<PAGE>
[MUTUAL BANCOMPANY LETTERHEAD]
This Form of Prospectus is filed pursuant to Rule 424(b)(2) under the
Securities Act of 1933, as amended, and relates to Registration Statement
No. 333-5079.
September 18, 1996
Dear Stockholder:
We invite you to attend a special meeting of stockholders of Mutual
Bancompany to be held at the office of Mutual Savings Bank, 101 West McCarty
Street, Jefferson City, Missouri, on Wednesday, October 23, 1996 at 11:00
a.m.
As described in the accompanying Notice of Special Meeting and Proxy
Statement/Prospectus, at the special meeting you will have the opportunity to
consider and vote upon the merger agreement between Roosevelt Financial Group,
Inc., Roosevelt Bank, Mutual Bancompany and Mutual Savings Bank and the
transactions contemplated thereby. Upon the merger, each share of common stock
of Mutual generally will be converted into the right to receive $23 in value of
the common stock of Roosevelt, based on the weighted average sale price of all
Roosevelt common stock traded on the Nasdaq National Market during the ten
trading days ending on the date that is three trading days prior to the closing
date of the merger. Consummation of the merger is conditioned upon, among other
things, the approval of the merger agreement and the merger at the special
meeting.
The consideration to be received by Mutual's stockholders pursuant to the
merger agreement was negotiated by your Board of Directors in light of various
factors, including Mutual's recent operating results, current financial
condition and perceived future prospects. Robert W. Baird & Co., Mutual's
financial advisor, has advised your Board of Directors that in its opinion the
consideration to be received by Mutual's stockholders in the merger is fair to
them from a financial point of view. Your Board of Directors has approved the
merger agreement and believes that the merger is in the best interest of Mutual
and its stockholders. Accordingly, your Board of Directors unanimously
recommends that you VOTE FOR APPROVAL of the merger agreement and the
transactions contemplated thereby.
You are urged to read the accompanying Proxy Statement/Prospectus,
which provides detailed information concerning the merger agreement, the merger
and related matters.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN
THE ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO
ATTEND THE SPECIAL MEETING. Your vote is important, regardless of the number of
shares you own. This will not prevent you from voting in person but will assure
that your vote is counted if you are unable to attend the Special Meeting.
Sincerely,
[SIGNATURE]
Donald L. Connor
President
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE>
[MUTUAL BANCOMPANY LETTERHEAD]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
October 23, 1996
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of Mutual Bancompany, Inc. ("Mutual") is scheduled to be held at the
office of Mutual Savings Bank, 101 West McCarty Street, Jefferson City,
Missouri, on Wednesday October 23, 1996 at 11:00 a.m. A Proxy Card and a
Proxy Statement/Prospectus accompany this Notice.
The Special Meeting is for the purpose of considering and acting upon:
1. The approval of the Agreement and Plan of Merger and Reorganization
dated April 9, 1996 between Roosevelt Financial Group, Inc., Roosevelt Bank,
Mutual and Mutual Savings Bank, f.s.b. (including the exhibits and schedules
thereto, the "Merger Agreement"), and the transactions contemplated thereby
(collectively, the "Merger");
2. Such other matters as may properly come before the Special Meeting or
any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the
Special Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Special Meeting may be adjourned.
Stockholders of record at the close of business on September 19, 1996 are the
stockholders entitled to vote at the Special Meeting and any adjournments
thereof.
Stockholders of Mutual may be entitled to assert dissenters' rights with
respect to the Merger under Section 351.455 of Chapter 351 of Title XXIII of the
Revised Statutes of Missouri, a copy of which is attached as Appendix III to the
accompanying Proxy Statement/Prospectus.
Please complete and sign the accompanying Proxy Card, which is solicited by
the Board of Directors, and mail it promptly in the accompanying envelope. The
proxy will not be used if you attend and vote at the Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
Marcrissie T. Henley
Secretary
Jefferson City, Missouri
September 18, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE MUTUAL BANCOMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE ACCOMPANIES THESE MATERIALS FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE>
PROXY STATEMENT
OF
MUTUAL BANCOMPANY, INC.
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 23, 1996
--------------------------
PROSPECTUS
OF
ROOSEVELT FINANCIAL GROUP, INC.
UP TO 525,262 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
--------------------------
This Proxy Statement/Prospectus relates to the proposed merger of Mutual
Bancompany, Inc., a Missouri corporation ("Mutual"), with Roosevelt Financial
Group, Inc., a Delaware corporation ("Roosevelt"), and the merger of Mutual's
principal subsidiary, Mutual Savings Bank, f.s.b. ("Mutual Bank"), with
Roosevelt's principal subsidiary, Roosevelt Bank (collectively, the "Merger"),
as contemplated by the Agreement and Plan of Merger and Reorganization, dated as
of April 9, 1996 (the "Merger Agreement ", by and among Roosevelt, Roosevelt
Bank, Mutual and Mutual Bank. The Merger Agreement is included as Appendix I
hereto and incorporated by reference herein.
This Proxy Statement/Prospectus is being furnished to the holders of shares
of common stock, par value $.01 per share, of Mutual ("Mutual Common Stock") in
connection with the solicitation of proxies by the Board of Directors of Mutual
(the "Mutual Board") for use at a Special Meeting of Stockholders (the "Special
Meeting"), scheduled to be held at the office of Mutual Bank located at 101 West
McCarty Street, Jefferson City, Missouri, on Wednesday, October 23, 1996, at
11:00a.m., local time, and at any and all adjournments and postponements
thereof.
At the Special Meeting, the holders of Mutual Common Stock will consider
and vote upon a proposal to approve the Merger Agreement and the transactions
contemplated thereby.
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Mutual Common Stock issued and outstanding immediately
prior to the Merger (other than shares held by holders who perfect dissenters'
rights and other excluded shares) will be converted into the right to receive a
number of shares (the "Exchange Ratio") of the common stock, par value $.01 per
share, of Roosevelt ("Roosevelt Common Stock") equal to the quotient of (A)
$23.00 divided by (B) the weighted average sale price of all Roosevelt Common
Stock traded on the Nasdaq National Market during the ten trading days ending on
the date that is three trading days prior to the Closing Date (as defined
herein) of the Merger, with cash paid in lieu of fractional share interests. If
the Closing Date had been September 13, 1996, each shareholder of Mutual would
have been entitled to receive 1.2863 shares of Roosevelt Common Stock for each
share of Mutual Common Stock held. The last reported sale price for Mutual
Common Stock as of that date as reported on the Nasdaq Small Cap System was
$21.00 per share. As of April 8, 1996, the last trading day preceding public
announcement of the proposed Merger, the last reported sale prices for Roosevelt
Common Stock and Mutual Common Stock were $18.125 and $16.75, respectively.
Mutual's financial advisor, Robert W. Baird & Co. Incorporated ("Baird"), has
rendered an opinion to the effect that as of April 9, 1996, the Exchange Ratio
is fair from a financial point of view to the stockholders of Mutual. The Merger
is subject to certain conditions, including the approval of the stockholders of
Mutual. In addition, the Merger Agreement may be terminated by either party
prior to the Effective Time (as defined herein) if certain events occur. For
additional information regarding the Merger Agreement and the terms of the
Merger, see "The Merger."
This Proxy Statement/Prospectus also constitutes a prospectus of Roosevelt,
filed as part of the Registration Statement (defined below) with respect to the
shares of Roosevelt Common Stock to be issued upon consummation of the Merger
pursuant to the terms of the Merger Agreement.
<PAGE>
This Proxy Statement/Prospectus, and the accompanying notice and form of
proxy, are first being mailed to stockholders of Mutual on or about September
23, 1996.
__________________________
THE SHARES OF ROOSEVELT COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AGENCY,
AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, ANY STATE SECURITIES COMMISSION NOR ANY OTHER AGENCY HAS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF ROOSEVELT COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
__________________________
The date of this Proxy Statement/Prospectus is September 18, 1996
ii
<PAGE>
AVAILABLE INFORMATION
Roosevelt and Mutual are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, in accordance therewith, file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information filed by Roosevelt and Mutual
can be obtained, upon payment of prescribed fees, from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549. Such information can be inspected and copied at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the SEC's Regional Offices located at Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. In addition, the SEC maintains a Web site
that contains reports, proxy and information statements and information
regarding Roosevelt's and Mutual's electronic filings within the SEC. The
address of the SEC's Web site is "http://www.sec.gov."
Roosevelt has filed with the SEC a registration statement on Form S-4
(together with all amendments, schedules, and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Roosevelt Common Stock to be
issued pursuant to and as contemplated by the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the SEC. The Registration Statement is
available for inspection and copying as set forth above. Statements contained
in this Proxy Statement/Prospectus or in any document incorporated by reference
in this Proxy Statement/Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (EXCLUDING
EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED BY OR ON BEHALF OF ROOSEVELT, UPON THE WRITTEN
OR ORAL REQUEST OF SUCH PERSON TO GARY W. DOUGLASS, ROOSEVELT FINANCIAL GROUP,
INC., 900 ROOSEVELT PARKWAY, CHESTERFIELD, MISSOURI 63017, TELEPHONE 314-532-
6200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL
MEETING, ANY REQUEST SHOULD BE MADE BY OCTOBER 16, 1996. PERSONS REQUESTING
COPIES OF EXHIBITS TO DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS MAY BE CHARGED THE COST OF REPRODUCTION AND MAILING.
The following documents previously filed with the SEC by Roosevelt (File
No. 0-17403) are hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. The Annual Report on Form 10-K of Roosevelt for the fiscal year ended
December 31, 1995, as amended on July 30 on Form 10-K/A and September
13, 1996 on Form 10-K/A-2 (the "Roosevelt 1995 10-K/A").
2. The Quarterly Report on Form 10-Q of Roosevelt for the quarter ended
March 31, 1996, as amended on September 13, 1996 on Form 10-Q/A.
3. The Quarterly Report on Form 10-Q of Roosevelt for the quarter ended
June 30, 1996, as amended on September 13, 1996 on Form 10-Q/A.
4. The description of the Roosevelt Common Stock contained in Roosevelt's
Registration Statement on Form S-4 dated March 30, 1994, as
amended.
All documents filed by Roosevelt with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the date of the Special Meeting
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
__________________________
iii
<PAGE>
All information contained in this Proxy Statement/Prospectus with respect
to Roosevelt and its subsidiaries has been supplied by Roosevelt, all
information with respect to Mutual and its subsidiaries has been supplied by
Mutual, and all information with respect to Baird and its analyses and opinion
has been supplied by Baird.
No person is authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Proxy Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy Statement/Prospectus,
or the solicitation of a proxy, in any jurisdiction, to or from any person to
whom or from whom it is unlawful to make such offer, solicitation of an offer or
proxy solicitation in such jurisdiction.
__________________________
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION.......................................................................... i
AVAILABLE INFORMATION................................................................. iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... iii
TABLE OF CONTENTS..................................................................... v
SUMMARY
The Parties to the Merger.......................................................... 1
Roosevelt Financial Group, Inc. and Roosevelt Bank............................... 1
Mutual Bancompany, Inc. and Mutual Savings Bank, f.s.b........................... 1
The Special Meeting................................................................ 2
The Merger......................................................................... 2
General.......................................................................... 2
Reasons for the Merger; Recommendation of the Board of Directors................. 2
Merger Consideration............................................................. 3
Opinion of Financial Advisor..................................................... 3
Effective Time and Closing Date.................................................. 3
Appraisal Rights................................................................. 4
Interests of Certain Persons in the Merger....................................... 4
Conditions to the Merger......................................................... 4
Regulatory Approvals............................................................. 4
Waiver and Amendment; Termination................................................ 5
Conduct of Business Pending the Merger........................................... 5
Expenses; Termination Fee........................................................ 5
Accounting Treatment............................................................. 6
Certain Federal Income Tax Consequences of the Merger............................ 6
Effects of the Merger on Rights of Stockholders.................................. 6
Nasdaq Listing................................................................... 6
Management After the Merger........................................................ 6
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION..................................... 7
RECENT DEVELOPMENTS................................................................... 9
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF ROOSEVELT
FINANCIAL GROUP, INC................................................................. 10
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF MUTUAL
BANCOMPANY, INC...................................................................... 12
COMPARATIVE UNAUDITED PER SHARE DATA.................................................. 14
ROOSEVELT FINANCIAL GROUP, INC. AND ROOSEVELT BANK.................................... 15
Roosevelt Financial Group, Inc..................................................... 15
Bank Holding Company Regulation.................................................... 16
Roosevelt Bank..................................................................... 18
MUTUAL BANCOMPANY, INC. AND MUTUAL SAVINGS BANK, F.S.B................................ 18
Mutual Bancompany, Inc............................................................. 18
Mutual Savings Bank, f.s.b......................................................... 18
THE SPECIAL MEETING................................................................... 19
General............................................................................ 19
Voting and Revocability of Proxies................................................. 19
Voting Securities and Security Ownership........................................... 20
Other Matters...................................................................... 21
Miscellaneous...................................................................... 21
THE MERGER............................................................................ 21
General............................................................................ 21
Background of the Merger........................................................... 22
Reasons for the Merger; Recommendation of the Board of Directors................... 23
Merger Consideration............................................................... 24
Opinion of Financial Advisor....................................................... 24
Effective Time and Closing Date.................................................... 27
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Appraisal Rights................................................................... 27
Fractional Shares.................................................................. 27
Exchange of Certificates........................................................... 28
Interests of Certain Persons in the Merger......................................... 28
Representations and Warranties..................................................... 30
Conditions to the Merger........................................................... 30
Regulatory Approvals............................................................... 31
Waiver and Amendment; Termination.................................................. 31
Conduct of Business Pending the Merger............................................. 32
Expenses; Termination Fee.......................................................... 33
Accounting Treatment............................................................... 33
The Bank Merger Agreement.......................................................... 33
Resales of Roosevelt Common Stock by Affiliates.................................... 33
Certain Federal Income Tax Consequences of the Merger.............................. 34
Nasdaq Listing..................................................................... 35
MANAGEMENT AFTER THE MERGER........................................................... 35
BUSINESS OF MUTUAL BANCOMPANY, INC.................................................... 35
General............................................................................ 35
Lending Activities................................................................. 36
Asset Quality...................................................................... 43
Investment Activities.............................................................. 47
Sources of Funds................................................................... 49
Subsidiaries....................................................................... 52
Competition........................................................................ 52
Employees.......................................................................... 52
PROPERTIES OF MUTUAL BANCOMPANY, INC.................................................. 52
LEGAL PROCEEDINGS INVOLVING MUTUAL BANCOMPANY, INC.................................... 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MUTUAL BANCOMPANY, INC...................................... 53
Introduction....................................................................... 53
Financial Condition................................................................ 53
Results of Operations.............................................................. 55
Comparison of Operating Results for the Nine Months Ended March 31, 1995 and 1996.. 56
Comparison of Operating Results for Years Ended June 30, 1994 and 1995............. 58
Comparison of Operating Results for Years Ended June 30, 1993 and 1994............. 59
Average Balances, Interest Rates and Yields........................................ 62
Rate/Volume Analysis of Net Interest Income........................................ 63
Asset/Liability Management......................................................... 64
Asset Quality...................................................................... 65
Liquidity and Capital Resources.................................................... 66
Potential Impact of Inflation and Changing Prices.................................. 67
Regulatory Developments............................................................ 67
Impact of New Accounting Standards and Changes in Federal Tax Law.................. 68
REGULATION OF MUTUAL BANCOMPANY, INC. AND MUTUAL SAVINGS BANK, F.S.B.................. 69
General............................................................................ 69
Federal Regulation of Savings Associations......................................... 69
Insurance of Accounts and Regulation by the FDIC................................... 70
Regulatory Capital Requirements.................................................... 71
Limitations on Dividends and Other Capital Distributions........................... 73
Liquidity.......................................................................... 74
Accounting......................................................................... 74
Qualified Thrift Lender Test....................................................... 74
Community Reinvestment Act......................................................... 75
Transactions with Affiliates....................................................... 75
Federal Reserve System............................................................. 75
Federal Home Loan Bank System...................................................... 75
Holding Company Regulation......................................................... 76
Federal Securities Laws............................................................ 76
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ROOSEVELT
FINANCIAL GROUP, INC. AND MUTUAL BANCOMPANY, INC.................... 77
Introduction...................................................... 77
Issuance of Capital Stock......................................... 77
Payment of Dividends.............................................. 77
Shareholder Action by Unanimous Consent........................... 77
Advance Notice Requirements for Nominations of Directors and
Proposals for New Business at Annual Meetings of Stockholders.... 77
Removal of Directors.............................................. 78
Limitations on Voting or Acquisition of Capital Stock............. 78
Approval of Mergers, Consolidations, Etc.......................... 79
Amendment of Articles or Certificate of Incorporation and Bylaws.. 80
LEGAL MATTERS........................................................ 80
EXPERTS.............................................................. 80
STOCKHOLDER PROPOSALS................................................ 81
INDEPENDENT ACCOUNTANTS.............................................. 81
OTHER MATTERS........................................................ 81
FINANCIAL STATEMENTS OF MUTUAL BANCOMPANY, INC....................... F-1
APPENDICES
</TABLE>
I. Agreement and Plan of Merger and Reorganization (omitting schedules
and exhibits)
II. Fairness Opinion of Robert W. Baird & Co. Incorporated
III. Text of Section 351.455 of The General and Business Corporation Law of
Missouri
vii
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The following is a brief summary of certain information contained elsewhere
or incorporated by reference in this Proxy Statement/Prospectus. Certain
capitalized terms used in this summary are defined elsewhere in this Proxy
Statement/Prospectus. This summary is not intended to be a complete description
of all material facts regarding Roosevelt, Mutual and the matters to be
considered at the Special Meeting and is qualified in its entirety by, and
reference is made to, the more detailed information contained elsewhere in this
Proxy Statement/Prospectus, the accompanying Appendices and the documents
referred to and incorporated by reference herein.
THE PARTIES TO THE MERGER
ROOSEVELT FINANCIAL GROUP, INC. AND ROOSEVELT BANK
Roosevelt, a Delaware corporation, is the holding company for Roosevelt
Bank, a federally chartered savings bank headquartered in Chesterfield,
Missouri. As of June 30, 1996, Roosevelt had total consolidated assets of $9.3
billion, deposits of $5.0 billion and stockholders' equity of $516 million.
Roosevelt's business has consisted primarily of the business of Roosevelt Bank
and its subsidiaries. The executive offices of Roosevelt and Roosevelt Bank are
located at 900 Roosevelt Parkway, Chesterfield, Missouri 63017, and the
telephone number at that address is (314) 532-6200.
Roosevelt Bank is a federally chartered savings bank with $9.3 billion in
consolidated total assets at June 30, 1996, making it the largest Missouri-
based thrift institution. Roosevelt Bank has 79 full-service offices including
38 offices serving the St. Louis metropolitan area and nine offices serving the
Kansas City metropolitan area.
Roosevelt's business consists primarily of attracting deposits from the
general public and using those deposits, together with borrowings and other
funds, to originate and acquire real estate and consumer loans, to acquire
mortgage-backed securities, to perform loan servicing functions for others, and
to provide other retail banking and financial services to consumers. The
principal elements of Roosevelt's business plan are (i) the origination of a
higher percentage of its assets; (ii) the diversification of its balance sheet
away from only mortgage and real estate related assets; (iii) the expansion of
its retail deposit base with a simultaneous shift within that deposit base
toward checking and transaction accounts; and (iv) growth in fee income by
providing other services such as insurance, brokerage and mortgage loan
servicing for other investors.
Since 1990, Roosevelt has pursued a program of acquiring other in-market
and adjacent-market thrift institutions, and in April 1996 Roosevelt entered
into agreements to acquire two additional Missouri-based financial institution
holding companies and their subsidiary institutions. Following the acquisition
of one such institution, Missouri State Bank and Trust Company ("Missouri State
Bank"), Roosevelt, which is currently regulated as a savings and loan holding
company under the Home Owners' Loan Act of 1933 (the "HOLA"), will also be
regulated as a bank holding company under the Bank Holding Company Act of 1956
(the "BHCA"). The permissible activities of a bank holding company are more
restrictive than those afforded to a savings and loan holding company. See
"Roosevelt Financial Group, Inc. and Roosevelt Bank -- Bank Holding Company
Regulation."
For additional information concerning Roosevelt and Roosevelt Bank, see
"Roosevelt Financial Group, Inc. and Roosevelt Bank" and "Incorporation of
Certain Documents by Reference."
MUTUAL BANCOMPANY, INC. AND MUTUAL SAVINGS BANK, F.S.B.
Mutual is a Missouri corporation that is the holding company for Mutual
Bank. Mutual has not engaged in any significant business other than as the
holding company for Mutual Bank. At March 31, 1996, Mutual had total
consolidated assets of $53.3 million, deposits of $45.8 million and
stockholders' equity of $6.2 million. The executive offices of Mutual and
Mutual Bank are located at 101 West McCarty Street, Jefferson City, Missouri
65101, and the telephone number at that address is (573) 634-2150.
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Mutual Bank was founded in 1906 and currently operates as a federally
chartered savings institution with one office in Jefferson City, Missouri.
Mutual Bank is primarily engaged in the business of accepting deposits from the
general public and originating and purchasing loans secured by one- to four-
family residential properties located in Mutual Bank's market area. To a lesser
extent, Mutual Bank also originates consumer loans. In addition, Mutual Bank
holds investment securities, mortgage-backed securities, deposits and other
interest-earning assets.
For additional information regarding Mutual and Mutual Bank, see "Mutual
Bancompany, Inc. and Mutual Savings Bank, f.s.b."
THE SPECIAL MEETING
The Special Meeting will be held on Wednesday, October 23, 1996 at
11:00 a.m. at the office of Mutual Bank, 101 West McCarty Street, Jefferson
City, Missouri. At the Special Meeting, holders of record of Mutual Common Stock
as of the voting record date, September 19, 1996, will consider and vote upon
the approval of the Merger Agreement and the Merger. In addition, stockholders
of Mutual may consider and vote upon the approval of the adjournment of the
Special Meeting, in the event there are not sufficient shares present in person
or by proxy at the Special Meeting to approve the Merger Agreement and the
Merger, and such other matters as may properly come before the Special Meeting
or any adjournments thereof. Stockholders of record at the close of business on
September 19, 1996 will be entitled to one vote for each share then so held.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Mutual Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting. Proxies
will be voted in accordance with the directions given therein. Where no
instructions are indicated, proxies will be voted for the Merger Agreement and
the Merger. The proxy confers discretionary authority on the persons named
therein to vote with respect to matters incident to the conduct of the Special
Meeting. If any other business is presented at the Special Meeting, proxies will
be voted by those named therein in accordance with the determination of a
majority of the Mutual Board. However, proxies instructed to vote against the
proposal to approve the Merger Agreement and the Merger will not be voted for a
proposal to approve adjournment of the Special Meeting in the event that there
are not sufficient shares present in person or by proxy at the Special Meeting
to approve the Merger.
Approval of the Merger Agreement at the Special Meeting will require the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Mutual Common Stock entitled to vote at the Special Meeting. As a result,
abstentions and broker non-votes will have the same effect as votes against the
Merger Agreement.
As of the voting record date, the directors and executive officers of
Mutual and their affiliates beneficially owned in the aggregate 20,380 shares,
or 6.11% of the then outstanding shares of Mutual Common Stock entitled to
vote at the Special Meeting. Each director of Mutual has entered into a voting
agreement whereby each such director has agreed to vote all shares of Mutual
Common Stock owned by him (16,844 shares in the aggregate for all directors)
for approval of the Merger Agreement. As of the voting record date, the
directors and executive officers of Roosevelt and their affiliates beneficially
owned in the aggregate 1,600 shares of Mutual Common Stock. For additional
information, see "The Special Meeting."
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached hereto as Appendix I and
incorporated by reference herein.
