marwick LLP with regard to the use of
its reports on MBI's financial statements.<F**>
23.3 Consent of KPMG Peat Marwick LLP with regard to the use of
its report on Regional's financial statements.<F**>
23.4 Consent of Ernst & Young LLP with regard to the use of its
report on Mark Twain's financial statements.<F**>
23.5 Consent of KPMG Peat Marwick LLP with regard to the use of
its report on Roosevelt's financial statements.<F**>
24.1 Power of Attorney (included on signature page).<F*>
<FN>
<F*> previously filed
<F**>filed herewith
</TABLE>
II-8
<PAGE> 1
[Exhibit 23.2]
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Mercantile Bancorporation Inc.:
We consent to the use of our reports incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 21, 1997
<PAGE> 1
[Exhibit 23.3]
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Regional Bancshares, Inc.:
We consent to the use of our report included herein
and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 21, 1997
<PAGE> 1
[Exhibit 23.4]
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated January 16, 1996, with respect
to the financial statements and schedules of Mark Twain Bancshares,
Inc. included in the Registration Statement (Form S-4) and related
Prospectus of Mercantile Bancorporation Inc. for the registration
of 600,419 shares of its common stock.
/s/ Ernst & Young LLP
January 21, 1997
St. Louis, Missouri
<PAGE> 1
[Exhibit 23.5]
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Roosevelt Financial Group, Inc.:
We consent to the use of our report incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 21, 1997