GENERAL
The stockholders of Mutual are being asked to consider and vote upon a
proposal to approve the Merger Agreement, pursuant to which Mutual will be
merged with Roosevelt, with Roosevelt as the surviving entity, and Mutual Bank
will be merged with Roosevelt Bank. The name of the surviving entities
following consummation of the Merger will be "Roosevelt Financial Group, Inc."
and "Roosevelt Bank," respectively. See "The Merger--General."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Mutual Board considered the Merger and the terms of the Merger
Agreement, including the consideration to be received by Mutual's stockholders
in the Merger, in light of economic, financial, legal and market factors and
concluded that the Merger is in the best interests of Mutual. The terms of the
Merger Agreement are the result of arms' length negotiations between Mutual and
Roosevelt, as well as consultations between Mutual and its financial advisor,
Baird, and special legal counsel. Among the factors considered by the Mutual
Board were the historical operating results, current financial condition,
business and management and future
2
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financial and other prospects of Mutual and Roosevelt and the advice of Baird as
to the fairness to Mutual's stockholders, from a financial point of view, of the
consideration to be received by them in the Merger. Also considered were the
relative size and geographic market areas of Mutual and Roosevelt. The Mutual
Board believes that the Merger will afford Mutual's stockholders the benefit of
Roosevelt's larger market capitalization and the more liquid market for
Roosevelt Common Stock and will offer enhanced opportunities for Mutual Bank to
meet the needs of banking customers and other members of the Jefferson City area
communities served by Mutual Bank. The Mutual Board believes that Mutual Bank
will be in an enhanced competitive position with respect to other financial
institutions in its market area after the Merger.
The Mutual Board unanimously recommends that the holders of Mutual Common
Stock vote FOR approval of the Merger Agreement and the Merger.
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Mutual Common Stock issued and outstanding immediately
prior to the Merger (other than shares held by holders who perfect dissenters'
rights and other excluded shares) will be converted into the right to receive a
number (the "Exchange Ratio") of shares of Roosevelt Common Stock equal to the
quotient of (A) $23.00 divided by (B) the weighted average sale price of all
Roosevelt Common Stock traded on the Nasdaq National Market during the ten
trading days ending on the date that is three trading days prior to the Closing
Date (as defined herein). See "The Merger--Merger Consideration." Each share
of Roosevelt Common Stock issued and outstanding at the Effective Time (as
defined herein) will remain outstanding and unchanged as a result of the Merger.
If the Closing Date had been September 13, 1996, each shareholder of Mutual
would have been entitled to receive 1.2863 shares of Roosevelt Common Stock for
each share of Mutual Common Stock held. The last reported sale price for Mutual
Common Stock as of that date as reported on the Nasdaq Small Cap System was
$21.00 per share. The number of shares of Roosevelt Common Stock to be received
in the Merger, however, is subject to fluctuation. Fluctuations in the market
price of Roosevelt Common Stock would generally result in an increase or
decrease in the number of shares of Roosevelt Common Stock to be received by
Mutual stockholders in the Merger. An increase in the market value of Roosevelt
Common Stock would generally decrease the number of shares to be received by
Mutual stockholders in the Merger. A decrease in the market value of Roosevelt
Common Stock would generally have the opposite effect. See "The Merger--Merger
Consideration."
OPINION OF FINANCIAL ADVISOR
Mutual has retained Baird as its financial advisor in connection with the
Merger and requested that Baird render its opinion with respect to the fairness
to Mutual stockholders of the consideration to be received by them in the
Merger. Baird has rendered its written opinion to the Mutual Board to the
effect that as of April 9, 1996, the consideration to be received by Mutual's
stockholders in the Merger was fair, from a financial point of view, to such
holders. The fairness opinion sets forth a description of assumptions made and
matters considered by Baird, and contains certain limitations and
qualifications. A copy of the fairness opinion is attached as hereto as
Appendix II, and the description set forth herein is qualified in its entirety
by reference to such opinion.
For additional information, see "The Merger--Opinion of Financial Advisor,"
and the fairness opinion attached hereto as Appendix II.
EFFECTIVE TIME AND CLOSING DATE
The Company Merger will become effective at the time and on the date of the
filing of a certificate of merger with the Secretary of State of Delaware and
articles of merger with the Secretary of State of Missouri and upon the issuance
of a certificate of merger by the Secretary of State of Missouri (the "Effective
Time"). The Bank Merger will become effective upon the endorsement of articles
of combination for such merger by the Secretary of the Office of Thrift
Supervision (the "OTS"). The consummation of the Merger will occur only after
the approval of the Merger Agreement by the requisite vote of Mutual's
stockholders and the satisfaction or waiver of all other conditions to the
Merger. The closing of the Merger will occur on the last business day of the
first
3
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<PAGE>
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calendar month following the satisfaction of all conditions to closing, or at
another time agreed to by Roosevelt and Mutual (the "Closing Date").
APPRAISAL RIGHTS
Under Missouri law, holders of Mutual Common Stock may dissent from the
Merger, and receive payment of the "fair value" of such stock in cash if the
Merger is consummated, by following certain procedures set forth in Section
351.455 of The General and Business Corporation Law of Missouri (the "Missouri
Act"), the text of which is attached hereto as Appendix III. Failure to follow
such procedures may result in a loss of dissenters' rights. A failure to vote
against the Merger Agreement and the Merger will not constitute a waiver of a
shareholder's dissenter's rights. However, a vote for the Merger Agreement and
the Merger will constitute such a waiver. A Mutual shareholder who returns an
executed proxy card without any voting instructions specified with respect to
the Merger Agreement proposal will be deemed to have voted in favor of the
Merger Agreement and the Merger, thereby waiving his or her dissenter's rights.
See "The Merger--Appraisal Rights" and Appendix III to this Proxy
Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors, officers and employees of Mutual may be deemed to have
certain interests in the Merger in addition to their interests generally as
stockholders of Mutual. Roosevelt has agreed to indemnify the present and former
directors, officers and employees of Mutual and its subsidiaries against
liability arising out of actions or omissions occurring at or prior to the time
of the Merger and to use its reasonable best efforts to cause the persons
serving as officers and directors of Mutual Bank immediately prior to the Merger
to be covered for a period of three years from the time of the Merger under the
directors' and officers' liability insurance policy maintained by Mutual Bank
with respect to acts or omissions occurring prior to the Merger, subject to
certain limitations. Mutual's directors and directors emeriti are expected to
serve as advisory directors of Roosevelt Bank, for which services such persons
will receive a fee of $1000 per month. Employees of Mutual Bank who are not
retained by Roosevelt Bank would be entitled to receive a severance payment
based on their years of service, except the severance payment for executive
officers (specifically, Donald L. Conner, Frank M. Vernon and Dale L. Smith) of
Mutual would instead be twice the amount of their current annual base salary at
the rate in effect as of April 9, 1996. It is estimated that the severance
payments for Messrs. Conner, Vernon and Smith would be $127,272, $90,264 and
$84,816, respectively. Following the Merger, the trustees of the Mutual
Bancompany, Inc. Employee Stock Ownership Plan (the "Mutual ESOP") will
liquidate the amount of unallocated Roosevelt Common Stock necessary to retire
the outstanding ESOP debt and distribute the remaining Roosevelt Common Stock to
the Mutual ESOP participants in proportion to their account balances at the time
of the Merger, subject to the limitations of Section 415 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based on the projected Mutual ESOP loan
balance at September 30, 1996 and Mutual ESOP share allocation as of June 30,
1996, it was estimated that the value of this additional Mutual ESOP allocation
for Messrs. Conner, Vernon, and Smith would have been approximately $49,226,
$35,036, and $32,884, respectively. See "The Merger--Interests of Certain
Persons."
CONDITIONS TO THE MERGER
The respective obligations of the parties to consummate the Merger are
subject to the satisfaction or waiver of certain conditions specified in the
Merger Agreement, including, among other things, the receipt of the requisite
regulatory and stockholder approvals, the accuracy of the representations and
warranties contained therein, the performance of all obligations imposed
thereby, the receipt by Roosevelt and Mutual of an opinion with respect to
certain federal income tax consequences of the Merger and certain other
conditions. See "The Merger--Conditions to the Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. Roosevelt filed an
application for approval of the Merger with the OTS on May 21, 1996, and
received such approval on July 25, 1996.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without the imposition of any condition which
differs from conditions customarily imposed by the OTS in orders approving
acquisitions of the type contemplated by the Merger Agreement. The OTS approval
did not contain any such condition.
4
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Under federal law, a period of 15 days must expire following approval by
the OTS within which period the United States Department of Justice (the
"Department of Justice") may file objections to the Merger under the federal
antitrust laws. The Department of Justice did not file any objection during this
period. See "The Merger--Regulatory Approvals."
WAIVER AND AMENDMENT; TERMINATION
The board of directors of any party to the Merger Agreement may waive
compliance with any term, condition or provision of the Merger Agreement where
such party or the stockholders of such party are entitled to the benefits
thereof.
Subject to applicable law, the Merger Agreement may be amended by action of
the board of directors of any party to the Merger Agreement at any time before
or after approval of the Merger Agreement by the stockholders of Mutual,
provided that, among other things, after approval of the Merger Agreement by the
stockholders of Mutual, no amendment may change the amount or form of the
consideration to be received by Mutual stockholders in the Merger or adversely
affect the tax treatment to Mutual Stockholders of the stock portion of the
consideration received in the Merger. In addition, Roosevelt may cause an
amendment to the Merger Agreement to change the method of effecting the Merger,
subject to certain limitations set forth in the Merger Agreement.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether prior to or after approval of the matters presented herein by
Mutual's stockholders, either by mutual consent of the parties in writing or by
either party if (i) the Company Merger is not consummated by February 28, 1997;
(ii) any required regulatory approval is denied; (iii) the required approval of
Mutual's stockholders is not obtained (provided, in the case of subparagraphs
(i), (ii) and (iii), that the terminating party is not then in material breach
of the Merger Agreement); or (iv) the other party has materially breached any
representation, warranty, covenant or agreement set forth in the Merger
Agreement and has failed to, or cannot, cure in a timely manner such breach
after receiving written notice of such breach. See "The Merger--Waiver and
Amendment; Termination." Under the Merger Agreement, Mutual must pay Roosevelt
a fee of $500,000 in cash in the event the Merger is not consummated if certain
events occur by October 9, 1997. See "The Merger--Expenses; Termination Fee."
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Roosevelt and Mutual has agreed to conduct its business prior to
the Effective Time in the ordinary and usual course consistent with past
practices and use its best efforts to maintain and preserve its business
organization, employees and advantageous business relationships, and retain the
services of its officers and key employees. Mutual also has agreed to certain
forbearances with respect to the conduct of its business prior to the Effective
Time. See "The Merger--Conduct of Business Pending the Merger."
EXPENSES; TERMINATION FEE
All expenses incurred in connection with the Merger Agreement and the
consummation of the Merger are to be paid by the party incurring such expenses,
except that Roosevelt will pay all printing and mailing expenses and filing fees
associated with the Registration Statement and this Proxy Statement/Prospectus
and all filings with regulatory authorities for approval of the Merger
Agreement. In addition, under the Merger Agreement, Mutual must pay Roosevelt a
fee of $500,000 in cash in the event the Merger is not consummated if certain
events occur by October 9, 1997. See "The Merger--Expenses; Termination Fee."
5
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ACCOUNTING TREATMENT
Roosevelt has not yet decided whether to account for the Merger under the
purchase method or the pooling of interests method. The decision will be based
on whether Roosevelt decides to issue shares in connection with the Merger from
authorized, but unissued shares, or to acquire shares in the open market for
issuance in connection with the Merger. If shares are acquired in the open
market, the pooling method will not be available. In addition, in order to
utilize the pooling method, Roosevelt would be required to, prior to
consummation of the merger, rescind its existing stock repurchase plan, which is
described in Note 18 to the Consolidated Financial Statements of Roosevelt
contained in the Roosevelt 1995 10-K, incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." Under the purchase method,
which accounts for a business combination as the acquisition of one enterprise
by another, the value of the company's shares issued in the transaction is
included in stockholders' equity and any of such amount in excess of net fair
values of tangible and identifiable intangible assets of the acquired company is
treated as an intangible asset on the acquiring company's financial statements.
Under the pooling method, the financial statements of the combining enterprises
are combined as if the two were and had been a single entity and no intangible
asset is created. See "The Merger--Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Roosevelt has received an opinion of Silver, Freedman & Taff, L.L.P.,
counsel to Roosevelt, in connection with the Registration Statement to the
effect that if the Merger were consummated on the date hereof, the Merger would
qualify as a reorganization under the Code with the following consequences:
(i) the Company Merger and the Bank Merger would each qualify as a
reorganization under Section 368(a) of the Code;
(ii) no gain or loss would be recognized by Roosevelt, Roosevelt Bank,
Mutual or Mutual Bank by reason of the Company Merger or the Bank Merger;
(iii) no gain or loss would be recognized by any Mutual stockholder upon
the exchange of Mutual Common Stock solely for Roosevelt Common Stock in
the Merger (except in connection with the receipt of cash in lieu of a
fractional share of Roosevelt Common Stock or in connection with the
exercise of dissuter's rights, as discussed below);
(iv) the aggregate tax basis of the Roosevelt Common Stock received by
each stockholder of Mutual who exchanges Mutual Common Stock for Roosevelt
Common Stock in the Merger would be the same as the aggregate tax basis of
the Mutual Common Stock surrendered in exchange therefor (subject to any
adjustments required as the result of receipt of cash in lieu of a
fractional share of Roosevelt Common Stock);
(v) the holding period of the shares of Roosevelt Common Stock received
by a Mutual stockholder in the Merger would include the holding period of
the Mutual Common Stock surrendered in exchange therefor (provided that
such shares of Mutual Common Stock were held as a capital asset by such
stockholder at the Effective Time);
(vi) cash received in the Merger by a Mutual stockholder in lieu of a
fractional share interest of Roosevelt Common Stock or by a Mutual
stockholder exercising dissenter's rights would be treated as having been
received as a distribution in full payment in exchange for the fractional
share interest of Roosevelt Common Stock which such stockholder would
otherwise be entitled to receive, and would qualify as capital gain or loss
(assuming the Mutual Common Stock surrendered in exchange therefor was held
as a capital asset by such stockholder at the Effective Time); and
(vii) A Mutual stockholder who received only cash as a result of the
exercise of appraisal rights would realize gain or loss for federal income
tax purposes (determined separately as to each block of Mutual Common Stock
exchanged) in an amount equal to the difference between (x) the amount of
cash received by such stockholder, and (y) such stockholder's tax basis for
the shares of Mutual Common Stock surrendered in exchange therefor,
provided that the cash payment does not have the effect of the distribution
of a dividend. Any such gain or loss would be recognized for federal income
tax purposes and will be treated as capital gain or loss. However, if the
cash payment did have the effect of the distribution of a dividend, the
amount of taxable income recognized generally would equal the amount of
cash received; such income generally would be taxable as a dividend; and no
loss (or other recovery of such stockholder's tax basis for the shares of
Mutual Common Stock surrendered in the exchange) generally would be
recognized by such stockholder. The determination of whether a cash payment
has the effect of the distribution of a dividend would be made pursuant to
the provisions and limitations of Section 302 of the Code, taking into
account the constructive stock ownership rules of Section 318 of the
Code.
The opinion is subject to various assumptions and qualifications, including
that the Company Merger and the Bank Merger will be consummated in the manner
and in accordance with the terms of the Merger Agreement. However, the Financial
accounting treatment of the transaction as a pooling or a purchase will not
impact the tax consequences described above. The opinion is based entirely upon
the Code, regulations in effect or proposed thereunder, current administrative
rulings and practice and judicial authority, all of which are subject to change,
possibly with retroactive effect. Consummation of the Merger is conditioned upon
the receipt by Roosevelt and Mutual of a closing tax opinion setting forth the
same tax consequences in the foregoing tax opinion. See "--Conditions of the
Merger." Mutual stockholders are urged to consult their tax advisors concerning
the specific tax consequences to them of the Merger, including the applicability
and effect of various state, local and foreign tax laws. For further discussion
of the opinion of Silver, Freedman & Taff, L.L.P. as to the material federal
income tax consequences of the Merger as issued and delivered to the Board of
Directors of Roosevelt, see "The Merger--Certain Federal Income Tax Consequences
of the Merger."
EFFECTS OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Mutual Common Stock who receive
shares of Roosevelt Common Stock in the Merger will become stockholders of
Roosevelt. For a comparison of the corporate charters and bylaws of Roosevelt
and Mutual governing the rights of Roosevelt and Mutual stockholders, see
"Comparison of Rights of Stockholders of Roosevelt Financial Group, Inc. and
Mutual Bancompany, Inc."
NASDAQ LISTING
Roosevelt Common Stock (symbol: RFED) currently is quoted on the Nasdaq
National Market. It is a condition to consummation of the Merger that the
Roosevelt Common Stock to be issued to the stockholders of Mutual in the Merger
and also will be approved for listing on the Nasdaq National Market. See "The
Merger--Conditions to the Merger."
MANAGEMENT AFTER THE MERGER
As of the Effective Time, the Boards of Directors of Roosevelt and
Roosevelt Bank will consist of the current members of such Boards, and the
executive officers of Roosevelt and Roosevelt Bank will be the current executive
officers of Roosevelt and Roosevelt Bank. For at least one year after the
Effective Time, and for so long thereafter as agreed to by Roosevelt Bank and
the participating directors of Mutual, the directors and directors emerti of
Mutual who wish to do so may serve as regional advisory directors of Roosevelt
Bank with a retainer fee for each such advisory director of $1,000 per month.
See also "The Merger--Interests of Certain Persons in the Merger."
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COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION
The Roosevelt Common Stock is quoted on the Nasdaq National Market under
the symbol "RFED." The Mutual Common Stock is quoted on the NASDAQ Small Cap
System under the symbol "MFSB." The following table sets forth the comparative
market prices for Roosevelt Common Stock and Mutual Common Stock and the
quarterly cash dividends per share declared, for the periods indicated. The
market prices of the Roosevelt Common Stock for the periods indicated represent
closing prices of such stock as quoted on the Nasdaq National Market. The
market prices of the Mutual Common Stock represent last sale prices of such
stock as quoted on the Nasdaq Small Cap Market. The stock prices and dividend
amounts have been restated to give effect to stock splits and stock dividends.
The stock prices do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
ROOSEVELT COMMON STOCK MUTUAL COMMON STOCK
--------------------------- ---------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994 CALENDAR YEAR
First Quarter...................... 15.833 13.917 0.10 --- --- ---
Second Quarter..................... 18.250 14.328 0.11 --- --- ---
Third Quarter...................... 17.375 16.000 0.11 --- --- ---
Fourth Quarter..................... 16.875 12.750 0.11 --- --- ---
1995 CALENDAR YEAR
First Quarter...................... 17.250 14.750 0.14 /1/11.500 10.250 ---
Second Quarter..................... 18.625 15.750 0.14 12.87 10.750 ---
Third Quarter...................... 18.875 15.250 0.14 18.00 12.875 ---
Fourth Quarter..................... 19.375 15.875 0.14 18.00 17.00 ---
1996 CALENDAR YEAR
First Quarter...................... 19.250 17.000 0.155 18.00 16.75 ---
Second Quarter..................... 20.000 17.750 0.155 21.75 16.75 ---
Third Quarter (through September 13) 18.875 15.625 0.155 21.25 21.00 ---
</TABLE>
_________________________
(1) Reflects the period from January 31, 1995 through March 31, 1995.
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The following table sets forth the last reported sale prices per share of
Roosevelt Common Stock and Mutual Common Stock and the equivalent per share
price for Mutual Common Stock giving effect to the Merger on (i) April 8, 1996,
the last trading day preceding public announcement of the signing of the Merger
Agreement; and (ii) August 22, 1996, the last practicable date prior to the
mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
ROOSEVELT MUTUAL EQUIVALENT PRICE PER
COMMON STOCK COMMON STOCK MUTUAL SHARE/(1)/
ps -------------- --------------- ------------------------
<S> <C> <C> <C>
April 8, 1996........ $18.125 $ 16.75 $23.00
September 13, 1996... $17.125 $ 21.00 $23.00
</TABLE>
_______________________
(1) The equivalent price per share of Mutual Common Stock at each specified
date was assumed to be $23.00 based upon the formula specified in the
Merger Agreement for calculating the Merger Consideration. The formula
provides that each share of Mutual Common Stock issued and outstanding
immediately prior to the Merger (other than shares held by holders who
perfect dissenters' rights and other excluded shares) will be converted
into the right to receive a number of shares of the common stock, par value
$.01 per share, of Roosevelt Common Stock equal to the quotient of (A)
$23.00 divided by (B) the weighted average sale price of all Roosevelt
Common Stock traded on the Nasdaq National Market during the ten trading
days ending on the date that is three trading days prior to the Closing
Date of the Merger, with cash paid in lieu of fractional share interests.
If the Closing Date had been September 13, 1996, each shareholder of Mutual
would have been entitled to receive 1.2863 shares of Roosevelt Common Stock
for each share of Mutual Common Stock held. Because of the formula, the
actual equivalent price per share of Mutual Common Stock may be more or
less than $23.00. The market value of the Merger Consideration at the time
of the Merger will depend upon the market value of a share of Roosevelt
Common Stock at such time. See "The Merger-Merger Consideration."
As of September 13, 1996, the 42,152,474 outstanding shares of Roosevelt
Common Stock were held by approximately 5,189 record owners and the 333,500
outstanding shares of Mutual Common Stock by approximately 252 record
owners.
The timing and amount of the future dividends of Roosevelt will depend upon
earnings, cash requirements, Roosevelt's financial condition and other factors
deemed relevant by the Roosevelt Board. Dividends may also be limited by certain
regulatory restrictions.
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RECENT DEVELOPMENTS
The deposits of Roosevelt Bank are presently insured by the Savings
Association Insurance Fund (the "SAIF") which together with the Bank Insurance
Fund (the "BIF") are the two insurance funds administered by the Federal Deposit
Insurance Corporation (the "FDIC"). As a result of the BIF reaching its
statutory reserve ratio, the FDIC revised the premium schedule for BIF insured
institutions to provide a range of .04% to .31% of deposits. The revisions
became effective in the third quarter of 1995. The BIF premium schedule was
further revised, effective January 1996, to provide a range of 0% to .27% with
an annual minimum assessment of $2,000, essentially eliminating deposit
insurance premiums for many BIF-insured institutions. As a result of these
adjustments, BIF insured institutions now generally pay lower premiums than SAIF
insured institutions.
The FDIC has noted that the SAIF is not expected to attain its designated
reserve ratio until the year 2002. As a result, SAIF insured members will
generally be subject to higher deposit insurance premiums than BIF insured
institutions until, all things being equal, the SAIF attains its required
reserve ratio.
The effect of this disparity on Roosevelt Bank and other SAIF members is
uncertain at this time. It may have the effect of permitting BIF member banks to
offer loan and deposit products on more attractive terms than SAIF members due
to the cost savings achieved through lower premiums, thereby placing SAIF
members at a competitive disadvantage. In order to eliminate this disparity, a
number of proposals to recapitalize the SAIF have been considered by the United
States Congress in 1995 and 1996. One proposal provides for a one-time
assessment to be imposed on all deposits assessed at the SAIF rates, as of March
31, 1995, in order to recapitalize the SAIF and eliminate the premium disparity.
It also provides for the eventual merger of the BIF and SAIF. The special
assessment rate is currently anticipated to be approximately .70%. Based on
Roosevelt Bank's level of SAIF deposits at March 31, 1995 (including the effect
of the acquisitions of Kirksville Federal Savings Bank ("Kirksville Bank"),
Washington Savings Bank, FSB ("Washington Savings"), Sentinel Federal Savings
and Loan Association of Kansas City ("Sentinel Federal") and Mutual Bank), and
assuming a special assessment of .70%, Roosevelt Bank's assessment would be
approximately $30.2 million on a pre-tax basis. If such special assessment had
been recorded as of June 30, 1996, on a pro forma basis (including the effect of
Sentinel Federal and Mutual Bank as of March 31, 1996), the tangible, core and
risk-based capital ratios would have been 5.37%, 5.40% and 14.17%, respectively.
The final form of any such legislation has been the subject of continuing
negotiations and cannot be assured. If the legislation is enacted during the
current Congressional session, however, it is anticipated the assessment would
be payable in 1996. Accordingly, this special assessment would significantly
increase noninterest expense and adversely affect Roosevelt Bank's results of
operations. Conversely, depending on Roosevelt Bank's capital level and
supervisory rating, and assuming, although there can be no assurance, that the
insurance premium levels for BIF and SAIF members are again equalized, deposits
insurance premiums could decrease significantly to the minimum assessment for
future periods.
The United States Congress is also considering legislation that would
require all Federal thrift institutions, such as Roosevelt Bank, to either
convert to a national bank or a state chartered financial institution by January
1, 1998. In addition, Roosevelt would no longer be regulated as a thrift holding
company, but rather as a bank holding company. The OTS would also be abolished
and its functions transferred among the other federal banking regulators.
Certain aspects of the legislation remain to be resolved and therefore no
assurance can be given as to whether or in what form the legislation will be
enacted or its effect on Roosevelt and Roosevelt Bank.
In August 1996, legislation was enacted that repeals the reserve
method of accounting (including the percentage of taxable income method) used by
many thrifts to calculate their bad debt reserve for federal income tax
purposes. As a result, large thrifts such as Roosevelt Bank must recapture that
portion of the reserve that exceeds the amount that could have been taken under
the specific charge-off method for post-1987 tax years. The legislation also
requires thrifts to account for bad debts for federal income tax purposes on the
same basis as commercial banks for tax years beginning after December 31, 1995.
The recapture will occur over a six-year period, the commencement of which will
be delayed until the first taxable year beginning after December 31, 1997,
provided the institution meets certain residential lending requirements. The
management of Roosevelt does not believe that the legislation will have a
material impact on Roosevelt or Roosevelt Bank.
9
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF ROOSEVELT FINANCIAL GROUP, INC.
The following table shows, for the periods indicated, certain summary
historical data for Roosevelt. Information at and for the years ended December
31, 1991 through 1993 have been restated to reflect an acquisition accounted for
as a pooling of interests. This information is derived in part from, and should
be read in conjunction with, the separate consolidated financial statements and
related notes included in the Roosevelt 1995 10-K, which is incorporated by
reference herein.
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
Total assets....................... $9,327,772 $8,961,061 $9,013,061 $8,431,866 $7,595,161 $6,038,732 $5,756,199
Securities available for sale...... 1,353,760 1,726,044 1,606,461 1,765,699 1,665,879 52,399 46,997
Securities held to maturity........ 3,534,341 3,641,954 3,550,140 3,276,062 2,642,916 2,219,147 2,487,141
Loans.............................. 4,016,699 3,264,735 3,577,892 3,072,151 2,671,810 2,349,771 2,259,867
Deposits........................... 4,979,371 4,785,619 4,907,497 4,899,389 5,081,496 4,300,981 4,184,323
Other borrowings................... 3,653,183 3,565,862 3,507,475 2,963,449 1,975,661 1,319,154 1,222,457
Stockholders' equity............... 516,317 452,350 496,906 441,626 378,462 288,545 254,396
SUMMARY OF OPERATIONS:
Total interest income.............. $ 328,423 $ 319,012 $ 647,795 $ 533,286 $ 486,940 $ 439,173 $ 503,801
Total interest expense............. 238,753 225,016 466,433 347,574 321,490 314,728 394,315
Provision for losses on loans...... 600 600 1,200 12,432 706 2,648 2,695
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for losses on loans..... 89,070 93,396 180,162 173,280 164,744 121,797 106,791
---------- ---------- ---------- ---------- ---------- ---------- ----------
Retail banking fees................ 6,587 5,228 10,706 8,682 6,260 4,870 3,150
Insurance and brokerage sales
commissions....................... 3,718 4,116 7,506 6,538 5,737 4,347 3,159
Loan servicing fees
(expenses), net................... 4,733 4,144 8,911 7,359 (11,145) 8,392 11,191
Net gain (loss) from
financial instruments............. 862 (55,739) (58,216) (10,660) 10,646 11,394 374
Unrealized losses on impairment
of mortgage-backed securitiesheld
to maturity...................... --- (27,063) (27,063) --- --- --- ---
Other.............................. 2,894 1,538 3,016 5,337 2,759 1,790 5,337
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest income
(loss)......................... 18,794 (67,776) (55,140) 17,256 14,257 30,793 23,211
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest expense....... 45,146 43,233 87,666 115,576 98,598 100,452 87,994
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax expense,
extraordinary item, and cumulative
effect of change in accounting
principle......................... 62,718 (17,613) 37,356 74,960 80,403 52,138 42,008
Income tax expense (benefit)....... 21,425 (7,298) 10,258 25,384 27,134 17,887 14,612
Extraordinary item, net............ --- --- --- (7,849) (1,908) (3,796) (1,662)
Cumulative effect of change in
accounting principle.............. --- --- --- --- (6,489)/(1)/ --- (16,321)/(2)/
---------- ---------- ---------- --------- ---------- ---------- ----------
Net income (loss).................. $ 41,293 $ (10,315)$ 27,098 $ 41,727 $ 44,872 $ 30,455 $ 9,413
========== ========== ========== ========= ========== ========== ==========
Net income attributable
to common stock................... $ 39,179 $ (12,444)$ 22,855 $ 36,543 $ 41,057 $ 28,866 $ 5,029
========== ========== ========== ========= ========== ========== ==========
PER SHARE DATA:
Primary earnings (loss) per share:
Income (loss) before
extraordinary item and cumulative
effect of change in accounting
principle........................ $ 0.92 $ (0.31)$ 0.56 $ 1.17 $ 1.54 $ 1.09 $ 1.09
Extraordinary item............... --- --- --- (0.21) (0.06) (0.13) (0.06)
Cumulative effect of change in... --- --- --- --- (0.20) --- (0.65)
---------- ---------- ---------- --------- ---------- ---------- ----------
accounting principles
Net income (loss).............. $ 0.92 $ (0.31)$ 0.56 $ 0.96 $ 1.28 $ 0.96 $ 0.38
========== ========== ========== ========= ========== ========== ==========
</TABLE>
10
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<PAGE>
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<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ ------------ ------------ ----------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Fully-diluted earnings per share:
Income (loss) before extraordinary
item and cumulative effect of
change in accounting principle $ 0.88 $ (.31) $ .56 $ 1.17 $ 1.32 $ 0.99 $ 1.09
Extraordinary item --- --- --- (0.21) (0.05) (0.11) (0.06)
Cumulative effect of change in
accounting principle --- --- --- --- (0.16) --- (0.65)
------ ------------- ------------ ------------ ------ ------ -------
Net Income (loss) $ 0.88 $ (.31) $ 0.56 $ 0.96 $ 1.11 $ 0.88 $ 0.38
====== ============= ============ ============ ====== ====== =======
PRO FORMA AMOUNT ASSUMING THE CHANGE IN
ACCOUNTING PRINCIPLE IS APPLIED
RETROACTIVELY:/(2)/
Net income N/A N/A N/A N/A N/A N/A $25,734
====== ============= ============ ============ ====== ====== =======
Earnings per share N/A N/A N/A N/A N/A N/A $ 1.03
====== ============= ============ ============ ====== ====== =======
OTHER DATA:
Ratio of net interest income to general
administrative expense 1.99x 2.17x 2.07x/(4)/ 1.67x/(3)/ 1.82x 1.55x 1.44x
Effective net spread during the period 2.00% 2.14% 2.06% 2.29% 2.40% 2.32% 2.01%
Nonperforming assets to total assets, end
of period 0.85 0.75 0.90 0.41 0.46 0.78 0.89
Return on assets (ratio of net income to
average total assets) 0.88 (.23)/(5)/ 0.30/(4)/ 0.49/(3)/ 0.61 0.54 0.16
Return on equity (ratio of net income
to average stockholders' equity) 16.27 (4.61)/(5)/ 5.97/(4)/ 10.30/(3)/ 12.86 11.11 3.55
Equity-to-assets ratio (ratio of
average stockholders' equity to average
total assets) 5.42 4.91 4.97 4.80 4.75 4.84 4.64
Cash dividends per share of common stock $ 0.31 $ 0.28 $ 0.56 $ 0.43 $ 0.31 $ 0.21 $ 0.20
Dividends on common stock payout ratio
(dividends paid per share of common
stock divided by primary net income
per share) 33.70% N/M/(5)/ 100.00%/(4)/ 44.79%/(3)/ 18.72% 18.63% 90.41%
Book value per share, end of period $10.98 $ 10.01 $ 10.60 $ 9.79 $ 9.18 $ 9.29 $ 8.67
</TABLE>
_______________________________
(1) During December 1993, Roosevelt adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," on a prospective basis. As a result,
Roosevelt recorded a $6.5 million charge, net of applicable income taxes,
as a cumulative effect of a change in accounting principle to reflect an
other than temporary impairment of certain interest-only stripped coupon
mortgage-backed pass-through certificates and collateralized mortgage
obligation residual interests. See Note 2 of the Notes to Consolidated
Financial Statements included in the Roosevelt 1995 10-K incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
(2) During 1991, Roosevelt changed its method of amortizing cost in excess of
fair value of net assets acquired. Prior to 1991, Roosevelt amortized the
cost in excess of fair value of net assets acquired (goodwill) on a
straight line basis over a 15 year life. On January 1, 1991, Roosevelt
adopted the provisions of Statement of Financial Accounting Standards No.
72, "Accounting for Certain Acquisitions of Banking and Thrift
Institutions" (SFAS 72) and amortizes goodwill over the life of the long-
term interest-bearing assets acquired. Such adoption was allowed as a
result of the Financial Accounting Standards Board Emerging Issues Task
Force Consensus No. 89-19 which permitted retroactive application for
purchase business combinations that occurred prior to the issuance of SFAS
72. Roosevelt recorded a $16.3 million cumulative effect of a change in
accounting principle in 1991.
(3) Includes a $57.3 million net expense (net of income tax benefit) of merger-
related expenses as a result of the acquisition of Farm & Home. Such
merger-related expenses included $11.4 million in provision for losses on
loans, $38.4 million of net loss from financial instruments, $3.7 million
in provision for real estate losses, $6.3 million in compensation and
employee benefits, occupancy expense of $5.9 million, transaction related
fees of $7.0 million, and $1.8 million of other expenses. This amount was
reduced by the income tax effect of $25.0 million. An extraordinary item
totalling $7.8 million was recorded related to the early extinguishment of
debt. Also included are gains resulting from the mark to market of the
Company's financial futures positions used to reduce the interest rate risk
of certain mortgage-backed securities in the available for sale portfolio
totalling $39.5 million ($25.1 million, net of income taxes). Not including
the aforementioned charges and gains for 1994, the ratio of net interest
income to general and administrative expense would have been 2.08x, return
on assets would have been 0.96%, return on equity would have been 20.01%,
and the dividend on common stock payout ratio would have been 18.40%.
(4) Excluding the impact of the impairment charge related to certain mortgage-
backed securities of $27.1 million, losses resulting from the mark to
market of Roosevelt's financial futures positions used to reduce the
interest rate risk of certain mortgage-backed securities in the available
for sale portfolio totalling $71.0 million and merger-related expenses of
$1.6 million, the ratio of net interest income to general and
administrative expense would have been 2.11x, return on assets would
have been 0.95%, return on equity would have been 18.96% and the dividend
on common stock payout ratio would have been 27.59%.
(5) Excluding the impact of the impairment charge related to certain mortgage-
backed securities of $27.1 million and losses resulting from the mark to
market of Roosevelt's financial futures positions used to reduce the
interest rate risk of certain mortgage-backed securities in the available
for sale portfolio totaling $61.7 million, return on assets would have been
0.98%, return on equity would have been 19.94% and the dividend on common
stock payout ratio would have been 26.92%.
11
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<PAGE>
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF MUTUAL BANCOMPANY, INC. /(1)/
The following table shows, for the periods indicated, certain summary
historical data for Mutual. This information is derived in part from, and should
be read in conjunction with, the separate consolidated financial statements and
related notes included elsewhere in this proxy statement/prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS
ENDED MARCH 31, JUNE 30,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
Total assets .................................... $53,311 $56,936 $56,851 $54,095 $58,174
Loans receivable, net /(2)/ ..................... 39,213 40,160 40,421 32,331 35,466
Mortgage-backed securities, net ................. 4,747 5,916 5,837 7,422 4,916
Investment securities ........................... 6,684 7,905 7,909 10,362 12,753
Securities available for sale ................... 11,431 4,238 4,248 --- ---
Savings deposits ................................ 45,818 47,937 48,854 50,164 54,334
Advances from Federal Home Loan Bank ............ 900 2,650 1,325 --- ---
Stockholders' equity/retained earnings -
substantially restricted ...................... 6,236 6,038 6,205 3,605 3,285
Number of full-service offices .................. 1 1 1 1 1
SUMMARY OF OPERATIONS:
Total interest and dividend income .............. $ 2,703 $ 2,557 $ 3,436 $ 3,456 $ 4,251
Total interest expense .......................... 1,811 1,657 2,258 2,025 2,664
------- ----- ----- ----- -----
Net interest income .................... 892 900 1,178 1,431 1,587
Provision for losses on loans ................... (5) (24) (52) 117 11
------- ----- ----- ----- -----
Net interest income after provision for
losses on loans ............... 897 924 1,230 1,314 1,576
------- ----- ----- ----- -----
Service fee income .............................. 27 24 33 30 30
Gain (loss) on sale of securities, net .......... (25) (43) (43) --- ---
Other noninterest income ........................ 49 50 59 77 53
------- ----- ----- ----- -----
Total noninterest income (loss) ........ 51 31 49 107 83
------- ----- ----- ----- -----
General and administrative expenses ............. 935 853 1,159 1,238 1,054
Income before income taxes and
cumulative effect of change in
accounting principle .......... 13 102 120 183 605
Income taxes .................................... 6 33 (56) (64) 234
------- ----- ----- ----- -----
Income before cumulative effect of
change in accounting principle 7 69 176 247 371
Cumulative effect of change in accounting
principle ..................................... --- --- --- 73 ---
------- ------ ------ ------ ------
Net income ............................. $ 7 $ 69 $ 176 $ 320 $ 371
======= ======= ======= ======= =======
Earnings per share:
Income before extraordinary item and
cumulative effect of change in accounting
principle ................................... $ .02 N/A N/A N/A N/A
Cumulative effect of change in accounting
principle ................................... --- N/A N/A N/A N/A
-------
Net income ............................. $ .02 N/A N/A N/A N/A
=======
<CAPTION>
--------------------------
1992 1991
------------ ------------
<S> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
Total assets .................................... $60,411 $59,336
Loans receivable, net /(2)/ ..................... 42,154 46,886
Mortgage-backed securities, net ................. 1,600 754
Investment securities ........................... 10,419 7,881
Securities available for sale ................... --- ---
Savings deposits ................................ 56,953 56,439
Advances from Federal Home Loan Bank ............ --- ---
Stockholders' equity/retained earnings -
substantially restricted ...................... 2,913 2,422
Number of full-service offices .................. 1 1
SUMMARY OF OPERATIONS:
Total interest and dividend income .............. 5,124 5,452
Total interest expense .......................... 3,528 4,184
----- -----
Net interest income .................... 1,596 1,268
Provision for losses on loans ................... 5 143
----- -----
Net interest income after provision for
losses on loans ............... 1,591 1,125
----- -----
Service fee income .............................. 27 29
Gain (loss) on sale of securities, net .......... --- (125)
Other noninterest income ........................ 34 16
----- -----
Total noninterest income (loss) ........ 61 (80)
----- -----
General and administrative expenses ............. 905 892
Income before income taxes and
cumulative effect of change in
accounting principle .......... 747 153
Income taxes .................................... 256 50
----- -----
Income before cumulative effect of
change in accounting principle 491 103
Cumulative effect of change in accounting
principle ..................................... --- ---
------ ------
Net income ............................. $ 491 $ 103
======= =======
Earnings per share:
Income before extraordinary item and
cumulative effect of change in accounting
principle ................................... N/A N/A
Cumulative effect of change in accounting
principle ................................... N/A N/A
Net income ............................. N/A N/A
</TABLE>
12
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<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS
ENDED MARCH 31, JUNE 30,
---------------------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ------------- ------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA: (3)
Average total assets................................ $55,072 $56,666 $56,793 $55,220 $59,693 $59,906 $59,073
Interest rate spread information:
Average during period............................. 1.73% 1.97% 1.83% 2.54% 2.57% 2.57% 2.09%
End of period..................................... 1.85 1.49 1.57 2.51 2.78 2.39 2.64
Net interest margin/(4)/............................ 2.21 2.19 2.14 2.67 2.74 2.75 2.22
Average interest-earning assets to average interest-
bearing liabilities............................... 1.11x 1.05x 1.08x 1.04x 1.04x 1.03x 1.02x
Non-performing assets to total assets at end of
period/(5)/....................................... .01% .04% .01% .28% .23% .35% .71%
Equity to total assets at end of period/(6)/........ 11.70 10.60 10.91 6.66 5.65 4.82 4.08
Return on assets (ratio of net income to average
total assets)...................................... .02 .16 .31 .58 .62 .82 .18
Return on equity (ratio of net income to average
equity)........................................... .15 2.16 3.84 10.14 12.05 18.36 4.31
Equity-to-assets ratio (ratio of average equity to
average total assets)............................. 11.56 7.53 8.08 5.70 5.18 4.47 4.07
General and administrative expenses as a percent
of average total assets........................... 2.26 2.01 2.04 2.24 1.77 1.51 1.51
Ratio of net interest income to general and
administrative expenses........................... .95x 1.06x 1.02x 1.16x 1.51x 1.76x 1.42x
</TABLE>
_______________________________
/(1)/ Mutual completed its initial public offering on January 31, 1995 and
purchased all of the outstanding stock of Mutual Bank. As a result, the
information above represents Mutual Bank only prior to January 31, 1995.
/(2)/ Does not include loans held for sale.
/(3)/ Annualized, with respect to information at or for the Nine Months Ended
March 31, 1995 and 1996.
/(4)/ Net interest income divided by average interest-earning assets.
/(5)/ Non-performing assets consist of non-accruing loans, accruing loans 90 or
more days past due and real estate owned.
/(6)/ Represents retained earnings prior to January 31, 1995.
13
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<PAGE>
- -------------------------------------------------------------------------------
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows unaudited comparative per share data for
Roosevelt and Mutual Common Stock on an historical basis, and on a pro forma
combined basis and a pro forma equivalent basis for Roosevelt and Mutual giving
effect to the Merger accounted for under the pooling of interests method of
accounting. Roosevelt has not yet decided whether to account for the
Merger under the pooling of interests method or the purchase method of
accounting. The pro forma data under the pooling and purchase methods of
accounting would not be materially different. See "The Merger--Accounting
Treatment."
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------- -----------------------
Equivalent
Roosevelt Mutual/(1)/ Combined Shares
--------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Book value per share at:
December 31, 1995................. $10.60 $18.61/(2)/ $10.63/(4)/ $13.67/(5)/
June 30, 1996..................... 10.98 18.70 11.01/(4)/ 14.16/(5)/
Cash dividends declared per
share:
Year Ended December 31, 1993....... 0.310 N/A 0.310 0.399
Year Ended December 31, 1994....... 0.430 N/A 0.430 0.553
Year Ended December 31, 1995....... 0.560 N/A 0.560 0.720
Six Months Ended June 30, 1996..... 0.310 N/A 0.310 0.399
Income per share before extraordinary
item and cumulative effect of change
in accounting principles:
Year Ended December 31, 1993....... 1.32 N/A 1.32 1.70/(6)/
Year Ended December 31, 1994....... 1.17 N/A 1.17 1.50/(6)/
Year Ended December 31, 1995....... 0.56 0.36/2//(3)/ 0.56 0.72/(6)/
Six Months Ended June 30, 1996..... 0.88 0.02 0.87 1.12/(6)/
- ------------------------
</TABLE>
(1) Mutual completed its initial public offering on January 31, 1995. As a
result, book value per share and income per share before extraordinary
items and cumulative effect of change in accounting principles prior to
such date is not applicable.
(2) In the case of Mutual, the information presented at or for the year ended
December 31, 1995 is at or for its fiscal year ended June 30, 1995, and the
information presented at or for the six month period ended June 30, 1996 is
at or for the three month period ended March 31, 1996.
(3) Based on net income from January 31, 1995 through June 30, 1995 divided by
the average shares outstanding for the same period.
(4) Based on the combined stockholders' equity of Roosevelt and Mutual,
including the effect of pro forma adjustments. The adjusted stockholders'
equity amounts are divided by the number of shares of Roosevelt Common
Stock outstanding at December 31, 1995 and June 30, 1996, respectively,
plus the product of the number of shares of Mutual Common Stock outstanding
at December 31, 1995 and March 31, 1996, respectively, and the Exchange
Ratio (assuming the Closing Date had been September 13, 1996). The number
of shares of Roosevelt Common Stock outstanding at December 31, 1995 and
June 30, 1996 includes 4,878,750 common stock equivalents attributable to
1,301,000 shares of Roosevelt's 6 1/2% non-cumulative convertible preferred
stock outstanding as of such dates.
(5) Based on the pro forma combined book value per share amounts of Roosevelt
and Mutual, respectively, multiplied by the Exchange Ratio (assuming the
Closing Date had been September 13, 1996).
(6) Based on the pro forma combined net income per share amounts before
extraordinary item and cumulative effect of change in accounting principles
of Roosevelt and Mutual, respectively, multiplied by the Exchange Ratio
(assuming the Closing Date had been September 13, 1996).
14
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<PAGE>
ROOSEVELT FINANCIAL GROUP, INC. AND ROOSEVELT BANK
ROOSEVELT FINANCIAL GROUP, INC.
General. Roosevelt is a Delaware corporation organized in 1988 to be the
thrift holding company for Roosevelt Bank. The principal asset of Roosevelt is
the outstanding stock of Roosevelt Bank. As of June 30, 1996, Roosevelt had
total consolidated assets of $9.3 billion, deposits of $5.0 billion and
stockholders' equity of $516 million. The executive offices of Roosevelt are
located at 900 Roosevelt Parkway, Chesterfield, Missouri 63017 and the telephone
number at that address is (314) 532-6200.
Roosevelt's business consists primarily of attracting deposits from the
general public and using those deposits, together with borrowings and other
funds, to originate and acquire real estate and consumer loans, to acquire
mortgage-backed securities, to perform loan servicing functions for others and
to provide other retail banking and financial services for consumers. The
principal elements of Roosevelt's business plan are (i) the origination of a
higher percentage of its assets; (ii) the diversification of its balance sheet
away from only mortgage and real estate related assets; (iii) the expansion of
its retail deposit base with a simultaneous shift within that deposit base
toward checking and transaction accounts; and (iv) growth in fee income by
providing other services such as insurance, brokerage and mortgage loan
servicing for other investors.
Acquisitions. Since the beginning of 1990, Roosevelt has pursued a program
of acquiring other in-market and adjacent-market thrift institutions. Roosevelt
expects to continue informal discussions with various financial institutions
regarding their acquisition by Roosevelt.
In 1990, Roosevelt expanded its franchise to the Illinois portion of the
St. Louis metropolitan area by acquiring Home Federal Savings, Alton, Illinois,
through the merger conversion acquisition of Home Federal Savings, which had
$110 million in assets and $104 million in savings deposits. In October 1991,
Roosevelt completed the merger conversion acquisition of Hannibal Mutual Loan
and Building Association, Hannibal, Missouri, which had $18 million in assets
and savings deposits. In November 1992, Roosevelt completed the merger
conversion acquisitions of Conservative Bank, FSB, St. Louis, Missouri, which
had $65 million in assets and $61 million in savings deposits, and First Granite
City Savings and Loan, Granite City, Illinois, which had $49 million in assets
and $42 million in savings deposits. In December 1992, Roosevelt entered the
Kansas City, Missouri market by completing the purchase of Brookside Savings
Bank, FSB, which had $219 million in assets and $146 million in savings
deposits.
In June 1993, Roosevelt completed the acquisition of the Missouri retail
banking network of First Nationwide Bank of San Francisco, California.
Roosevelt received net cash totaling $588 million. Gross proceeds totaled $595
million, which represented the amount of deposit accounts acquired by Roosevelt
Bank and accrued but unpaid interest on such accounts. This amount was reduced
by $7 million, which was paid by Roosevelt Bank for the acquisition of certain
loans and a tax deductible intangible asset related to the deposit accounts.
In November 1993, Roosevelt completed the acquisition of the 17 eastern
Missouri retail banking branches of Home Savings of America, Los Angeles,
California. The transaction was structured as a purchase of deposits and
related branch locations and equipment. Roosevelt received net cash of $709
million. Gross proceeds totaled $733 million, which represented the amount of
deposit accounts acquired by Roosevelt and accrued but unpaid interest on such
accounts. This amount was reduced by $24 million, which was paid by Roosevelt
for the acquisition of certain loans and a tax deductible intangible asset
related to the deposit accounts.
On April 22, 1994, Roosevelt completed the acquisition of Home Federal
Bancorp of Missouri, Inc., St. Louis, Missouri, which had total consolidated
assets of $533 million and savings deposits of $467 million.
On June 30, 1994, Farm & Home Financial Corporation ("Farm & Home"),
Nevada, Missouri, with total consolidated assets of $3.1 billion and savings
deposits of $2.1 billion, merged with and into Roosevelt and Farm & Home Savings
Association, a Missouri chartered stock savings and loan association and wholly
owned subsidiary
15
<PAGE>
of Farm & Home, merged with and into Roosevelt Bank. The transaction was
accounted for as a pooling of interests and, accordingly, the consolidated
financial statements of Roosevelt have been restated to include the results of
Farm & Home for the periods presented. On July 1, 1994, Roosevelt completed the
sale of Farm & Home's construction lending business for $75 million in cash.
On October 20, 1995, Roosevelt completed the acquisition of WSB Bancorp,
Inc. ("WSB"), Washington, Missouri, the holding company for Washington Savings.
Upon consummation of the merger, each WSB stockholder became entitled to receive
$22.75 in cash for each share of WSB common stock held. As of the date of the
acquisition, WSB had $97 million in total consolidated assets, $81 million in
deposits and stockholders' equity of $19 million.
On December 29, 1995, Roosevelt completed the acquisition of Kirksville
Bancshares, Inc. ("Kirksville"), Kirksville, Missouri, the holding company for
Kirksville Bank. Upon consummation of the merger, each Kirksville stockholder
became entitled to receive 2.4437 shares of Roosevelt Common Stock. As of the
date of the acquisition, Kirksville had total consolidated assets of $131
million, deposits of $102 million and stockholders' equity of $21 million.
On March 22, 1996, Roosevelt entered into a definitive agreement pursuant
to which Sentinel Financial Corporation ("Sentinel"), Kansas City, Missouri, the
holding company for Sentinel Federal, will be merged with Roosevelt. Upon the
consummation of the merger, each Sentinel stockholder will become entitled to
receive 1.4231 shares of Roosevelt Common Stock (subject to adjustment upon
certain events). As of March 31, 1996, Sentinel had total consolidated assets of
$149 million, deposits of $126 million and stockholders' equity of $12 million.
Roosevelt filed an application with the OTS for approval of the Sentinel
acquisition in May 1996 and received such approval in July 1996. Roosevelt
anticipates that Sentinel will commence its solicitation of Sentinel
shareholders for the approval of the acquisition in late September and that the
acquisition will close in the middle of the fourth quarter of 1996.
On April 16, 1996, Roosevelt entered into a definitive agreement pursuant
to which Community Charter Corporation ("CCC"), St. Louis, Missouri, the holding
company for Missouri State Bank, will be merged with Roosevelt, resulting in
Missouri State Bank becoming a stand-alone first tier subsidiary of Roosevelt.
Upon the consummation of the merger, each CCC stockholder will become entitled
to receive 1.6 shares of Roosevelt Common Stock. As of June 30, 1996, CCC had
total consolidated assets of $64.7 million, deposits of $56.8 million and
stockholders' equity of $5.8 million. Roosevelt filed an application with the
Missouri Division of Finance (the "MDF") in June 1996 and the Board of Governors
of the Federal Reserve System (the "FRB") in July 1996 for approval of the
acquisition of Missouri State Bank and received the approval of the MDF in July
1996 and the FRB in August 1996. CCC will be commencing its solicitation of CCC
shareholders for the approval of the acquisition on or about September 20, 1996.
Roosevelt anticipates that the CCC acquisition will close in the middle of the
fourth quarter of 1996.
BANK HOLDING COMPANY REGULATION
General. Upon consummation of the acquisition of Missouri State Bank,
Roosevelt will become a bank holding company in addition to its current status
as a savings and loan holding company, and will register as such with the FRB.
Bank holding companies are subject to comprehensive regulation by the FRB under
the BHCA and the regulations of the FRB. As a bank holding company, Roosevelt
will be required to file reports with the FRB and such additional information as
the FRB may require, and will be subject to regular inspections by the FRB. The
FRB also has extensive enforcement authority over bank holding companies,
including, among other things, the ability to assess civil money penalties, to
issue cease and desist or removal orders and to require that a holding company
divest subsidiaries (including its bank subsidiaries). In general, enforcement
actions may be initiated for violations of law and regulations and unsafe or
unsound practices.
Under FRB policy, a bank holding company must serve as a source of strength
for its subsidiary banks. Under this policy the FRB may require, and has
required in the past, a holding company to contribute additional capital to an
undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain FRB approval before:
(i) acquiring, directly or indirectly, ownership or control of any voting
shares of another bank or bank holding company if, after such acquisition, it
would own or control more than 5% of such shares (unless it already owns or
controls the majority of such shares); (ii) acquiring all or substantially all
of the assets of another bank or bank holding company; or (iii) merging or
consolidating with another bank holding company.
16
<PAGE>
As a savings and loan holding company, Roosevelt is generally not subject
to any activity restrictions, but as a bank holding company will be subject to
more restrictive activity limitations imposed on bank holding companies. The
BHCA prohibits a bank holding company, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any company which is not a bank or bank holding company, or from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks, or providing services for its subsidiaries. The principal
exceptions to these prohibitions involve certain non-bank activities which, by
statute or by FRB regulation or order, have been identified as activities
closely related to the business of banking or managing or controlling banks. The
list of activities permitted by the FRB includes, among other things, operating
a savings institution (such as Roosevelt Bank), mortgage company, finance
company, credit card company or factoring company; performing certain data
processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of credit-
related insurance; leasing property on a full-payout, non-operating basis;
selling money orders, travelers' checks and United States Savings Bonds; real
estate and personal property appraising; providing tax planning and preparation
services; and, subject to certain limitations, providing securities brokerage
services for customers. The scope of permissible activities may be expanded from
time to time by the FRB. Such activities may also be affected by federal
legislation.
Interstate Banking and Branching. In 1994, the Riegle-Neal Interstate
Banking and Branching Act of 1994 (the "Act") was enacted to ease restrictions
on interstate banking. Effective September 29, 1995, the Act allows the FRB to
approve an application of an adequately capitalized and adequately managed bank
holding company to acquire control of, or acquire all or substantially all of
the assets of, a bank located in a state other than such holding company's home
state, without regard to whether the transaction is prohibited by the laws of
any state. The FRB may not approve the acquisition of a bank that has not been
in existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state. The Act also prohibits the FRB from
approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Act does not
affect the authority of states to limit the percentage of total insured deposits
in the state which may be held or controlled by a bank or bank holding company
to the extent such limitation does not discriminate against out-of-state banks
or bank holding companies. Individual states may also waive the 30% state-wide
concentration limit contained in the Act.
Additionally, beginning on June 1, 1997, the federal banking agencies will
be authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Act by enacting a law after the date
of enactment of the Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving out-of-
state banks. A state may also permit such transactions before such time by
enacting authorizing legislation. Interstate acquisitions of branches will be
permitted only if the law of the state in which the branch is located permits
such acquisitions. Interstate mergers and branch acquisitions will also be
subject to the nationwide and statewide insured deposit concentration amounts
described above.
The Act authorizes the Office of the Comptroller of the Currency and the
FDIC to approve interstate branching de novo by national and state banks,
respectively, only in states which specifically allow for such branching. The
Act also requires the appropriate federal banking agencies to prescribe
regulations by June 1, 1997 which prohibit any out-of-state bank from using the
interstate branching authority primarily for the purpose of deposit production.
These regulations must include guidelines to ensure that interstate branches
operated by an out-of-state bank in a host state are reasonably helping to meet
the credit needs of the communities which they serve. The State of Missouri has
not yet authorized interstate merger transactions or de novo interstate
branching.
Any future acquisitions of thrift institutions of Roosevelt will continue
to be subject to the HOLA. As a federal thrift institution, Roosevelt Bank,
subject to certain conditions, has nationwide branching authority.
Dividends. The FRB has issued a policy statement on the payment of cash
dividends by bank holding companies, which expresses the FRB's view that a bank
holding company should pay cash dividends only to the extent that its net income
for the past year is sufficient to cover both the cash dividends and a rate of
earning retention that is consistent with the holding company's capital needs,
asset quality and overall financial condition.
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<PAGE>
The FRB also indicated that it would be inappropriate for a company experiencing
serious financial problems to borrow funds to pay dividends. Furthermore, under
the prompt corrective action regulations adopted by the FRB, the FRB may
prohibit a bank holding company from paying any dividends if the holding
company's bank subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the FRB prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
Capital Requirements. The FRB has established capital requirements for
bank holding companies that generally parallel the capital requirements for
national banks and federal thrift institutions such as Roosevelt Bank. As a
thrift holding company, Roosevelt is not subject to any minimum capital
requirements.
ROOSEVELT BANK
Roosevelt Bank is a federally chartered savings bank with $9.3 billion in
consolidated assets at June 30, 1996, making it the largest Missouri-based
thrift institution. Roosevelt Bank has 79 full-service offices with 38 offices
serving the St. Louis metropolitan area (including Alton and Granite City,
Illinois) and nine offices serving the Kansas City metropolitan area. The
remaining 32 offices are located in Staunton, Illinois and Pittsburg, Kansas and
the Missouri cities of Hannibal (2), Springfield (3), Columbia, Union,
Warrenton, St. James, Washington, Sikeston, Dexter, Malden, Poplar Bluff, Hayti,
Portageville, Cape Girardeau, Mexico, Jefferson City, Trenton, Marshall,
Sedalia, Clinton, Maryville, St. Joseph, Nevada, Lamar, Joplin (2) and
Kirksville. Incorporated as a Missouri chartered mutual savings and loan in
1934, Roosevelt Bank converted to a federally chartered savings and loan in
1935. In 1987, Roosevelt Bank became a stock savings and loan and, one year
later, converted to a stock savings bank.
Roosevelt Bank is subject to examination and comprehensive regulation and
oversight by the OTS and the FDIC. Roosevelt Bank is further subject to
regulations of the FRB with respect to reserves required to be maintained
against transaction accounts. Roosevelt Bank is a member of the Federal Home
Loan Bank ("FHLB") of Des Moines, which is one of the 12 regional banks
constituting the FHLB system and its savings deposits are insured by the SAIF to
the maximum extent permitted by the FDIC.
For additional information, see "Selected Consolidated Financial and Other
Data of Roosevelt Financial Group, Inc." Information concerning Roosevelt and
Roosevelt Bank also is included in the Roosevelt documents incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
MUTUAL BANCOMPANY, INC. AND MUTUAL SAVINGS BANK, F.S.B.
MUTUAL BANCOMPANY, INC.
Mutual is a Missouri corporation that is the holding company for Mutual
Bank. Mutual has not engaged in any significant business other than as the
holding company for Mutual Bank. At March 31, 1996, Mutual had total
consolidated assets of $53.3 million, deposits of $45.8 million and
stockholders' equity of $6.2 million. The executive offices of Mutual and
Mutual Bank are located at 101 West McCarty Street, Jefferson City, Missouri
65101, and the telephone number at that address is (573) 634-2150.
MUTUAL SAVINGS BANK, F.S.B.
Mutual Bank, which was originally chartered in 1906 as a Missouri-chartered
mutual savings and loan association, is headquartered in Jefferson City,
Missouri. Mutual Bank became a federal mutual savings bank in
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1994. Its deposits are insured up to the maximum allowable amount by the FDIC.
On January 31, 1995, Mutual Bank converted to the stock form of organization
through the sale and issuance of 333,500 shares of its common stock to Mutual.
Mutual Bank serves the financial needs of customers predominately within a
30-mile radius of Jefferson City, Missouri through its office located at 101
West McCarty Street, Jefferson City, Missouri. Mutual Bank has been, and
intends to continue to be, a community-oriented financial institution offering
financial services to meet the needs of the market area it serves. Mutual Bank
attracts deposits from the general public and uses the deposits to originate
loans secured by first mortgages on owner-occupied one- to four-family
residences in its market area. To a lesser extent, Mutual Bank originates
consumer loans in its market area.
Mutual Bank's revenues are derived primarily from interest on mortgage
loans and mortgage-backed securities, interest and dividends on FHLB stock,
investment securities, loan origination and servicing fees.
For additional information, see "Selected Consolidated Financial and Other
Data of Mutual Bancompany, Inc.," "Business of Mutual Bancompany, Inc." and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation of Mutual Bancompany, Inc."
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Mutual Board to be used at the Special Meeting
which will be held at the office of Mutual Bank, 101 West McCarty Street,
Jefferson City, Missouri, on Wednesday, October 23, 1996 at 11:00 a.m. This
Proxy Statement/Prospectus and the accompanying Notice and Proxy Card are being
first mailed to stockholders of Mutual on or about September 23, 1996.
At the Special Meeting, holders of record of Mutual Common Stock as of the
voting record date will consider and vote upon the approval of the Merger
Agreement and the Merger. In addition, stockholders of Mutual may consider and
vote upon the approval of the adjournment of the Special Meeting, in the event
there are not sufficient shares present in person or by proxy at the Special
Meeting to approve the Merger Agreement, and such other matters as may properly
come before the Special Meeting or any adjournments thereof.
VOTING AND REVOCABILITY OF PROXIES
The presence, in person or by proxy, of at least a majority of the total
number of shares of Mutual Common Stock outstanding and entitled to vote will be
necessary to constitute a quorum at the Special Meeting. Stockholders of Mutual
who execute proxies retain the right to revoke them at any time. Unless so
revoked, the shares represented by such proxies will be voted at the Special
Meeting and all adjournments thereof. Proxies may be revoked by written notice
to Marcrissie T. Henley, Secretary, at the address shown above, by filing a
later dated proxy prior to a vote being taken on a particular proposal at the
Meeting or by attending the Special Meeting and voting in person.
Proxies solicited by the Mutual Board will be voted in accordance with the
directions given therein. Where no instructions are indicated, proxies will be
voted for the Merger Agreement and the Merger. The proxy confers discretionary
authority on the persons named therein to vote with respect to matters incident
to the conduct of the Special Meeting. If any other business is presented at
the Special Meeting, proxies will be voted by those named therein in accordance
with the determination of a majority of the Mutual Board. However, proxies
instructed to vote against the proposal to approve the Merger Agreement and the
Merger will not be voted for a proposal to approve adjournment of the Special
Meeting in the event that there are not sufficient shares present in person or
by proxy at the Special Meeting to approve the Merger. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
will not be counted as votes cast. Proxies marked as abstentions or as broker no
votes, however, will be treated as shares present for purposes of determining
whether a quorum is present.
Approval of the Merger Agreement at the Special Meeting will require the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Mutual Common Stock entitled to vote at the Special Meeting. As a result,
abstentions and broker non-votes will have the same effect as votes against the
Merger Agreement.
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As of the voting record date (as set forth below), the directors and
executive officers of Mutual and their affiliates beneficially owned in the
aggregate 20,380 shares, or 6.11% of the then outstanding shares of Mutual
Common Stock entitled to vote at the Special Meeting. Each director of Mutual
has entered into a voting agreement whereby each such director has agreed to
vote all shares of Mutual Common Stock owned by him (16,844 shares in the
aggregate for all directors) for approval of the Merger Agreement. As of the
voting record date, the directors and executive officers of Roosevelt and their
affiliates beneficially owned in the aggregate 1,600 shares of Mutual Common
Stock.
VOTING SECURITIES AND SECURITY OWNERSHIP
Stockholders of record as of the close of business on the voting record
date, September 19, 1996, are entitled to one vote for each share then held. As
of the voting record date, there were 333,500 shares of Mutual Common Stock
issued and outstanding.
Persons and groups owning more than five percent of the Mutual Common Stock
are required to file certain reports regarding such ownership pursuant to the
Exchange Act. Based upon such reports and other information available to
management of Mutual, the following table sets forth information as of the
voting record date regarding (i) persons, including directors of Mutual, who
were believed by management to be beneficial owners of more than five percent of
the Mutual Common Stock and (ii) the Mutual Common Stock beneficially owned by
each other director of Mutual and by all directors, directors emeriti and
executive officers of Mutual as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
- ---------------------------------------- ------------ ---------
<S> <C> <C>
Tidal Insurance Company Limited 33,312/(1)/ 10.0%
c/o S.T.A.R. Corporate Management
Hibiscus Square, Grand Turk
Turks & Caicos Islands, British West
Indies
Jerome H. Davis 33,300/(2)/ 10.0
11 Baldwin Farms North
Greenwich, Connecticut 06831
Donald L. Koch 30,500/(3)/ 9.1
#4 Muirfield Lane
St. Louis, Missouri 63141
Various entities affiliated with 22,500/(5)/ 6.7/(5)/
The Chicago Corporation
208 South LaSalle Street
Chicago, Illinois 60604
Mutual Bancompany, Inc. Employee Stock 26,680/(5)/ 8.0
Ownership Plan
101 West McCarty Street
Jefferson City, Missouri 65101
Donald L. Connor 5,246 1.57
Robert B. Schwartz 1,500 .45
Michael J. Abbott 3,000 .90
Larry V. Brickey 3,500 1.05
Frank Newell 100 .03
J. Stephen Weber, Esq. 1,500 .45
Directors, directors emeriti and 27,980/(6)/ 8.4
executive officers of
Mutual and Mutual Bank, as a group (ten
persons)
</TABLE>
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<PAGE>
_____________________
/(1)/ As reported by Tidal Insurance Company Limited ("Tidal") in a statement
dated February 23, 1995 on Schedule 13D under the Exchange Act. Tidal
reported sole voting and investment power as to all of the reported
shares.
/(2)/ As reported by Mr. Davis in a statement dated January 31, 1996 on Schedule
13D under the Exchange Act. Mr. Davis reported sole voting and investment
power as to 10,000 of the reported shares and shared voting and investment
power as to 13,300 of the reported shares. The remaining 10,000 shares
were reported to be owned by Mr. Davis' spouse and he reported that he may
be deemed to have shared voting and investment power of such shares.
/(3)/ As reported by Mr. Koch in a statement dated April 5, 1995 on Schedule 13D
under the Exchange Act. Mr. Koch reported sole voting and investment power
as to 16,000 of the reported shares. He also reported that the remaining
14,500 shares are owned by investment advisory clients of Mr. Koch and as
such he has sole dispositive power over such shares, but that the economic
interest in such shares is held by his investment advisory clients.
/(4)/ The amount reported represents shares held by the Mutual ESOP, 1,406 of
which have been allocated to accounts of participants. First Bankers Trust
Company, N.A., Quincy, Illinois, the trustee of the Mutual ESOP, may be
deemed to beneficially own the shares held by the Mutual ESOP which have
not been allocated to accounts of participants. Participants in the Mutual
ESOP are entitled to instruct the trustee as to the voting of shares
allocated to their accounts under the Mutual ESOP. Unallocated shares held
in the Mutual ESOP's suspense account or allocated shares for which no
voting instructions are received are voted by the trustee in the same
proportion as allocated shares voted by participants.
/(5)/ In Schedule 13D dated June 25, 1996, Bank Fund III, L.P., Bank Fund III
Trust, Bank Fund IV, L.P. and Bank Fund IV Trust claimed sole voting and
disposition power over 3,075, 9,425, 2,292 and 7,708 shares, respectively,
each of these entities disclaimed beneficial ownership of shares
beneficially owned by the other of these entities, and these entities
reported that they affiliated with The Chicago Corporation though common
ownership and management.
/(6)/ Includes shares held directly, as well as in retirement accounts, 580
shares allocated to the Mutual ESOP accounts of certain of the named
persons, held by certain members of the named individuals' families, or
held by trusts of which the named individual is a trustee or substantial
beneficiary, with respect to which the named individuals may be deemed to
have sole voting and investment power.
OTHER MATTERS
The Mutual Board is not aware of any business to come before the Special
Meeting other than the matter described in this Proxy Statement/Prospectus.
However, if any other matters should properly come before the Special Meeting,
it is intended that proxies in the accompanying form will be voted in respect
thereof in accordance with the determination of the Mutual Board.
MISCELLANEOUS
The cost of soliciting proxies will be borne by Mutual. Mutual will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Mutual Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of Mutual may solicit proxies
personally or by telegraph or telephone without additional compensation. In
addition, Mutual has retained Regan & Associates to assist Mutual in
distributing proxy materials and contacting record and beneficial owners of
Mutual Common Stock. Mutual has agreed to pay Regan & Associates a fee of $7,500
plus out-of-pocket expenses up to $1,250 for its services to be rendered on
behalf of Mutual.
THE MERGER
The information in this Proxy Statement/Prospectus concerning the terms of
the Merger is qualified in its entirety by reference to the full text of the
Merger Agreement, which is attached hereto as Appendix I and incorporated by
reference herein. All stockholders are urged to read the Merger Agreement in
its entirety.
GENERAL
Pursuant to the Merger Agreement, Mutual will be merged with Roosevelt,
with Roosevelt being the surviving entity (the "Company Merger") and,
immediately thereafter, Mutual Bank will be merged with Roosevelt Bank (the
"Bank Merger" and, together with the Company Merger, the "Merger"). As soon as
possible after the conditions to consummation of the Merger described below have
been satisfied or waived, and unless the Merger Agreement has been terminated as
provided below, Roosevelt and Mutual will file a certificate of merger with the
Secretary of State of Delaware and articles of merger with the Secretary of
State of Missouri for the Company Merger, and articles of combination with the
OTS for the Bank Merger. The Company Merger will become effective upon the
filing of the certificate of merger with the Secretary of State of Delaware and
articles of merger with the Secretary of State of Missouri and the issuance of
certificate of Merger by the Secretary of State of Missouri (the "Effective
Time"). The Bank Merger will become effective at the time the articles of
combination are endorsed by the OTS.
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At the Effective Time, each outstanding share of Mutual Common Stock (other
than shares held by holders who perfect dissenters' rights and other excluded
shares) of Mutual Common Stock held by Roosevelt or Mutual) shall be converted
into a number of shares of Roosevelt Common Stock equal to the quotient of (A)
$23.00 divided by (B) the weighted average sale price of all Roosevelt Common
Stock traded on the Nasdaq National Market during the ten trading days ending on
the date that is three trading days prior to the Closing Date. Each stockholder
of Mutual shall be entitled to exchange Mutual Common Stock certificates for
Roosevelt Common Stock certificates and thereupon shall cease to be a
stockholder of Mutual, and the separate existence and corporate organization of
Mutual shall cease.
BACKGROUND OF THE MERGER
Mutual Bank has operated for years as a modestly sized, community-oriented
savings institution primarily serving the personal banking needs of residents of
the Jefferson City area in Missouri. Mutual Bank's historically conservative
emphasis on accepting deposits from the general public and originating loans
secured by single family residential properties located in its market area has
remained relatively constant over the years. In the meantime, however, the
financial markets of which Mutual Bank is a part, and especially the regulatory
environment in which Mutual Bank operates, have become increasingly complex and,
in recent years, have been undergoing fundamental restructuring, including rapid
consolidation within the entire banking industry. Management's maintenance of
Mutual Bank's conservative business practices throughout recent periods of
increased competition for both deposits and loans in its market area allowed
Mutual Bank to preserve its asset quality and maintain its high levels of
capital but also resulted in an erosion of Mutual Bank's net yield from
interest-bearing liabilities and interest-earning assets. For additional
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Mutual Bancompany, Inc."
The initial public stock offering by Mutual in connection with Mutual
Bank's mutual-to-stock conversion in January 1995 substantially increased
Mutual's capitalization, thereby making it increasingly difficult to maintain an
acceptable level of return on equity. Between August and November 1995, in light
of Mutual Bank's modest return on equity and substantial prices being paid in
numerous bank and thrift mergers, a principal stockholder of Mutual began to
urge Mutual to engage a financial advisor to evaluate the possibility of an
acquisition of Mutual at a price significantly above the prevailing market price
for Mutual's stock. The Mutual Board was aware of these recommendations but,
consistent with its fiduciary duties to Mutual and all of its stockholders and
in light of applicable federal policies which generally prohibited Mutual from
taking any action in connection with a change of control of Mutual during the
first year after it converted from mutual to stock form (i.e., until January 31,
1996), did not respond to the stockholder's demands. From time to time, Mutual
received informal inquiries from potential acquirors, but there were no
substantive discussions regarding a possible acquisition.
In early December 1995, Roosevelt contacted Mutual and expressed an
interest in a possible business combination by sending a letter to the Mutual
Board outlining general terms of a possible merger of Mutual with Roosevelt. The
letter acknowledged that no action could be taken by Mutual before January 31,
1996. Previously, Roosevelt and Mutual had not had any business relationship,
other than discussions between the respective banks that occurred in 1993 with
respect to a possible merger conversion, which were terminated by Mutual due to
the Mutual Board's determination that a merger conversion would not be in the
best interests of Mutual at that time, (and other than the experience of
Roosevelt's chief financial officer as Mutual's auditor between 1985 and 1993,
when he was an accountant at Deloitte & Touche LLP). Roosevelt's expression of
interest was expressly conditioned upon Mutual not soliciting any other
potential acquirors. During December 1995, in connection with the completion of
a regular regulatory examination, the OTS reviewed Mutual's modest profitability
and directed the Mutual Board to take corrective action and not to implement the
stock option and incentive plan and management recognition plan approved by
Mutual's stockholders in October 1995 until Mutual's profitability was
substantially improved.
At the December meeting of the Mutual Board, Roosevelt's inquiry and the
OTS directives were discussed, and representatives of Baird presented an
overview of several strategic alternatives available to Mutual Bank, including a
preliminary analysis of the inquiry from Roosevelt. Baird and the Mutual Board
discussed whether Mutual Bank should remain a small independent savings
institution and, if so, whether Mutual should adopt stock repurchase and/or
dividend programs to boost Mutual's return on equity and also how Mutual might
increase its net interest yield. They also discussed whether Mutual should merge
with a larger institution and, if Mutual were to seek a merger, how Mutual would
develop and evaluate merger opportunities. Baird informed the Mutual Board that,
based on Baird's analysis and subject to further evaluation, the merger price
then proposed by Roosevelt ($22.00 per share) probably was both in excess of the
stock price Mutual could be reasonably expected to promptly obtain from
improvements in its capital structure or operations as an independent
institution and also within the range of prices Mutual could be reasonably
expected to receive if Mutual were to solicit offers from potential
offerors.
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<PAGE>
The Mutual Board authorized Baird to continue its strategic analysis of Mutual
and deferred making any determination with respect to how to respond to the
inquiry from Roosevelt in light of the regulatory restrictions imposed during
the first year after conversion.
In January 1996, Mutual formally retained Baird, and at the January meeting
of the Mutual Board representatives of Baird presented further analysis of
Mutual's strategic alternatives, including comparative estimates of potential
returns to stockholders of Mutual if Mutual Bank were to remain an independent
savings institution or merge with a larger institution, such as Roosevelt Bank.
The Baird representatives also supplemented their preliminary analysis of the
inquiry from Roosevelt with additional information regarding Roosevelt and
possible terms of a merger. Upon consideration of the information presented and
discussed at the meeting, the Mutual Board authorized management to direct Baird
to conduct a thorough review of available strategic options as an independent
savings institution and, in particular, to work with representatives of
Roosevelt to develop a detailed evaluation of a possible merger with Roosevelt.
In light of the merger price proposed by Roosevelt and Roosevelt's condition
that Mutual not solicit indications of interest from other potential acquirors,
the Mutual Board determined that neither Mutual nor Baird should make any such
solicitation at that time.
From the January 1996 meeting of the Mutual Board until a special meeting
of the Mutual Board held in early March 1996, Mutual's management and financial
advisor continued their evaluation of Roosevelt's proposal without any formal
action by the Mutual Board.
In early March 1996, the Mutual Board held a special meeting for the
express purpose of considering the Roosevelt proposal. At the meeting, the
Mutual Board discussed with its financial advisor and legal counsel the terms
and conditions of Roosevelt's proposal, the historical results and future
prospects of Mutual and Roosevelt and their respective stock prices, the extent
of the Mutual Board's fiduciary duties on behalf of Mutual and the process
involved in the negotiation of a merger. The Mutual Board directed management
and Baird to continue negotiations with Roosevelt, including the execution of a
confidentiality agreement, the commencement of due diligence reviews of Mutual
and Roosevelt and the pursuit of improvements in various terms of the proposed
merger, including an increase in the merger price above the $22.00 of Roosevelt
stock to be issued in exchange for each share of Mutual stock as originally
proposed by Roosevelt.
Thereafter, Mutual's management and financial advisor performed a thorough
review of Roosevelt, Roosevelt performed its own review of Mutual, and Mutual's
management, financial advisor and legal counsel conducted intensive discussions
and negotiations with Roosevelt and its legal counsel regarding terms of a
proposed merger and agreement. These negotiations resulted in an increase in
the merger price from $22.00 to $23.00 per share, as well as various other
changes from Roosevelt's original proposal. Between early March and early April
1996, the Mutual Board held several meetings regarding the proposed merger, in
which Mutual's financial advisor and legal counsel participated, at which the
status and progress with respect to various issues in connection with the
discussions and negotiations with Roosevelt were considered.
On April 9, 1996, upon the completion of negotiations between Mutual and
Roosevelt, the Mutual Board met to consider approval of the Merger Agreement and
the Merger. At this meeting, Mutual's financial advisor presented analyses of
Mutual, Roosevelt and the financial terms of the proposed merger, and Mutual's
legal counsel thoroughly reviewed the terms and conditions of the Merger
Agreement. After discussion, the Mutual Board unanimously approved the Merger
and authorized the execution of the Merger Agreement. Following the meeting,
the Merger Agreement was executed by the respective parties, and a joint press
release was issued announcing the agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Mutual Board considered the Merger and the terms of the Merger
Agreement, including the consideration to be received by Mutual's stockholders
in the Merger, in light of economic, financial, legal and market factors and
concluded that the Merger is in the best interests of Mutual. The terms of the
Merger Agreement are the result of arms' length negotiations between Mutual and
Roosevelt, as well as consultations between Mutual and its financial advisor and
special legal counsel. Among the factors considered by the Mutual Board were the
historical operating results, current financial condition, business and
management and future financial and other prospects of Mutual and Roosevelt and
the advice of Baird as to the fairness to Mutual's stockholders, from a
financial point of view, of the consideration to be received by them in the
Merger. Also considered were the relative size and geographic
23
<PAGE>
market areas of Mutual and Roosevelt. The Mutual Board believes that the Merger
will afford Mutual's stockholders the benefit of Roosevelt's larger market
capitalization and the more liquid market for Roosevelt Common Stock and will
offer enhanced opportunities for Mutual Bank to meet the needs of banking
customers and other members of the Jefferson City area communities served by
Mutual Bank. The Mutual Board believes that Mutual Bank will be in an enhanced
competitive position with respect to other financial institutions in its market
area after the Merger.
The Mutual Board unanimously recommends that the holders of Mutual Common
Stock vote FOR approval of the Merger Agreement and the Merger.
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Mutual Common Stock issued and outstanding immediately
prior to the Merger (other than shares held by holders who perfect dissenters'
rights and other excluded shares) will be converted into a number of shares (the
"Exchange Ratio") of Roosevelt Common Stock equal to the quotient of (A) $23.00
divided by (B) the weighted average sale price of all Roosevelt Common Stock
traded on the Nasdaq National Market during the ten trading days ending on the
date that is three trading days prior to the Closing Date. The Exchange Ratio
was determined through arm's-length negotiations between Roosevelt and Mutual,
which was advised during such negotiations by its financial advisor.
Each share of Roosevelt Common Stock issued and outstanding at the
Effective Time will remain outstanding and unchanged as a result of the Merger.
No fractional shares of Roosevelt Common Stock will be issued in the Merger, and
Mutual stockholders who otherwise would be entitled to receive a fractional
share of Roosevelt Common Stock will receive a cash payment in lieu thereof. See
"--Fractional Shares."
If the Closing Date had been September 13, 1996, each shareholder of Mutual
would have been entitled to receive 1.2863 shares of Roosevelt Common Stock for
each share of Mutual Common Stock held. The last reported sale price for Mutual
Common Stock as of that date as reported on the Nasdaq Small Cap System was
$21.00 per share.
OPINION OF FINANCIAL ADVISOR
General. Mutual retained Baird to act as its financial advisor in
connection with the Merger based on Mutual's prior relationship with Baird and
Baird's experience in such matters. Baird, as part of its investment banking
business, is engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwriting, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes. Baird is
familiar with Mutual, having provided advisory services in connection with
Mutual's mutual-to-stock conversion and the negotiations leading to the Merger
Agreement.
On April 9, 1996, Baird delivered its written opinion to the Mutual Board
that, as of such date, the consideration to be received by Mutual's shareholders
pursuant to the Merger Agreement was fair from a financial point of view.
THE FULL TEXT OF THE BAIRD OPINION, WHICH SETS FORTH CERTAIN ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS
APPENDIX II AND IS INCORPORATED HEREIN BY REFERENCE. MUTUAL S SHAREHOLDERS ARE
URGED TO READ THE BAIRD OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE
BAIRD OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.
The consideration received by Mutual pursuant to the Merger Agreement was
determined by Mutual and Roosevelt in their negotiations. No limitations were
imposed by the management of Mutual or the Mutual Board on Baird with respect to
its investigation or procedures followed in rendering its opinion.
24
<PAGE>
In connection with its opinion, Baird reviewed the Merger Agreement, Mutual
s proxy statement dated September 1, 1995, Mutual's audited financial statements
for the five fiscal years ending June 30, 1995 and its interim financial
statements on Form 10-Q for the periods ended September 30, 1995 and December
31, 1995, financial budgets and analyses prepared by management of Mutual, the
views of senior management and the Mutual Board on the past and future business
operations of Mutual, and certain reported price and trading history for Mutual
Common Stock. In developing its opinion, Baird performed a number of analyses.
These analyses included but were not limited to an analysis of Mutual s audited
financial statements for the past five years, an analysis of comparable prices
and terms governing recent transactions, a comparison of other financial
information prepared by management of Mutual and dilution analyses. Baird
believes, based on its experience as an investment banking firm and its specific
expertise valuing financial institutions, that its methods are an effective
means of evaluating the fairness of a transaction from a financial point of
view.
Baird has relied on the completeness and accuracy of the financial records
provided to it by Mutual and Roosevelt. Baird has not independently verified
such information or conducted any independent appraisals of Mutual's assets or
liabilities, including real property. Baird's opinion is based on the economic
and market data that prevailed as of the date of such opinion.
The Baird opinion was rendered without regard to the necessity for or level
of any restrictions, obligations or undertakings that may be required in the
course of obtaining regulatory approvals for the Merger. The Baird opinion does
not constitute a recommendation to any Mutual stockholder as to how such
stockholder should vote at the Special Meeting.
Mutual has agreed to pay Baird a fee of $90,000 upon the delivery of a
fairness opinion to the Mutual Board. Additionally, if the Merger is
consummated, Mutual has agreed to pay Baird an additional fee of $60,000. Mutual
has also agreed to reimburse Baird for reasonable out-of-pocket expenses and has
agreed to indemnify Baird against certain liabilities, including liabilities
under the federal securities laws, in connection with the engagement of Baird by
Mutual. In addition to the fees for the financial advisory services referred to
herein, Baird received fees of $113,952 for its advice and assistance in
connection with Mutual's conversion from mutual to stock form in January
1995.
Summary of Financial Analyses. In connection with its opinion on the
consideration to be received pursuant to the Merger Agreement and the
presentation of such opinion to the Mutual Board, Baird performed several
valuation analyses with respect to Mutual. They included:
. Stock trading history.
. Analysis of Mutual's value against comparative prices and terms of
recent transactions involving the acquisition of thrifts by other
institutions.
. Analysis of Mutual's value compared to comparative prices and terms of
recent transactions involving the acquisition of thrifts by other
institutions after adjusting Mutual's financial information for an
implied dividend which brings capital to a fully leveraged ratio to
assets.
. A discounted dividend analysis for Mutual.
. Analysis of earnings per share and book value of the pro-forma
combined entity.
The preparation of a fairness opinion involves various determinations as to
appropriate and relevant methods of financial analysis and application of those
methods to particular circumstances, and therefore such an opinion is not
readily summarized. In arriving at its fairness opinion, Baird did not expressly
attribute any particular weight to any analysis or factor considered by it but
rather implicitly made qualitative judgments as to the significance and
relevance of each analysis and factor. The fact that any specific analysis is
referred to in the summary below is not meant to indicate that such analysis was
given greater weight than any other analysis. Baird may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that ranges of
valuation resulting from particular analyses should not be considered Baird's
view of the actual value of Mutual or the combined company. As a result, Baird
believes that its analyses must be considered as a whole and that considering
portions of analyses and factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying its fairness opinion.
The following presents a summary of the analysis used in connection with
providing its opinion to Mutual. This summary is not intended to be a complete
description of the analysis performed by Baird.
Stock Trading History. Baird reviewed the trading prices and volume of
Mutual since the mutual-to-stock conversion of Mutual Bank. Mutual's stock
exhibited modest, post-conversion pricing performance for newly public savings
and loan holding companies, until late July and August 1995, when a significant
shareholder of Mutual began to publicly call for the possible sale of Mutual.
At that time, Mutual s stock price increased from approximately $13.00 per share
in late July 1995 to approximately $18.00 per share in late September 1995 and
subsequently traded at between $16.00 and $18.00 per share until the
announcement of the Merger Agreement.
Comparative Transactions. Baird evaluated more than 40 financial
institution merger and acquisition transactions in considering the fairness of
the Merger proposal. The transactions were grouped into four major categories.
. Savings institutions acquired by other financial institutions with
assets of less than $100.0 million and capital exceeding 10.0% (16
transactions). No geographical restrictions were placed on the
location of institutions in this group. However, all of the
transactions in this group occurred between April 1995 and March 29,
1996.
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<PAGE>
. Midwestern savings institutions of less than $100.0 million in assets
that were acquired between April 1995 and March 29, 1996 (13
transactions).
. Missouri savings institutions acquired between August 1993 and March
29, 1996 (ten Transactions).
. A specific group of savings institutions acquired by other financial
institutions. This group had characteristics generally believed to be
similar in nature to Mutual (ten transactions).
The following table compares selected ratios with respect to the Merger and
the four groups described above.
<TABLE>
<CAPTION>
Mutual/ Medians
--------------------------------------------
Roosevelt /(1)/ High Cap Midwest Missouri Selected
--------------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Purchase Price/Book Value 123.46% 147.65% 148.56% 144.45% 153.24%
Purchase Price/Tangible Book Value 123.46% 147.65% 148.56% 145.43% 153.24%
Purchase Price/Earnings 60.40x 23.57x 23.20x 13.73x 17.97x
Purchase Premium/Deposits 3.06% 10.09% 8.06% 7.42% 3.99%
Purchase Price/Assets 13.97% 21.75% 19.30% 15.06% 11.57%
/(1)/ Based on financials at December
31, 1995
</TABLE>
Discounted Dividend Analysis. Baird estimated the present value of the
future stream of dividend payments Mutual could make to its shareholders based
on a dividend sufficient to reduce Mutual s capital to no lower than 6.0%.
Baird based its earnings and growth analyses on historical trends of Mutual.
Baird estimated terminal values using the following assumptions:
. Financial analysis regarding Mutual's reasonable earnings prospects.
Terminal income growth rate of between 4.0% and 6.0%.
. Discount rates of between 11.0% and 12.5%.
. Annual increase of earnings of 5.0%.
Based on these analyses, Baird concluded that the range of value of Mutual
is between $3.3 million and $4.1 million, representing a price of from $10.00
to $12.22 per share.
Deleveraged Capital. Baird also evaluated a deleveraged capital analysis
of the four Comparative Groups to develop a comparative range of values for
Mutual. Baird adjusted certain financial statistics of Mutual and the
Comparative Groups by an amount reflecting excess capital, or capital exceeding
8.0% (the "Specific" Comparative Group had a median capital-to-assets ratio of
7.61% and was considered fully leveraged). Excess capital was treated as if it
were paid out as a dividend prior to acquisition. Baird used acquisition group
multiples at the median price to book levels and adjusted Mutual financial
information. Based on this analysis, Mutual had a range of value between
$8.1 million and $9.5 million, or between $24.37 per share and $28.42 per share.
Baird considered the result of this analysis in conjunction with the results of
other analyses, including the indicated Purchase Price/Earnings multiples for
the Merger and comparative transactions, in delivering its fairness opinion.
Dilution Analysis. Baird analyzed selected financial information for the
pro-forma combined institution resulting from the Merger Agreement. In
calculating financial information for the pro-forma combined institution, Baird
used financial information for Mutual and Roosevelt, based on the due diligence
it conducted of each company. Such information included estimates of earnings
per share for calendar years 1996, 1997 and 1998. Baird estimated that Roosevelt
s per share earnings' dilution would be less than 1.0% for each of the next
three years.
Because no comparative group or individual transactions are identical to
the Merger, Baird indicated to the Mutual Board that the analyses described
herein are not mathematical but rather involve complex considerations and
judgments concerning differences in operating and financial characteristics,
including differences in revenue composition and earnings performance. The
analyses were prepared solely for the purpose of Baird s written opinion to the
Mutual Board and do not purport to be appraisals or necessarily reflect the
prices for which Mutual or its securities may be sold. Analyses based on
forecasts of future results may not necessarily be indicative of future results,
which may be significantly more or less favorable than suggested by such
analyses.
Based upon the analyses described above, including the indicated Purchase
Price/Earnings multiples for the Merger and comparative transactions, as well as
the consideration of such factors as it deemed relevant, on April 9, 1996, Baird
delivered its opinion to the Mutual Board that, as of that date, the
consideration to be received by the holders of Mutual Common Stock pursuant to
the Merger Agreement was fair, from a financial point of view, to such holders.
26
<PAGE>
EFFECTIVE TIME AND CLOSING DATE
The Company Merger will become effective at the time and on the date of the
filing of a certificate of merger with the Secretary of State of Delaware and
articles of Merger under the Secretary of State of Missouri and upon the
issuance of a certificate of merger by the Secretary of State of Missouri. The
Bank Merger will become effective at the time the articles of combination for
such merger are endorsed by the OTS. The effectuation of the Merger will occur
only after the receipt of all requisite regulatory approvals, the approval of
the Merger Agreement by the requisite vote of Mutual's stockholders and the
satisfaction or waiver of all other conditions to the Merger. The closing of
the Merger shall occur on the last business day of the first calendar month as
soon as practicable after the satisfaction or waiver of all conditions and
obligations of Roosevelt and Mutual to consummate the Merger, or at another time
agreed to by Roosevelt and Mutual (the "Closing Date").
APPRAISAL RIGHTS
Each holder of Mutual Common Stock has the right to dissent from the Merger
and receive the fair value of such shares of Mutual in cash if the shareholder
follows the procedures set forth in Section 351.455 of the Missouri Act set
forth as Appendix III, the material provisions of which are summarized below.
Under the Missouri Act, a holder of Mutual Common Stock may dissent and
Roosevelt, as the surviving corporation, must pay to such shareholder the fair
value of such shareholder's shares of Mutual Common Stock as of the day prior to
the Special Meeting if such shareholder (i) files with Mutual prior to or at the
Special Meeting a written objection to the Merger; and (ii) does not vote in
---
favor thereof; and (iii) within 20 days after the Effective Time makes written
---
demand on Roosevelt for payment of the fair value of the shares held by such
shareholder as of the day prior to the date of the Special Meeting. Such demand
shall state the number of shares owned by such dissenting shareholder. A failure
to vote against the Merger Agreement will not constitute a waiver of the
shareholder's dissenter's rights. A Mutual shareholder who returns an executed
proxy card without any voting instructions specified with respect to the Merger
Agreement proposal, however, will be deemed to have voted in favor of the Merger
Agreement and the Merger, thereby waiving his or her dissenter's rights.
Promptly after the Effective Time, Roosevelt will include notice of the
Effective Time in its letter to all shareholders of Mutual notifying them of the
procedures to exchange their shares for those of Roosevelt. Any shareholder
failing to make demand within the 20-day period shall be conclusively presumed
to have consented to the Merger and shall be bound by the terms thereof. A PROXY
OR VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN
OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
If within 30 days after the Effective Time, the value of such shares is
agreed upon between the dissenting shareholder and Roosevelt, payment therefor
must be made within 90 days after the Effective Time, upon the surrender by such
shareholder of the certificate or certificates representing said shares. Upon
payment of the agreed value, the dissenting shareholder will cease to have any
interest in such shares or in Roosevelt.
If within such period of 30 days, the shareholder and Roosevelt do not
agree as to value, then the dissenting shareholder may, within 60 days after the
expiration of the 30-day period, file a complaint in the court of competent
jurisdiction within St. Louis County, Missouri, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against Roosevelt for the amount of such fair value as of the day prior
to the date of the Special Meeting with interest thereon to the date of such
judgment. The "fair value" determined by the court may be more or less than the
amount offered to Mutual shareholders under the Merger Agreement. The judgment
shall be payable only upon and simultaneously with the surrender to Roosevelt of
the certificate or certificates representing said shares. Upon the payment of
the judgment, the dissenting shareholder shall cease to have any interest in
such shares or in Roosevelt. Unless the dissenting shareholder shall file such
complaint within the 60-day period, such shareholder and all persons claiming
under such shareholder shall be conclusively presumed to have approved and
ratified the Merger, and shall be bound by the terms thereof.
The above summary of the provisions regarding dissenters' rights under the
Missouri Act is qualified in its entirety by the text of Section 351.455 of the
Missouri Act, attached hereto as Appendix III.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Roosevelt Common
Stock will be issued upon the surrender for exchange of certificates
representing Mutual Common Stock, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Roosevelt. Each stockholder of Mutual who
27
<PAGE>
otherwise would be entitled to a fractional share of Roosevelt Common Stock in
the Merger will receive a cash payment in lieu thereof (without interest) in an
amount determined by multiplying the fractional share interest to which
stockholder would otherwise be entitled by the weighted average sale price of
all Roosevelt Common Stock trading on the Nasdaq National Market during the ten
trading days ending on the date that is three trading days prior to the Closing
Date.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Time, an exchange agent
designated by Roosevelt (the "Exchange Agent") will deliver to each Mutual
holder of record of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding shares of Mutual Common Stock (the
"Certificates"), a transmittal letter and instructions to be used in
surrendering Certificates in exchange for (i) certificates representing the
number of shares of Roosevelt Common Stock into which their shares of Mutual
Common Stock were converted pursuant to the Merger Agreement, and (ii) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such stockholder has the right to
receive in respect of the Certificates surrendered in connection with the
Merger. No interest will be paid or accrued on the cash in lieu of fractional
shares or on the unpaid dividends and distributions, if any, payable to holders
of Mutual Common Stock.
MUTUAL STOCKHOLDERS SHOULD NOT FORWARD THEIR MUTUAL STOCK
CERTIFICATES UNTIL THEY RECEIVE THE TRANSMITTAL LETTER AND INSTRUCTIONS.
Until such surrender and subject to the effect, if any, of applicable law,
the Certificates will as of the Effective Time represent ownership of the number
of shares of Roosevelt Common Stock into which such shares were converted in the
Merger, and the holders will be entitled to all rights and privileges of holders
of Roosevelt Common Stock, except that holders of Certificates will not be
entitled to receive dividends declared by Roosevelt until the Certificates are
so surrendered. Following surrender of the Certificates in accordance with the
terms of the Merger Agreement, the holders of newly issued Roosevelt
certificates will be paid, without interest, any dividends with respect to the
shares of Roosevelt Common Stock the record date for which is after the
Effective Time (less any taxes that may have been imposed thereon).
Any Certificate representing shares of Roosevelt Common Stock to be issued
in a name other than that in which the Certificate is registered must be
properly endorsed and otherwise in proper form for transfer, and the holder
requesting such exchange must pay to the Exchange Agent in advance any transfer
or other taxes in connection therewith.
In the event any Certificate has been lost, stolen or destroyed, upon the
mailing of an affidavit of that fact by the holder of such Certificate and the
posting of any bond required by Roosevelt or the Exchange Agent, Roosevelt or
the Exchange Agent will issue for such lost, stolen or destroyed Certificate,
the shares of Roosevelt Common Stock and deliver cash due to the holder of such
Certificate under the terms of the Merger Agreement.
After the Effective Time, there will be no further transfers on the records
of Mutual of the Certificates, and, if such Certificates are presented to
Roosevelt for transfer, they will be cancelled against delivery of certificates
for Roosevelt Common Stock.
After the Effective Time, holders of unsurrendered Certificates shall be
entitled to vote at any meeting of Roosevelt stockholders at which holders of
Roosevelt Common Stock are eligible to vote, regardless of whether such holders
have exchanged their Certificates.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. Shares of Mutual Common Stock held by directors, officers and
employees of Mutual will be converted into the right to receive Roosevelt Common
Stock under the Merger Agreement on the same basis as shares held by other
Mutual shareholders. As a result, the following paragraphs describe interests
of Mutual's directors, officers and employees in the Merger in addition to their
interests generally as stockholders of Mutual. The Mutual Board was aware of
these interests and considered them in approving the Merger Agreement and the
Merger.
28
<PAGE>
Indemnification. Roosevelt has agreed to indemnify, defend and hold
harmless the present and former directors, officers and employees of Mutual and
its subsidiaries against all liabilities, claims, losses, damages or judgments,
or amounts paid in settlement with the approval of Roosevelt of any claim,
action or suit arising out of actions or omissions occurring at or prior to the
time of the Merger, to the fullest extent permitted by Mutual's articles of
incorporation or bylaws or Missouri or federal law, and Roosevelt has further
agreed to use its reasonable best efforts to cause the persons serving as
officers and directors of Mutual Bank immediately prior to the Merger to be
covered for a period of three years from the time of the Merger by single-
premium tail coverage under the directors' and officers' liability insurance
policy maintained by Mutual Bank with respect to acts or omissions occurring
prior to the Merger which were committed by such officers and directors in their
capacities as such; provided, however, that in no event will Roosevelt be
required to expend more than 150% of the annual amount currently expended by
Mutual Bank to maintain or procure such insurance coverage and further provided
that if Roosevelt is unable to maintain or obtain such insurance coverage,
Roosevelt will use its reasonable best efforts to obtain as much comparable
insurance as is available for such amount.
Advisory Board Directors. For at least one year after the Merger, and for
so long thereafter as is deemed mutually beneficial, Mutual's directors and
directors emeriti are expected to consult and advise Roosevelt, and assist in
the orderly transition of customer relationships from Mutual Bank to Roosevelt
Bank, as advisory directors of Roosevelt Bank, for which services such persons
will receive a fee of $1,000 per month.
Employee Severance Benefits; Continuing Employees. Roosevelt Bank
anticipates retaining the employees of Mutual Bank as employees of Roosevelt
Bank after the Effective Time, subject to the needs of Roosevelt Bank and the
qualifications of such employees. As a general matter, those employees who are
not retained for at least six months after the Effective Time, with at least
their current salary and at their present principal location of employment, will
be offered a severance arrangement of (i) four weeks' pay plus (ii) an
additional week's pay for each year of service to Mutual or any of its
subsidiaries, except each executive officer of Mutual as of April 9, 1996
(specifically, Donald L. Connor, Frank M. Vernon and Dale L. Smith), who is not
similarly so retained shall receive instead a severance payment in the amount of
twice the amount of such executive officer's annual base salary at the rate in
effect as of April 9, 1996. It is estimated that the severance payment amounts
for Messrs. Connor, Vernon and Smith would be approximately $127,272, $90,264
and $84,816, respectively. Employees (including executive officers) of Mutual
and its subsidiaries who continue in employment with Roosevelt or any of its
subsidiaries following the Effective Time shall be credited for prior years of
service with Mutual and its subsidiaries for purposes of eligibility, vesting
and the accrual of benefits (but not for the accrual of benefits under tax-
qualified defined benefit pension plans maintained by Roosevelt or any of its
subsidiaries) under benefit plans and policies of Roosevelt and its subsidiaries
(including, without limitation, vacation and sick leave policies), there shall
be no exclusion from medical coverage as the result of pre-existing conditions
that were covered under the medical plan of Mutual or any applicable subsidiary,
and such employees shall be entitled to participate on an equitable basis in the
same benefit plans and policies as are generally available to Roosevelt and
Roosevelt Bank employees of similar rank and status.
Employee Stock Ownership Plan. At the Effective Time, all shares of Mutual
Common Stock under the control of the Mutual ESOP will be converted into the
right to receive the Merger Consideration. Each Mutual ESOP participant will
receive a number of shares of Roosevelt Common Stock equal to the number of
shares of Mutual Common Stock allocated to his or her account multiplied by the
Exchange Ratio. In addition, with respect to shares of Roosevelt Common Stock
received by the Mutual ESOP in exchange for shares of Mutual Common Stock not
allocated to accounts of participants, the trustees of the Mutual ESOP as soon
as practicable after the Effective Time (but not before the publication of
financial results covering at least 30 days of combined operations after the
Merger) will liquidate the number of shares of such Roosevelt Common Stock
necessary to retire the outstanding Mutual ESOP debt and distribute the
remaining shares to participants in the Mutual ESOP in proportion to the account
balances of such participants as they existed as of the Effective Time, subject
to the limitations of Section 415 of the Code. At September 13, 1996, there were
14 participants in the Mutual ESOP. Based on the projected Mutual ESOP loan
balance at September 30, 1996 and Mutual ESOP share allocation as of June 30,
1996, it was estimated that the value of this additional Mutual ESOP allocation
for Donald L. Connor, Frank M. Vernon and Dale L. Smith would have been
approximately $49,226, $35,036 and $32,884, respectively.
29
<PAGE>
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement each of Mutual, Mutual Bank, Roosevelt and
Roosevelt Bank has made certain representations and warranties relating to,
among other things, the parties' respective organization, capitalization,
qualification to do business and compliance with applicable law, corporate
authority relative to the Merger Agreement, the timely filing of all regulatory
reports, reliability of financial statements, taxes, employee arrangements and
benefits, compliance with the Community Reinvestment Act (the "CRA"), the truth
and accuracy of information prepared and provided by them in connection with the
Merger and the absence of certain legal proceedings and other events, including
material adverse changes in the parties' business, financial condition,
operations or assets. For detailed information on such representations and
warranties, see Articles II and III of the Merger Agreement attached hereto as
Appendix I.
CONDITIONS TO THE MERGER
The respective obligations of Roosevelt, Roosevelt Bank, Mutual and Mutual
Bank to consummate the Merger are subject to the satisfaction or waiver at or
prior to the Effective Time of the following conditions: (i) the Merger
Agreement shall have been approved by the stockholders of Mutual; (ii) all
requisite approvals of the Merger Agreement shall have been received from the
OTS and all other applicable regulatory authorities, if any, without the
imposition of any condition which differs from conditions customarily imposed by
such regulatory authorities in orders approving acquisitions of the type
contemplated by the Merger Agreement, and all applicable waiting periods shall
have expired; (iii) the Registration Statement shall have been declared
effective and shall not be subject to a stop order or any threatened stop order;
(iv) neither Roosevelt, Roosevelt Bank, Mutual nor Mutual Bank shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Merger; (v)
Roosevelt and Mutual shall have received, from counsel or independent certified
accountants mutually acceptable to them, an opinion to the effect that, among
other things, 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
Roosevelt, Roosevelt Bank, Mutual or Mutual Bank, or by the stockholders of
Mutual (except in connection with the receipt of cash in lieu of a fractional
share of Roosevelt Common Stock); and (vi) the shares of Roosevelt Common Stock
to be issued in the Merger shall have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance. For additional
information, see Section 6.1 of the Merger Agreement attached hereto as Appendix
I.
In addition, the obligations of Mutual and Mutual Bank to consummate the
Merger are subject to the satisfaction by Roosevelt and Roosevelt Bank or waiver
by Mutual and Mutual Bank of the following conditions: (i) the representations
and warranties of Roosevelt and Roosevelt Bank contained in the Merger Agreement
shall be true and correct as of the date of the Merger Agreement and as of the
Effective Time except (A) to the extent such representations and warranties are
by their express provisions as of a specific date, (B) for the effect of the
transactions contemplated by the Merger Agreement and (C) where the failure to
be true and correct would not have a material adverse effect on Roosevelt and
its subsidiaries, taken as a whole, and Mutual and Mutual Bank shall have
received a certificate of the president and chief executive officer of Roosevelt
and Roosevelt Bank to that effect; (ii) Roosevelt and Roosevelt Bank shall have
performed in all material respects all obligations required to be performed by
them under the Merger Agreement prior to the Effective Time and Mutual and
Mutual Bank shall have received a certificate of the president and chief
executive officer of Roosevelt and Roosevelt Bank to that effect; (iii) Mutual
and Mutual Bank shall have received an opinion from counsel to Roosevelt and
Roosevelt Bank dated the Closing Date regarding certain legal matters; and (iv)
certificates for the number of shares of Roosevelt Common Stock and cash for
fractional share interests necessary to effectuate the exchange of Mutual Common
Stock for the Merger Consideration shall have been delivered to the Exchange
Agent. For additional information, see Section 6.2 of the Merger Agreement
attached hereto as Appendix I.
In addition, the obligations of Roosevelt and Roosevelt Bank to consummate
the Merger are subject to the satisfaction by Mutual and Mutual Bank or waiver
by Roosevelt and Roosevelt Bank of the following conditions: (i) the
representations and warranties of Mutual and Mutual Bank contained in the Merger
Agreement shall be true and correct as of the date of the Merger Agreement and
as of the Effective Time except (A) to the extent such representations and
warranties are by their express provisions as of a specific date, (B) for the
effect of the transactions contemplated by the Merger Agreement and (C) where
the failure to be true and correct would not have a material adverse effect on
Roosevelt as the surviving corporation and Roosevelt and Roosevelt Bank shall
have received a certificate of the president and chief
30
<PAGE>
executive officer of Mutual and Mutual Bank to that effect; (ii) Mutual and
Mutual Bank shall have performed in all material respects all obligations
required to be performed by them under the Merger Agreement prior to the
Effective Time and Roosevelt and Roosevelt Bank shall have received a
certificate of the president and chief executive officer of Mutual and Mutual
Bank to that effect; (iii) Roosevelt and Roosevelt Bank shall have received an
opinion from counsel to Mutual and Mutual Bank dated the Closing Date regarding
certain legal matters; (iv) Mutual and Mutual Bank shall have obtained all
consents and approvals required to be obtained in connection with the Merger
other than those which, individually or in the aggregate, would not have a
material adverse effect on Roosevelt as the surviving corporation; (v) Roosevelt
shall have received a letter from its independent accountants to the effect that
the Merger will qualify for pooling of interests accounting treatment; and (vi)
Roosevelt shall have received from the "affiliates" of Mutual certain letters
with respect to the resale of shares of Roosevelt Common Stock received by them
in the Merger. For additional information, see Section 6.3 of the Merger
Agreement attached hereto as Appendix I.
There can be no assurance that the conditions to consummation of the Merger
will be satisfied or waived. In the event the conditions to either party's
obligations become impossible to satisfy in any material respect, the other
party may elect to terminate the Merger Agreement. See "--Waiver and Amendment;
Termination."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. Roosevelt filed an
application for approval of the Merger with the OTS on May 21, 1996, and
received such approval on July 25, 1996.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without the imposition of any condition which
differs from conditions customarily imposed by the OTS in orders approving
acquisitions of the type contemplated by the Merger Agreement. The OTS approval
did not contain any such condition.
Under federal law a period of 15 days must expire following
approval by the OTS within which period the Department of Justice may file
objections to the Merger under the federal antitrust laws. The Department of
Justice did not file any objection during this period.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, the board of directors of any party to the
Merger Agreement may waive compliance with any term, condition or provision of
the Merger Agreement where such party or the stockholders of such party are
entitled to the benefits thereof.
Subject to applicable law, the Merger Agreement may be amended by action of
the Roosevelt and Mutual Boards at any time before or after approval of the
Merger Agreement by the stockholders of Mutual, provided that after approval by
the stockholders of Mutual, no amendment may (i) alter or change the amount or
kind of consideration to be received by holders of Mutual Common Stock as
provided in the Merger Agreement or (ii) adversely affect the tax treatment to
Mutual stockholders of the Merger Consideration. In addition, Roosevelt may
cause the Merger Agreement to be amended to change the method of effecting the
Merger, to the extent permitted by applicable law. No such amendment, however,
may (i) alter or change the amount or kind of the Merger Consideration, (ii)
diminish the benefits to be received by the directors, officers or employees of
Mutual and Mutual Bank as set forth in the Merger Agreement or in any other
agreements between the parties made in connection with the Merger Agreement,
(iii) materially impede or delay the consummation of the Company Merger or (iv)
adversely affect the tax treatment of Mutual stockholders as a result of
receiving the Merger Consideration.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether prior to or after approval of the matters presented herein by
Mutual's stockholders, by mutual consent of the boards of directors of Roosevelt
and Mutual or by the board of directors of either Roosevelt or Mutual if (i) the
Company Merger is not consummated by February 28, 1997; (ii) any required
regulatory approval is not obtained (iii) the required approval of Mutual's
stockholders is not obtained (provided, in the case of subparagraphs (i), (ii)
and (iii), that the terminating party is not then in material breach of the
Merger Agreement); or (iv) the other party has materially breached any
representation, warranty, covenant or agreement set forth in the Merger
Agreement and has failed to, or cannot, cure
31
<PAGE>
in a timely manner such breach after receiving written notice of such breach.
See "The Merger--Waiver and Amendment; Termination." Under the Merger Agreement,
Mutual must pay Roosevelt a fee of $500,000 in cash in the event the Merger is
not consummated if certain events occur by October 9, 1997. See "The Merger--
Expenses; Termination Fee" and Section 7.2 of the Merger Agreement attached
hereto as Appendix I.
The representations, warranties and agreements of the parties set forth in
the Merger Agreement shall not survive the Effective Time, and shall be
terminated and extinguished at such time. From and after the Effective Time,
neither of the parties shall have any liability to the other on account of any
breach or failure of any of the representations, warranties and agreements in
the Merger Agreement, except with respect to agreements of the parties which by
their terms are intended to be performed after the Effective Time and with
respect to liability for an uncured material breach of the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Roosevelt and Mutual has agreed, with respect to it and its
subsidiaries, that, prior to the Effective Time, it will (i) conduct its
business only in the ordinary and usual course consistent with past practices,
and (ii) use its best efforts to maintain and preserve its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees.
In addition, Mutual has agreed that, prior to the Effective Time, it and
its subsidiaries will not, without the prior written consent of Roosevelt: (i)
declare or pay any dividends or other distributions on its capital stock (other
than certain inter-company dividends); (ii) enter into or amend any employment
or similar agreement or arrangement, materially modify any employee benefit plan
or grant any salary or wage increase (A) other than increases consistent with
past practice and required by applicable law or contract, (B) as provided for in
the Merger Agreement or (C) as to which Roosevelt does not disapprove after
written notification by Mutual; (iii) except as required in fulfillment of the
fiduciary duties of the Mutual Board (as determined in consultation with
counsel), authorize, recommend, propose or announce an intention to authorize,
so recommend or propose, or enter into an agreement in principle with respect
to, any merger, consolidation or business combination (aside from the Merger),
any acquisition of a material amount of assets or securities, any disposition of
a material amount of assets or securities or any release or relinquishment of
any material contractual rights; (iv) propose or adopt any amendments to its
certificate of incorporation or other charter document or bylaws, other than as
required by law or regulation or provided for in the Merger Agreement; (v)
issue, sell, grant, confer or award any shares of its capital stock, or effect
any stock split or otherwise change its capitalization as it existed on the date
of the Merger Agreement; (vi) purchase, exchange or otherwise acquire or dispose
of any shares of its capital stock; (vii) except as provided for in the Merger
Agreement or in honor of existing contractual obligations, enter into, increase
or modify certain loan or credit commitments, without first consulting with
Roosevelt or unless Roosevelt does not object after notification by Mutual, as
applicable, or enter into any agreement or engage in any transaction which
reasonably could be construed as materially affecting the asset/liability
management or interest rate risk management position of Mutual or Mutual Bank;
(viii) directly or indirectly (A) initiate, solicit or encourage any discussions
or proposals relating to the disposition of any significant portion of the
business or assets of Mutual or any subsidiary or the acquisition of 10% or more
of the shares of any class of capital stock of Mutual or any subsidiary or the
merger of Mutual or any subsidiary with any person (other than Roosevelt) or any
similar transaction or (B) except as required in fulfillment of the fiduciary
duties of the Mutual Board (in consultation with counsel), provide any such
person with information or assistance or negotiate with any such person with
respect to any such transaction; (ix) take any action that would (A) materially
impede or delay the consummation of the transactions contemplated by the Merger
Agreement or the ability of Roosevelt or Mutual to obtain any required approval
of any regulatory authority or to perform its covenants and agreements under the
Merger Agreement, (B) prevent the Merger from qualifying as a pooling of
interests for accounting purposes or (C) prevent the Company Merger from
qualifying as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code or the Bank Merger from qualifying as a reorganization within the meaning
of Section 368(a)(1)(A) or (D) of the Code; (x) other than in the ordinary
course of business consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for the obligations of any other individual,
corporation or other entity; or (xi) agree in writing or otherwise take any of
the foregoing actions or engage in any activity, enter into any transaction or
take or omit to take any other act which would make any of the representations
and warranties of Mutual and Mutual Bank 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 act.
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<PAGE>
EXPENSES; TERMINATION FEE
All expenses incurred in connection with the Merger Agreement and the
consummation of the Merger are to be paid by the party incurring such expenses,
except that Roosevelt will pay all printing and mailing expenses and filing fees
associated with this Proxy Statement/Prospectus and all filings with regulatory
authorities for approval of the Merger Agreement.
If the Merger is not consummated by October 9, 1997 and a Fee Event (as
defined below) occurs prior thereto, under the Merger Agreement, Mutual must pay
Roosevelt on demand a fee of $500,000 in cash in recognition of the expenses of,
and other opportunities foregone by, Roosevelt in connection with the Merger
Agreement. A Fee Event shall be deemed to have occurred if: (i) any person
other than Roosevelt or an affiliate of Roosevelt acquires beneficial ownership
of 25% of the then-outstanding shares of Mutual Common Stock; (ii) without
having received Roosevelt's prior written consent, Mutual or any of its
affiliates enters into an agreement to engage in, or the Mutual Board recommends
that Mutual's stockholders approve or accept, an Acquisition Transaction (as
defined below) with any person other than Roosevelt or any of its subsidiaries;
or (iii) Mutual or any of its subsidiaries or stockholders receives a proposal
from a third party to engage in an Acquisition Transaction and after such
proposal (A) Mutual willfully breaches the Merger Agreement entitling Roosevelt
to terminate the Merger Agreement, (B) Mutual stockholders do not approve the
Merger Agreement at the Special Meeting, (C) the Special Meeting is not held or
is canceled prior to termination of the Merger Agreement for reasons other than
the fault of Roosevelt or (D) the Mutual Board withdraws or modifies its
recommendation with respect to the Merger Agreement in a manner adverse to
Roosevelt. Notwithstanding the foregoing, Mutual will not be obligated to pay
such termination fee if, prior to a Fee Event, the Merger Agreement is
terminated by mutual consent of the respective Boards of Directors of Roosevelt
and Mutual, or by Mutual because any required regulatory approval has been
denied, or Roosevelt has committed a material breach of a representation,
warranty, covenant or agreement set forth in the Merger Agreement which
Roosevelt has failed to cure in a timely manner after receiving written notice
of such breach.
Under the Merger Agreement, each of the following will be deemed an
Acquisition Transaction: (i) a merger or consolidation or similar transaction
involving Mutual or Mutual Bank; (ii) the purchase, lease or other acquisition
of all or substantially all of the assets of Mutual or any if its subsidiaries;
or (iii) the purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Mutual or Mutual Bank.
ACCOUNTING TREATMENT
Roosevelt has not yet decided whether to account for the Merger under the
purchase method or the pooling of interests methods. The decision will be based
on whether Roosevelt decides to issue shares in connection with the Merger from
authorized, but unissued shares, or to acquire shares in the open market for
issuance in connection with the Merger. If shares are acquired in the open
market, the pooling method will not be available. In addition, in order to
utilize the pooling method, Roosevelt would be required to, prior to
consummation of the merger, rescind its existing stock repurchase plan, which is
described in Note 18 to the Consolidated Financial Statements of Roosevelt
contained in the Roosevelt 1995 10-K, incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." Under the purchase method,
which accounts for a business combination as the acquisition of one enterprise
by another, the value of the company's shares issued in the transaction is
included in stockholders' equity and any of such amount in excess of net fair
values of tangible and identifiable intangible assets of the acquired company is
treated as an intangible asset on the acquiring company's financial statements.
Under the pooling method, the financial statements of the combining enterprises
are combined as if the two were and had been a single entity and no intangible
asset is created.
THE BANK MERGER AGREEMENT
In connection with the Merger, Roosevelt Bank and Mutual Bank will execute
an agreement pursuant to which Mutual Bank will merge with Roosevelt Bank (the
"Bank Merger Agreement"). Under the Bank Merger Agreement, the Bank Merger will
occur at the date and time specified on the endorsement of the articles of
combination that will be filed with the OTS by the parties to the Merger
Agreement as soon as practicable after the satisfaction or waiver of the
conditions of each party to effect the Merger. The name of the surviving
institution will be "Roosevelt Bank."
RESALES OF ROOSEVELT COMMON STOCK BY AFFILIATES
The shares of Roosevelt Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any stockholder who may be deemed to
be an "affiliate" of Roosevelt or Mutual for purposes of Rule 145 under the
Securities Act as of the date of the Special Meeting. Affiliates of Roosevelt
or Mutual may not sell their shares of Roosevelt Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such
33
<PAGE>
shares or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. Persons who may be deemed to be
affiliates of Roosevelt or Mutual generally include individuals or entities that
control, are controlled by or under common control with Roosevelt or Mutual, and
may include certain officers and directors of Roosevelt and Mutual as well as
certain principal stockholders of Roosevelt and Mutual.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales by affiliates of Roosevelt or Mutual in the Merger.
SEC guidelines indicate that the pooling of interests method of accounting
generally will not be challenged on the basis of sales by affiliates if they do
not dispose of any of the shares of either combining company they owned prior to
the consummation of a merger or shares of the surviving company received in
connection with a merger during the period beginning 30 days before the merger
and ending when financial results covering at least 30 days of post-merger
operations of the surviving company have been published.
It is a condition to Roosevelt's obligation to consummate the Merger that
each person who may be deemed an affiliate (for purposes of Rule 145 and for
purposes of qualifying the Merger for pooling of interests accounting treatment)
of Mutual execute and deliver to Roosevelt a written agreement intended to
ensure compliance with the Securities Act and to ensure that the Merger will
qualify as a pooling of interests. See also "--Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Set forth below is a discussion of federal income tax consequences of the
Merger to Roosevelt, Mutual and Mutual stockholders who are citizens or
residents of the United States. THE FOLLOWING DISCUSSION CONSTITUTES THE OPINION
OF SILVER, FREEDMAN & TAFF, L.L.P., COUNSEL TO ROOSEVELT, AS TO THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AS ISSUED AND DELIVERED TO THE
ROOSEVELT BOARD. THE FOLLOWING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER TO VOTE IN
FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. FURTHER, THE DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY
BE RELEVANT TO A PARTICULAR MUTUAL STOCKHOLDER SUBJECT TO SPECIAL TREATMENT
UNDER CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS,
INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES STOCKHOLDERS
AND PERSONS WHO ACQUIRED THEIR SHARES AS COMPENSATION, NOR ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. THE
DISCUSSION IS BASED UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND
ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION.
HOLDERS OF MUTUAL COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISERS AS
TO THE PARTICULAR EFFECT OF THEIR OWN PARTICULAR FACTS AND CIRCUMSTANCES ON THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND ALSO TO THE EFFECT OF
ANY STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAX LAWS.
Under current federal income tax law, and based upon assumptions and
representations of Roosevelt and Mutual to be made as of the Effective Time,
and assuming that the Company Merger and the Bank Merger are each consummated in
the manner set forth in the Merger Agreement, the following material federal
income tax consequences would result:
(i) the Company Merger and the Bank Merger would each qualify as a
reorganization under Section 368(a) of the Code;
(ii) no gain or loss would be recognized by Roosevelt, Roosevelt Bank,
Mutual or Mutual Bank by reason of the Company Merger or the Bank Merger;
(iii) no gain or loss would be recognized by any Mutual stockholder upon
the exchange of Mutual Common Stock solely for Roosevelt Common Stock in
the Merger (except in connection with the receipt of cash in lieu of a
fractional share of Roosevelt Common Stock or in connection with the
exercise of dissuter's rights, as discussed below);
(iv) the aggregate tax basis of the Roosevelt Common Stock received by
each stockholder of Mutual who exchanged Mutual Common Stock for Roosevelt
Common Stock in the Merger would be the same as the aggregate tax basis of
the Mutual Common Stock surrendered in exchange therefor (subject to any
adjustments required as the result of receipt of cash in lieu of a
fractional share of Roosevelt Common Stock);
(v) the holding period of the shares of Roosevelt Common Stock received
by a Mutual stockholder in the Merger would include the holding period of
the Mutual Common Stock surrendered in exchange therefor
34
<PAGE>
(provided that such shares of Mutual Common Stock were held as a capital
asset by such stockholder at the Effective Time);
(vi) cash received in the Merger by a Mutual stockholder in lieu of a
fractional share interest of Roosevelt Common Stock or by a Mutual
stockholder exercising dissenter's rights would be treated as having been
received as a distribution in full payment in exchange for the fractional
share interest of Roosevelt Common Stock which such stockholder would
otherwise be entitled to receive, and would qualify as capital gain or loss
(assuming the Mutual Common Stock surrendered in exchange therefor was held
as a capital asset by such stockholder at the Effective Time); and
(vii) A Mutual stockholder who received only cash as a result of the
exercise of appraisal rights would realize gain or loss for federal income
tax purposes (determined separately as to each block of Mutual Common Stock
exchanged) in an amount equal to the difference between (x) the amount of
cash received by such stockholder, and (y) such stockholder's tax basis for
the shares of Mutual Common Stock surrendered in exchange therefor,
provided that the cash payment did not have the effect of the distribution
of a dividend. Any such gain or loss will recognized for federal income tax
purposes and would be treated as capital gain or loss. However, if the cash
payment did have the effect of the distribution of a dividend, the amount
of taxable income recognized generally will equal the amount of cash
received; such income generally will be taxable as a dividend; and no loss
(or other recovery of such stockholder's tax basis for the shares of Mutual
Common Stock surrendered in the exchange) generally will be recognized by
such stockholder. The determination of whether a cash payment has the
effect of the distribution of a dividend will be made pursuant to the
provisions and limitations of Section 302 of the Code, taking into account
the constructive stock ownership rules of Section 318 of the Code.
Roosevelt has received an opinion of Silver, Freedman & Taff, L.L.P.,
counsel to Roosevelt, that the Company Merger and the Bank Merger will each
qualify as a reorganization under the Code with the consequences set forth
above. The opinion is subject to various assumptions and qualifications,
including that the Company Merger and the Bank Merger will be consummated in the
manner and in accordance with the terms of the Merger Agreement. However, the
financial accounting treatment of the transaction as a pooling of interests or a
purchase will not impact the tax consequences described above. The opinion is
based entirely upon the Code, regulations in effect or proposed thereunder,
current administrative rulings and practice and judicial authority, all of which
are subject to change, possibly with retroactive effect. Consummation of the
Merger is conditioned upon the receipt by Roosevelt and Mutual of a closing tax
opinion setting forth the same tax consequences in the foregoing tax
opinion. See "--Conditions to the Merger."
No ruling has been or will be requested from the Internal Revenue Service
("IRS"), including any ruling as to federal income tax consequences of the
Merger to Roosevelt, Mutual or Mutual stockholders. Unlike a ruling from the
IRS, an opinion of counsel or independent certified accountants is not binding
on the IRS. There can be no assurance that the IRS will not take a position
contrary to the positions reflected in such opinion or that such opinion would
be upheld by the courts if challenged.
NASDAQ LISTING
Roosevelt Common Stock currently is quoted on the Nasdaq National Market.
It is a condition to consummation of the Merger that the Roosevelt Common Stock
to be issued to stockholders of Mutual in the Merger also will be approved for
listing on the Nasdaq National Market. See "--Conditions to the Merger."
MANAGEMENT AFTER THE MERGER
As of the Effective Time, the Boards of Directors of Roosevelt and
Roosevelt Bank will consist of the current members of such Boards, and the
executive officers of Roosevelt and Roosevelt Bank will be the current executive
officers of Roosevelt and Roosevelt Bank. For at least one year after the
Effective Time, and for so long thereafter as agreed to by Roosevelt Bank and
the participating directors of Mutual, the directors of Mutual who wish to do so
may serve as regional advisory directors of Roosevelt Bank, with a retainer fee
for each such advisory director of $1,000 per month. See also "The Merger--
Interests of Certain Persons in the Merger."
BUSINESS OF MUTUAL BANCOMPANY, INC.
GENERAL
Mutual is a Missouri corporation which was organized in 1994 for the
purpose of becoming a thrift institution holding company of Mutual Bank. Mutual
Bank, which was originally chartered in 1906 as a Missouri-chartered mutual
savings and loan association, is headquartered in Jefferson City, Missouri.
Mutual Bank became a federal mutual savings bank in 1994. Its deposits are
insured up to the maximum allowable amount by the FDIC. On January 31, 1995,
Mutual Bank converted to the stock form of organization through the sale and
issuance of 333,500 shares of its common stock to Mutual. The principal asset of
Mutual is the outstanding stock of Mutual Bank, its wholly owned subsidiary.
Mutual presently has no separate operations and its business consists only of
the business of Mutual Bank.
Mutual Bank serves the financial needs of customers predominately within a
30-mile radius of Jefferson City, Missouri through its office located at 101
West McCarty Street, Jefferson City, Missouri. Mutual Bank has been, and
intends to continue to be, a community-oriented financial institution offering
financial services to meet the needs of the market area it serves. Mutual Bank
attracts deposits from the general public and uses the deposits to originate
loans
35
<PAGE>
secured by first mortgages on owner-occupied one- to four-family residences in
its market area. To a lesser extent, Mutual Bank originates consumer loans in
its market area. See "--Originations, Purchases and Sales of Loans." Mutual Bank
also invests in mortgage-backed securities, investment securities and other
short-term liquid assets. See "--Investment Activities."
Mutual Bank's revenues are derived primarily from interest on mortgage
loans and mortgage-backed securities, interest and dividends on FHLB stock,
investment securities, loan origination and servicing fees.
The following discussion describes the business of Mutual as of June 30,
1995. Except as indicated below or as otherwise disclosed in this Proxy
Statement/Prospectus, the management of Mutual does not believe that the
business of Mutual as a whole was materially different at March 31, 1996. For
financial statements and other information regarding Mutual through March 31,
1996, see "Selected Consolidated Financial and Other Data of Mutual Bancompany,
Inc.," "Management's Discussion and Analysis of Financial Condition and Results
of Operations of Mutual Bancompany, Inc.," and the financial statements of
Mutual contained in this Proxy Statement/Prospectus.
LENDING ACTIVITIES
General. Historically, Mutual Bank originated fixed-rate mortgage loans.
Since 1985, however, Mutual Bank has emphasized, subject to market conditions,
the origination and holding of adjustable-rate mortgage loans ("ARMs") and
selected fixed-rate loans with shorter terms to maturity than traditional 30-
year, fixed-rate loans. Management's strategy has been to attempt to increase
the percentage of assets in its portfolio with more frequent repricing or
shorter maturities. In response to customer demand, however, Mutual Bank
continues to originate fixed-rate mortgages with terms not greater than 30 years
which it typically sells in the secondary market while retaining the servicing
rights. See "--Originations, Purchases and Sales of Loans."
Mutual Bank's primary focus in lending activities is on the origination of
loans secured by first mortgages on owner-occupied, one- to four-family
residences. To a much lesser extent, Mutual Bank also originates consumer loans
as an accommodation to its customer base. Prior to May 1993, Mutual Bank also
originated loans secured by multi-family and commercial real estate. See "--
Multi-Family and Commercial Real Estate Lending" and "- Originations, Purchases
and Sales of Loans." From time to time, Mutual Bank also purchases mortgage
loans secured by one- to four-family real estate located in or near its market
area which meet its underwriting criteria. See "--Originations, Purchases and
Sales of Loans." At June 30, 1995, Mutual Bank's net loan portfolio totaled
$40.4 million.
All loans must be reviewed by a loan committee comprised of certain
directors and Mutual Bank's loan officers. The committee has authority to
approve loans secured by real estate to any one borrower of up to $150,000 for
loans with a maximum loan-to-value ratio of 90% and up to $120,000 for loans
with a maximum loan-to-value ratio of 95%. Loans in excess of these limits
require approval of the entire Board of Directors of Mutual Bank.
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<PAGE>
Loan Portfolio Composition. The following table sets forth the
composition of Mutual Bank's loan portfolio in dollar amounts and in percentages
(before deductions for loans in process, net deferred loan origination costs
(fees) and discounts and allowances for losses) as of the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------------ ----------------- ------------------ ------------------ -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- ------- -------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
- -----------------
One- to four-family/(1)/......... $41,199 87.4% $36,390 85.9% $29,875 83.8% $28,053 85.6% $37,253 91.7%
Multi-family..................... 1,956 4.2 1,996 4.7 1,895 5.3 1,535 4.7 1,391 3.4
Commercial/(3)/.................. 3,454 7.3 3,614 8.5 3,479 9.8 2,830 8.6 1,537 3.8
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total real estate loans...... 46,609 98.9 42,000 99.1 35,249 98.9 32,418 98.9 40,181 98.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Other Loans:
- -----------
Consumer Loans:
Deposit account................. 334 .7 190 .5 173 .5 94 .3 96 .2
Unsecured....................... 122 .3 144 .3 174 .5 210 .6 263 .7
Home improvement/(2)/........... 35 .1 34 .1 36 .1 53 .2 101 .2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total consumer loans......... 491 1.1 368 .9 383 1.1 357 1.1 460 1.1
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total loans.................. 47,100 100.0% 42,368 100.0% 35,632 100.0% 32,775 100.0% 40,641 100.0%
------- ===== ------- ===== ------- ===== ------- ===== ------- =====
Less:
- ----
Loans in process................. 15 12 --- 207 43
Net deferred loan origination
costs (fees).................... 11 7 (2) (6) 10
Allowance for losses............. 208 195 168 243 187
------- ------- ------- ------- -------
Total loans receivable, net.. $46,866 $42,154 $35,466 $32,331 $40,421
======= ======= ======= ======= =======
</TABLE>
- -------------------
/(1)/ Includes construction loans.
/(2)/ Includes home improvement loans with original loan amounts of less than
$5,000. Home improvement loans originated in excess of $5,000 are
included in one- to four-family loans above.
/(3)/ Includes land loans.
The following table sets forth the amount of fixed-rate and adjustable-rate
loans as of the dates indicated in Mutual Bank's total loan portfolio.
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
---------------- ---------------- ---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------ ------- ------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate........ $ 9,372 19.9% $ 7,605 17.9% $ 5,437 15.3% $ 4,446 13.6% $ 2,730 6.8%
Adjustable-rate... 37,728 80.1 34,763 82.1 30,195 84.7 28,329 86.4 37,911 93.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total.......... $47,100 100.0% $42,368 100.0% $35,632 100.0% $32,775 100.0% $40,641 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
37
<PAGE>
The following table sets forth the interest rate sensitivity of Mutual
Bank's loan portfolio at June 30, 1995. Loans which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
loan first matures or adjusts. The schedule does not reflect the effects of
possible prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
REAL ESTATE
-------------------------
MULTI-FAMILY
ONE- TO AND
FOUR-FAMILY COMMERCIAL CONSUMER TOTAL
----------- ------------ -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due During Periods Ending:
Within One Year/(1)/............ $34,461 $2,213 $ 88 $37,762
After 1 Year through 3 years.... 490 419 152 1,061
After 3 years through 5 years... 468 58 206 732
After 5 years through 10 years.. 995 103 14 1,112
Beyond 10 years................. 839 135 --- 974
------- ------ ---- -------
Total...................... $37,253 $2,928 $460 $40,641
======= ====== ==== =======
</TABLE>
_____________________
/(1)/ Includes demand loans and loans having no stated maturity.
As of June 30, 1995, the total amount of loans due after June 30, 1996
which had predetermined interest rates was $2.5 million, while the total amount
of loans due after such date which had floating or adjustable interest rates was
$1.3 million.
In the loan approval process, Mutual Bank assesses the borrower's ability
to repay the loan, the adequacy of the proposed security, the employment
stability of the borrower and the credit-worthiness of the borrower. Initially,
Mutual Bank's loan underwriters analyze the loan application and the property
involved. As part of the loan application process, qualified outside appraisers
inspect and appraise the security property. All appraisals are subsequently
reviewed by the loan committee.
All of Mutual Bank's lending is subject to its written underwriting
standards and loan origination procedures. Decisions on loan applications are
made on the basis of detailed applications and property valuations.
Mutual Bank requires evidence of marketable title and lien position and/or
appropriate title insurance (except on certain home equity loans) on all loans
secured by real property. Mutual Bank also requires fire and extended coverage
casualty insurance in amounts at least equal to the lesser of the principal
amount of the loan and the value of improvements on the property, depending on
the type of loan. As required by federal regulations, Mutual Bank also requires
flood insurance to protect the property securing its interest if such property
is located in a designated flood area.
At June 30, 1995, the maximum amount which Mutual Bank could have lent to
any one borrower and the borrower's related entities, under current regulations,
was approximately $765,000, and Mutual Bank did not have any loans in excess of
this amount. See "Regulation--Federal Regulation of Savings Associations."
One- to Four-Family Residential Real Estate Lending. The cornerstone of
Mutual Bank's lending program has long been the origination of long-term
permanent loans secured by mortgages on owner-occupied, one- to four-family
residences. At June 30, 1995, $37.3 million, or 91.7%, of Mutual Bank's loan
portfolio consisted of permanent loans on one- to four-family residences.
Substantially all of the residential loans originated by Mutual Bank are secured
by properties located in Mutual Bank's market area.
Historically, Mutual Bank originated for retention in its own portfolio,
long-term fixed-rate loans secured by one- to-four family residential real
estate. Beginning in 1985, in order to reduce its exposure to changes in
interest rates, Mutual Bank began to emphasize the origination of ARMs, subject
to market conditions and consumer preference. As a result of continued consumer
demand for long-term fixed-rate loans, particularly during periods of relatively
low interest rates, Mutual Bank has continued to originate fixed-rate loans for
sale in the secondary market in amounts and at rates which are monitored for
compliance with Mutual Bank's asset/liability management policy.
38
<PAGE>
Mutual Bank's loans are underwritten and documented pursuant to the
guidelines of the Federal Home Loan Mortgage Corporation ("FHLMC"). Most of
Mutual Bank's fixed-rate residential loans have contractual terms to maturity of
ten to 30 years. Mutual Bank's decision to hold or sell these loans is based on
its asset/liability management policy and goals and the market conditions for
mortgages at any period in time. Under current policy, Mutual Bank originates
and sells most of the fixed-rate loans with terms of greater than ten years and
holds fixed-rate loans having terms of ten years or less. Mutual Bank retains
the servicing of the conventional loans it originates. See "--Originations,
Purchases and Sales of Loans" for information regarding fees received by Mutual
Bank in connection with loans serviced for others. At June 30, 1995, Mutual
Bank had $1.8 million of fixed-rate residential loans with remaining terms of
less than ten years and $901,000 of fixed-rate loans with remaining terms of ten
years or more in its loan portfolio. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Mutual Bancompany, Inc.--
Asset/Liability Management."
Mutual Bank has offered ARM loans at rates and on terms determined in
accordance with market and competitive factors. The ARM program currently
offered by Mutual Bank meets the standards and requirements of the secondary
market for residential loans. Mutual Bank's current one- to four-family
residential ARMs are fully amortizing loans with contractual maturities of up to
30 years. The interest rates on the ARMs originated by Mutual Bank adjust at
stated intervals based on a margin over a specified index and are subject to
periodic and lifetime adjustment limits.
Mutual Bank presently offers ARM products which adjust annually subject to
a limitation on the annual increase of two percent and an overall life of loan
limitation of six percent. These ARM products utilize the quarterly Cost of
Funds Index ("COFI") for Eighth District Institutions plus a margin of two and
one-half percent. ARM products held in Mutual Bank's portfolio do not permit
negative amortization of principal and carry no prepayment restrictions. At
June 30, 1995, Mutual Bank had $35.2 million of one- to four-family ARM loans.
It is Mutual Bank's present policy generally not to lend more than 95% of
the lesser of the appraised value or purchase price of the property, except for
loans made pursuant to Mutual Bank's first-time home purchasers program which
provides for loans up to 100% of the appraised value of the property. Mutual
Bank presently requires private mortgage insurance in specified amounts on all
conventional residential loans with a loan-to-value ratio at origination
exceeding 80%. The terms of the private mortgage insurance have generally
provided that Mutual Bank would receive a payment equal to 17% to 22%, depending
on the initial loan-to-value ratio, of the outstanding principal amount of the
loan if there has been a default, plus costs of foreclosure.
Substantially all of Mutual Bank's present one- to four-family real estate
loans are secured by properties located in Missouri. In view of the prevailing
level of real estate values in Mutual Bank's market area, Mutual Bank rarely
originates loans in excess of $202,500 (the FHLMC maximum).
Mutual Bank's residential mortgage loans customarily include due-on-sale
clauses giving Mutual Bank the right to declare the loan immediately due and
payable in the event that, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.
Mutual Bank has enforced due-on-sale clauses in its mortgage contracts for the
purpose of increasing its loan portfolio yield. ARM loans may be assumed
provided home buyers meet Mutual Bank's underwriting standards and the
applicable fees are paid.
Mutual Bank also originates loans to owner-occupants for the construction
of one- to four-family residences. Loans to such individuals are generally six-
month fixed-rate loans. Such loans have generally been provided when Mutual
Bank also originates the permanent loan on such property. At June 30, 1995,
$237,000, or 0.6%, of Mutual Bank's loan portfolio consisted of construction
loans.
Mutual Bank's construction loans have been originated with fixed-rates of
interest. Construction loans are made in amounts of up to a maximum loan-to-
value ratio of 75%. Prior to making a commitment to fund a construction loan,
Mutual Bank requires an appraisal of the property. The underwriting standards
for construction loans are similar to those for one- to four-family residential
loans. All of Mutual Bank's construction loans have been secured by properties
located in its market area.
39
<PAGE>
Mutual Bank's construction loan agreements generally provide that loan
proceeds are disbursed in increments as construction progresses. Mutual Bank
periodically reviews the progress of the underlying construction project.
Construction lending generally affords Mutual Bank an opportunity to
receive interest at rates higher than those obtainable from residential lending
and to receive higher origination and other loan fees. In addition, such loans
are generally made for relatively short terms. Nevertheless, the nature of
these loans is such that they are more difficult to evaluate and monitor.
Mutual Bank's risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value upon completion of the
project and the estimated cost (including interest) of the project. If the
estimate of value proves to be inaccurate, Mutual Bank may be confronted, at or
prior to the maturity of the loan, with a project having a value which is
insufficient to assure full repayment. Because defaults in repayment may not
occur during the construction period it may be difficult to identify problem
loans at an early stage.
Multi-Family and Commercial Real Estate Lending. Prior to May 1993, Mutual
Bank originated loans for multi-family and commercial (including land)
properties. At June 30, 1995, $1.4 million, or 3.4%, of Mutual Bank's loan
portfolio consisted of multi-family loans and $1.5 million, or 3.8%, of Mutual
Bank's loan portfolio consisted of commercial real estate (including land)
loans.
Multi-family and commercial real estate loans previously originated by
Mutual Bank had terms of ten to 30 years and up to 30-year amortization schedule
rates on such loans generally adjusted annually to specified spreads over a
specified index; however, certain loans were also made at fixed rates. Multi-
family and commercial real estate loans (other than loans to facilitate) were
written in amounts of up to 75% of the lesser of the appraised value of the
property or the sales price.
At June 30, 1995, Mutual Bank had a participation interest in one multi-
family real estate loan to a borrower, or group of borrowers, which had an
existing carrying value in excess of $500,000. This participation interest,
which had an outstanding balance of $628,000 at June 30, 1995, is secured by an
apartment complex and was originated in 1983 with original balance of $1.5
million of which Mutual Bank had a $750,000 interest. At June 30, 1995, the
loan was performing in accordance with its terms. See "Regulation--Federal
Regulation of Savings Associations."
Effective in May 1993, based on OTS instructions, Mutual Bank discontinued
its policy of originating multi-family and commercial real estate loans due to
concerns raised by the OTS related to underwriting deficiencies for such loans
determined in connection with Mutual Bank's regulatory examination. The non-
residential real estate loans originated by Mutual Bank prior to such time were
primarily secured by multi-family properties, office buildings, farms, retail
buildings, nursing and retirement homes, warehouses, and other income-producing
properties. All of these loans were performing in accordance with their terms.
The OTS had previously required that Mutual Bank enter into a supervisory
agreement relating to underwriting policies and procedures to be utilized in
connection with the origination of multi-family and commercial real estate
loans. This agreement, which was dated April 22, 1992, required, among other
things, that Mutual Bank adopt more stringent underwriting policies and
procedures to strengthen Mutual Bank's underwriting standards. The supervisory
agreement was terminated in August 1994 based upon the OTS' determination that
Mutual Bank was in compliance with the terms of such agreement. Mutual Bank
continues to be subject to prohibitions on its ability to originate multi-family
and commercial real estate loans. In December 1995, based on the results of a
comprehensive regulatory examination in October 1995, the OTS terminated the May
1993 leading restrictions and replaced them with less restrictive leading
limitations which, among other things, raise from $100,000 to $250,000 the
amount Mutual Bank may lend on non-owner-occupied one- to four-family residences
without prior regulatory approval. Due to Mutual Bank's limited lending in this
area and the pending merger with Roosevelt, the relaxed lending restrictions
have not had, and are not expected to have, a material effect on Mutual Bank.
40
<PAGE>
Due to the pending Merger, Mutual Bank no longer intends to hire a lending
officer who is experienced in the area of commercial real estate lending or to
begin originating commercial real estate and multi-family loans in its market
area.
Multi-family and commercial real estate lending previously offered by
Mutual Bank afforded Mutual Bank an opportunity to receive interest at rates
higher than those generally available from one- to four-family residential
lending. Nevertheless, loans secured by such properties were generally larger
and involved a greater degree of risk than one- to four-family residential
mortgage loans. Because payments on loans secured by commercial real estate and
multi-family properties were often dependent on the successful operation or
management of the properties, repayment of such loans may have been subject to
adverse conditions in the real estate market or the economy. If the cash flow
from the project was reduced (for example, if leases were not obtained or
renewed), the borrower's ability to repay the loan might be impaired. In the
past, Mutual Bank attempted to minimize these risks by lending primarily on
existing income-producing properties. In addition, Mutual Bank had generally
limited itself to a real estate market and/or borrowers with which it had
knowledge and experience.
Consumer Lending. Mutual Bank offers a variety of consumer loans for
various purposes with terms up to five years. The majority of lending is for
home improvement and other personal purposes. Mutual Bank also makes loans for
consumer purposes secured by deposit accounts. Mutual Bank currently originates
substantially all of its consumer loans in its market area. At June 30, 1995,
Mutual Bank's consumer loans totaled $460,000, or 1.1% of Mutual Bank's loan
portfolio.
Consumer loan terms vary according to the type of collateral, term of the
loan and creditworthiness of the borrower. Unsecured loans are offered to
borrowers for a variety of purposes and personal needs. These are generally
fully amortizing with loan terms of five years or less.
The underwriting standards employed by Mutual Bank for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of the borrower's ability to meet payments on the proposed loan along
with his existing obligations.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured. Consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various Federal and state laws, including
Federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans. Although the level of delinquencies in Mutual
Bank's consumer loan portfolio has generally been low (at June 30, 1995,
consumer loans totaling $4,000 were 90 days or more delinquent), there can be no
assurance that delinquencies will not increase in the future.
Originations, Purchases and Sales of Loans. Mutual Bank originates real
estate loans through marketing efforts, its customer base and walk-in customers.
Mutual Bank originates both adjustable-rate and fixed-rate loans. Since Mutual
Bank sells the fixed-rate loans it originates with terms to maturity of greater
than ten years, its ability to originate loans for portfolio is dependent upon
the relative demand for fixed-rate or ARM loans in the origination market, which
is affected by the term structure (short-term compared to long-term) of interest
rates as well as the current and expected future level of interest rates.
Historically, Mutual Bank has, from time to time, also purchased ARM loans
and loan participations, some of which were secured by properties located
outside the State of Missouri. For the three years prior to 1995, Mutual Bank
had not purchased a significant amount of loans or loan participations primarily
because it has not found such loans which meet its criteria (e.g., adjustable-
rate loans secured by property located in or around its market area). In fiscal
1994, Mutual Bank entered into an arrangement with a mortgage banking company
located in Columbia, Missouri to acquire loans originated by the mortgage banker
in or near Mutual Bank's market area that meet Mutual Bank's underwriting
criteria. Pursuant to the terms of this agreement, the mortgage banking company
would continue to service the loans acquired. During fiscal 1995, Mutual Bank
purchased $3.0 million of one-year adjustable-rate one- to four-family mortgage
loans. Such purchases enabled Mutual Bank to offset the relatively low level of
loan demand in Mutual Bank's principal market area, to take advantage of
favorable lending
41
<PAGE>
opportunities in other markets, to diversify its portfolio and to limit
origination expenses while generally providing Mutual Bank with a higher yield
than was available on mortgage-backed securities. At June 30, 1995, Mutual Bank
had $718,000 (or 1.8% of Mutual Bank's loan portfolio) in loans and loan
participations secured by properties located in Arkansas, Alabama, Kansas,
Indiana, Wisconsin, Minnesota, North Dakota and South Dakota, of which 12 loans
totalling $467,000 were secured by properties located in the State of Alabama.
Mutual Bank has underwritten its loan purchases using the same criteria it
uses in originating loans, other than geographic location. Servicing of
purchased loans is generally done by the seller. At June 30, 1995,
approximately $5.3 million of Mutual Bank's loan portfolio was serviced by
others.
Typically, when Mutual Bank sells loans, it retains responsibility for
collecting and remitting loan payments, inspecting the properties, making
certain insurance and tax payments on behalf of borrowers and servicing the
loans, and receives a fee for performing this service. Sales of loans generate
income (or loss) at the time of sale, produce future servicing income and
provide funds for additional lending and other purposes. At June 30, 1995,
Mutual Bank was servicing mortgage loans for others in the amount of $10.6
million.
The contractual right to service mortgage loans that have been sold has an
economic value that is not recognized in Mutual Bank's financial statements.
The value results from the future income stream of the servicing fees, the
availability of the cash balances associated with escrow funds collected monthly
for real estate taxes and insurance, the availability of the cash from monthly
principal and interest payments from the collection date to the remittance date,
and the ability to utilize the servicing relationships to cross-sell other
products and services. The actual value of a servicing portfolio is dependent
upon such factors as the age, maturity, and prepayment rate of the loans in the
portfolio, the average dollar balance of the loans, the location of the
collateral property, the average amount of escrow funds held, the interest rates
and delinquency experience on the loans, the types of loans and other factors.
The marketability of loans depends on the purchasers' investment
limitations, general market and competitive conditions, mortgage loan demand,
and other factors. Mutual Bank's sales of loans or participation are generally
"without recourse" (i.e., without remedy against the seller by the purchaser if
the borrower defaulted on payment under the loan) against Mutual Bank in the
event of default. Mutual Bank does have contingent liability on loans sold
under warranty of conforming origination to FHLMC.
Gains or losses on loan sales are recognized at the time of sale and are
determined by the difference between net sales proceeds and the principal
balance of the loans sold, adjusted for deferred loan fees.
42
<PAGE>
The following table sets forth the loan origination, purchase, sale and
repayment activities of Mutual Bank for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Originations by type:
- ---------------------
Real estate - one- to four-family/(1)/.............. $ 12,280 $ 12,320 $ 13,457
- multi-family.......................... --- 19 ---
- commercial/(2)/....................... 850 --- ---
Consumer............................................ 323 384 534
-------- -------- --------
Total loans originated......................... 13,453 12,723 13,991
Purchases:
- ---------
Real estate - one- to four-family................... --- 321 3,018
-------- -------- --------
Sales and Repayments:
- --------------------
Sales of one- to four-family real estate............ 7,289 6,245 444
Principal repayments................................ 8,009 4,273 7,379
-------- -------- --------
Total reductions............................. 15,298 10,518 7,823
Decrease in other items, net/(3)/................... (4,602) (5,851) (1,135)
-------- -------- --------
Net increase (decrease)/(4)/................. $ (6,447) $ (3,331) $ 8,051
======== ======== ========
</TABLE>
_________________
/(1)/Includes construction loans.
/(2)/Includes land loans.
/(3)/Consists mainly of refinancings.
/(4)/Includes net loans receivable and loans held for sale, excluding allowance
for loan losses.
ASSET QUALITY
Delinquency Procedures. When a borrower fails to make a required payment
on a loan, Mutual Bank attempts to cause the delinquency to be cured by
contacting the borrower when the loan is 30 days delinquent. A late notice is
sent 15 days after the due date of the loan. If the delinquency is not cured by
the 60th day, additional written and verbal contacts are made with the borrower.
If there is no acceptable response from the borrower, a 30-day notice of
foreclosure is sent. If the delinquency is not cured within the 30 days,
foreclosure proceedings are initiated.
In the event the loan payment is past due for 90 days or more, Mutual
Bank performs an in-depth review of the loan's status, the condition of the
property and circumstances of the borrower. Based upon the results of the
review, Mutual Bank may negotiate and accept a repayment program with the
borrower, accept a voluntary deed in lieu of foreclosure or, when deemed
necessary, initiate foreclosure proceedings. If foreclosed on, real property is
sold at a public sale and Mutual Bank may bid on the property to protect its
interest. A decision as to whether and when to initiate foreclosure proceedings
is made by the Board of Directors of Mutual Bank pursuant to a recommendation
from the Senior Vice President and is based on such factors as the amount of the
outstanding loan in relation to the original indebtedness, the extent of
delinquency and the borrower's ability and willingness to cooperate in curing
the delinquencies.
The following table sets forth Mutual Bank's loan delinquencies by type, by
amount and by percentage of total loan portfolio as of March 31, 1996.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR: TOTAL LOANS DELINQUENT
-----------------------------------------------------
60-89 DAYS 90 DAYS AND OVER 60 DAYS AND OVER
------------------------- ------------------------- --------------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
LOAN LOAN LOAN
NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO
------ ------ --------- ------ ------ --------- ------ ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
residential real estate.... 4 $ 121 .31% -- $ -- ---% 4 $ 121 .31%
Consumer ................... 1 5 --- -- -- --- 1 5 .01
- ----- .01 -- ----- --- -- ----- ---
Total ................... 5 $ 126 .32% -- $ -- ---% 5 $ 126 .32%
= ===== === == ===== === == ===== ===
</TABLE>
43
<PAGE>
The following table sets forth Mutual Bank's loan delinquencies by type, by
amount and by percentage of total loan portfolio as of June 30, 1995.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR: TOTAL LOANS DELINQUENT
-----------------------------------------------------
60-89 DAYS 90 DAYS AND OVER 60 DAYS AND OVER
------------------------- ------------------------- --------------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
LOAN LOAN LOAN
NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO
------ ------ ---------- ------ ------ --------- ------ ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
residential real estate.... 1 $ 90 .22% 2 $ 1 ---% 3 $ 91 .22%
Consumer ................... 2 2 --- 3 4 .01 5 6 .01
- ----- --- -- ----- --- -- ----- ---
Total ................... 3 $ 92 .22% 5 $ 5 .01% 8 $ 97 .23%
= ===== === == ===== === == ===== ===
</TABLE>
The following table sets forth Mutual Bank's loan delinquencies by type, by
amount and by percentage of total loan portfolio as of June 30, 1994.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR: TOTAL LOANS DELINQUENT
-----------------------------------------------------
60-89 DAYS 90 DAYS AND OVER 60 DAYS AND OVER
------------------------- -------------------------- -------------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
LOAN LOAN LOAN
NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO
------ ------ --------- ------ ------ --------- ------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
residential real estate.... 3 $ 57 .17% 4 $150 .46% 7 $207 .63%
=== ===== === === ==== === === ==== ===
</TABLE>
Non-Performing Assets. Loans are reviewed periodically and any loan whose
collectibility is doubtful is placed on non-accrual status. Real estate loans
are placed on non-accrual status when either principal or interest is 90 days or
more past due.
Real estate acquired in settlement of loans is initially recorded on an
individual asset basis at the lower of (i) fair value minus estimated cost to
sell or (ii) cost. If, subsequent to foreclosure, the fair value of the real
estate acquired through foreclosure is determined to have declined based upon
periodic evaluations by management, valuation allowances are established through
a charge to income. Subsequent increases in the fair value are recorded through
a reversal of the valuation allowance, provided that such allowance may not be
recorded below zero. Costs relating to the development or improvement of real
estate owned are capitalized to the extent of net realizable value.
Mutual Bank considers a loan as in-substance foreclosed if the borrower has
little or no equity in the property based upon its current fair value, if
repayment can be expected only to come from operations or sale of the collateral
and if the borrower has effectively abandoned control of the collateral or has
continued to retain control of the collateral but because of the current
financial status of the borrower, it is doubtful the borrower will be able to
repay in the foreseeable future.
The following table sets forth the amounts and categories of Mutual Bank's
non-performing assets as of the dates indicated. Loans are placed on non-accrual
status when the collection of principal and/or interest become doubtful. For all
years presented, Mutual Bank has had no troubled debt restructurings (which
involve forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than that of market rates). Foreclosed assets
include assets acquired in settlement of loans.
44
<PAGE>
<TABLE>
<CAPTION> AT JUNE 30, MARCH 31
--------------------------------------------- ------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-accruing loans: $279 $ 139 $ 25 $150 $ 1 $ ---
One- to four-family residential real estate ........ 83 --- --- --- --- ---
Multi-family real estate ........................... --- 1 --- --- 4 5
Consumer ........................................... ---- ----- ----- ---- ----- -----
362 140 25 150 5 $ 5
Total ........................................... ---- ----- ----- ---- ----- -----
Foreclosed assets (net of valuation allowance):
One- to four-family residential real estate ....... 57 70 109 --- --- ---
---- ---- ---- ---- ----- -----
Total non-performing assets ..................... $419 $210 $134 $150 $ 5 5
==== ==== ==== ==== ===== =====
Total as a percentage of total .................. .71% .35% .23% .28% .01% .01%
assets ==== ==== ==== ==== ===== =====
</TABLE>
For the year ended June 30, 1995, gross interest income, which would have
been recorded had the non-accruing loans been current in accordance with their
original terms, amounted to $339. No amount was included in interest income on
such loans for the year ended June 30, 1995.
At June 30, 1995, Mutual Bank's non-accruing loans were comprised of two
loans, totaling $1,000, secured by one- to four-family real estate located in
Mutual Bank's market area, and three loans totalling $4,000 that were unsecured.
Other Loans of Concern. In addition to the non-performing loans set forth
in the preceding table, as of June 30, 1995, there was also an aggregate of
$380,000 in net book value of loans identified by Mutual Bank with respect to
the majority of which known information about the possible credit problems of
the borrowers or the cash flows of the security properties have caused
management to have some doubts as to the ability of the borrowers to comply with
present loan repayment terms and which may result in the future inclusion of
such items in the non-performing asset categories. At June 30, 1995, there were
no other loans of concern in excess of $100,000 except for three loans to
facilitate the sale of real estate owned to one borrower secured by real estate
totaling $114,000.
Management has considered Mutual Bank's non-performing and "of concern"
assets in establishing its allowance for loan losses.
Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: Substandard,
Doubtful and Loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the savings association will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of Substandard assets, with the additional characteristics that
the weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as Loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. Assets classified as Substandard or Doubtful require the institution
to establish prudent general allowances for loan losses. If an asset or portion
thereof is classified as Loss, the institution must either establish specific
allowances for loan losses in the amount of 100% of the portion of the asset
classified Loss, or charge off such amount. If an institution does not agree
with an examiner's classification of an asset, it may appeal this determination
to the District Director of the OTS.
On the basis of management's review of its assets, at June 30, 1995, on a
net basis, Mutual Bank had classified $373,000 as Substandard, $12,000 as Loss
and none as doubtful. All of Mutual Bank's classified assets consisted of loans
secured by one- to four-family real estate and are included in the non-
performing assets herein or discussed under "Other Loans of Concern" herein.
45
<PAGE>
Allowance for Loan Losses. The allowance for estimated loan losses is
established through a provision for losses on loans based on management's
evaluation of the risk inherent in its loan portfolio and changes in the nature
and volume of its loan activity. Such evaluation, which includes a review of
all loans of which full collectibility may not be reasonably assured, considers
the estimated net realizable value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate allowance for loan losses. Mutual
Bank's policies have had the effect of increasing Mutual Bank's allowance for
loan losses in recent periods as management deemed it prudent to increase the
provision for loan losses after considering various factors including the
continuing uncertainty regarding local economic recovery and its impact on
borrowers' continuing ability to repay their loans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Mutual Bancompany, Inc.--Results of Operations."
While management believes that it uses the best information available to
determine the allowance for loan losses, unforeseen market conditions could
result in adjustments to the allowance for loan losses, and net earnings could
be significantly affected, if circumstances differ substantially from the
assumptions used in making the final determination.
The following table sets forth an analysis of Mutual Bank's allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
------------------ ------------------------------------------
1996 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period ........................... $ 187 $ 136 $ 208 $ 195 $ 168 $ 243
Charge-offs:
One- to four-family residential real estate ............. 15 71 26 38 42 4
Consumer loans 4 --- --- --- --- ---
------ ------ ----- ----- ----- -----
Recoveries:
One- to four-family residential real estate ............ 13 ---- 8 --- --- ---
------ ------ ----- ----- ----- -----
Net charge-offs .......................................... 6 71 18 38 42 ---
Additions (benefit) charged to operations ................ (5) 143 5 11 117 (52)
------ ------ ----- ----- ----- -----
Balance at end of period ................................. $ 176 $ 208 $ 195 $ 168 $ 243 $ 187
====== ====== ===== ===== ===== =====
Ratio of net charge-offs during the period to
average loans outstanding during the period .............. .01% .15% .04% .10% .13% .00%
==== === === === === ===
Ratio of net charge-offs during the period to
non-performing assets .................................... 1.36% 17.02% 8.72% 28.10% 28.30% 60.00%
===== ===== ===== ===== ===== =====
</TABLE>
46
<PAGE>
The following table sets forth the distribution of Mutual Bank's allowance
for loan losses as of the dates indicated is summarized as follows:
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
---------------- ----------------- -------------------- ------------------- ----------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ --------- ------ -------- ------ --------- ------ ---------- ------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
residential real estate $ 34 87.4% $ 41 85.9% $ 25 83.8% $ 12 85.6% $ 97 99.7%
Unallocated/(1)/ ....... 174 --- 154 --- 143 --- 231 --- 90 ---
----- ----- ----- ----- ----- -----
Total ............. $ 208 100.0% $ 195 100.0% $ 168 100.0% $ 243 100.0% $ 187 100.0%
===== ===== ===== ===== =====
<CAPTION>
March 31,
----------------
1996
----------------
PERCENT
OF LOANS
IN EACH
CATEGORY
TO TOTAL
AMOUNT LOANS
------ ---------
<S> <C> <C>
One- to four-family
residential real estate $ 94 99.4%
Unallocated/(1)/ ....... 82 ---
----- -----
Total ............. $ 176 100.0%
</TABLE>
- ------------------------
/(1)/To be distributed consistent with the percentage that loans in each
category bear to total loans.
INVESTMENT ACTIVITIES
General. Mutual Bank must maintain minimum levels of investments that
qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, Mutual Bank has
maintained liquid assets at levels above the minimum requirements imposed by the
OTS regulations and at levels believed adequate to meet the requirements of
normal operations, including potential deposit outflows. Cash flow projections
are regularly reviewed and updated to assure that adequate liquidity is
maintained. For June 30, 1995, Mutual Bank's liquidity ratio (liquid assets as
a percentage of net withdrawable savings deposits and current borrowings) was
21.3%. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Mutual Bancompany, Inc.--Liquidity and Capital
Resources."
Mutual Bank has the authority to invest in various types of liquid assets,
including United States Treasury obligations, securities of various federal
agencies, certain certificates of deposit of insured banks and savings
institutions, certain bankers' acceptances, repurchase agreements and federal
funds. Subject to various restrictions, Mutual Bank may also invest its assets
in commercial paper and investment grade corporate debt securities.
Generally, the investment policy of Mutual and Mutual Bank is to invest
funds among various categories of investments and maturities based upon Mutual
Bank's asset/liability management policies, investment quality and
marketability, liquidity needs and performance objectives.
During fiscal 1995, the current market value of the investment and
mortgage-backed securities classified as available-for-sale were adjusted as
required by SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities ("SFAS 115"). Based upon the implementation of SFAS 115, the book
value of the available-for-sale portfolio was reduced by $73,000.
Securities. At June 30, 1995, interest-bearing deposits with banks totaled
$191,000, or .3% of total assets, and its debt securities totaled $7.9 million,
or 13.9% of total assets. As of such date, Mutual Bank also had a $414,000
investment in FHLB stock, satisfying its requirement for membership in the FHLB
of Des Moines. It is Mutual Bank's general policy to purchase securities which
are U.S. Government securities or federal agency obligations or other issues
that are rated investment grade or have credit enhancements.
At June 30, 1995, Mutual's securities' portfolio contained neither tax-
exempt securities nor securities of any issuer with an aggregate book value, in
excess of 10% of Mutual's stockholders' equity, excluding those issued by the
U.S. Government or its agencies.
47
<PAGE>
The following table sets forth the composition of the investment portfolio
as of the dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------------------------------------
1993 1994 1995
------------------ ----------------- ----------------
BOOK % OF BOOK % OF BOOK % OF
VALUE TOTAL VALUE TOTAL VALUE TOTAL
-------- ------ ------- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Investment Securities:
U.S. government securities ................ $ --- ---% $ 1,522 14.7% $ 508 6.1%
Federal agency obligations ................ 11,988 94.0 8,075 77.9 7,401 88.9
------- ----- ------- ----- ------ -----
Subtotal ............................... 11,988 94.0 9,597 92.6 7,909 95.0
FHLB stock .................................. 765 6.0 765 7.4 414 5.0
------- ----- ------- ----- ------ -----
Total Investment Securities and
FHLB stock .......................... $12,753 100.0% $10,362 100.0% $8,323 100.0%
======= ===== ======= ===== ====== =====
Other Interest-Earning Assets:
Interest-bearing deposits with banks ...... $ 2,773 100.0% $ 1,512 75.7% $ 42 22.0%
Federal funds sold ........................ --- --- 486 24.3 149 78.0
------- ----- ------- ----- ------ -----
Total Other Interest-Earning Assets .... $ 2,773 100.0% $ 1,998 100.0% $ 191 100.0%
======= ===== ======= ===== ====== =====
</TABLE>
The following table sets forth, as of June 30, 1995, the composition and
maturities of the investment securities portfolio, excluding FHLB of Des Moines
stock.
<TABLE>
<CAPTION>
AT JUNE 30, 1995
------------------------------------------------------------------------------
LESS THAN 1 TO 5 5 TO 10 OVER
1 YEAR YEARS YEARS 10 YEARS TOTAL SECURITIES
---------- ---------- ---------- ---------- -------------------------
BOOK VALUE BOOK VALUE BOOK VALUE BOOK VALUE BOOK VALUE MARKET VALUE
---------- ---------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
U.S. government securities ........... $ --- $ 508 $ --- $ --- $ 508 $ 508
Federal agency obligations ........... 996 6,405 --- --- 7,401 7,133
----- ------ ------ ------ ------ ------
Total securities ..................... $ 996 $6,913 $ --- $ --- $7,909 $7,641
===== ====== ====== ====== ====== ======
Weighted average yield ............... 4.50% 4.50% ---% ---% 4.50%
==== ====== === === ====
</TABLE>
Mortgage-Backed Securities. Mutual Bank purchases mortgage-backed
securities to supplement residential loan production. The type of securities
purchased is based upon Mutual Bank's asset/liability management strategy and
balance sheet objectives. For instance, most of the mortgage-backed investments
purchased over the last several years have had adjustable interest rates or
short or intermediate effective terms to maturity. The book value of all
mortgage-backed securities at June 30, 1995, was $5.8 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Mutual Bancompany, Inc.--Asset/Liability Management."
The mortgage-backed securities are held in its investment portfolio and
accordingly are included in its financial statements at amortized cost for
securities held-to-maturity and fair value for securities available-for-sale.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Mutual Bancompany, Inc.--Impact of New Accounting Standards and
Changes in Federal Tax Law" for information regarding the impact of SFAS 115.
As of June 30, 1995, all of Mutual Bank's mortgage-backed securities were
backed by federal agencies. Accordingly, management believes that Mutual Bank's
mortgage-backed securities are generally resistant to credit problems.
48
<PAGE>
Mutual Bank's holdings of mortgage-backed securities have decreased as
Mutual Bank has invested in higher yielding loans. Since federal agency
mortgage-backed securities generally carry a yield approximately 50 to 100 basis
points below that of the corresponding type of residential loan (due to the
implied federal agency guarantee fee and the retention of a servicing spread by
the loan servicer), in the event that the proportion of Mutual Bank's assets
consisting of mortgage-backed investments increase, Mutual Bank's asset yields
could be adversely affected.
The following table sets forth the contractual maturities of Mutual Bank's
mortgage-backed securities as of June 30, 1995.
<TABLE>
<CAPTION>
DUE IN JUNE 30, 1995
------------------------------------------------------
LESS THAN 1 TO 3 3 TO 5 5 TO 10 10 TO 20 OVER 20 BALANCE
ONE YEAR YEARS YEARS YEARS YEARS YEARS OUTSTANDING
---------- ------- ------- -------- --------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation ............... $ 86 $1,392 $1,296 $ --- $ 6 $ 870 3,650
Federal National Mortgage
Association ............... --- --- --- 896 --- 1,227 2,123
Government National Mortgage
Association ............... --- --- 20 44 --- --- 64
---- ------ ------ ------ ----- ------
Total .................. $ 86 $1,392 $1,316 $ 940 $ 6 $2,097 5,837
==== ====== ====== ====== ===== ====== =====
</TABLE>
SOURCES OF FUNDS
General. Deposit accounts have traditionally been the principal source of
Mutual Bank's funds for use in lending and for other general business purposes.
In addition to deposits, Mutual Bank derives funds from loan repayments and cash
flows generated from operations. Scheduled loan payments are a relatively stable
source of funds, while deposit inflows and outflows and the related cost of such
funds have varied. Other potential sources of funds available to Mutual Bank
include borrowings from the FHLB of Des Moines and other borrowings.
Deposits. Mutual Bank attracts both short-term and long-term deposits
by offering a wide assortment of accounts and rates. Mutual Bank offers regular
passbook accounts, NOW accounts, money market accounts and fixed interest rate
certificates of deposit with varying maturities and individual retirement
accounts. Deposit account terms vary, according to the minimum balance
required, the time period the funds must remain on deposit and the interest
rate, among other factors. Mutual Bank has not actively sought deposits outside
of its market area.
Mutual Bank, like many thrift institutions in the current interest rate
environment, has had to compete for depositors' funds with non-traditional
deposit vehicles, such as annuities, mutual funds, municipal bonds and other
obligations. As a result of the higher yields available on such instruments,
there has been some disintermediation (i.e., an outflow of funds from the
institution) and, accordingly, a reduction in Mutual Bank's deposits. Should
this disintermediation continue, management believes that Mutual Bank's
borrowing capacity with the FHLB of Des Moines at rates comparable to those
associated with the outflow of funds should preclude any significant negative
impact on earnings.
In setting rates, Mutual Bank regularly evaluates (i) its internal cost of
funds, (ii) the rates offered by competing institutions, (iii) its investment
and lending opportunities and (iv) its liquidity position. In order to decrease
the volatility of its deposits, Mutual Bank imposes penalties on early
withdrawal on its certificates of deposit. Mutual Bank does not have any
brokered deposits and has no present intention to accept or solicit such
deposits.
49
<PAGE>
The following table sets forth the savings flows at Mutual Bank during the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1993 1994 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Opening balance .............. $56,953 $54,334 $50,164
Net outflows ................. (4,417) (5,592) (2,845)
Interest credited ............ 1,798 1,422 1,535
------- ------- -------
Ending balance ............ $54,334 $50,164 $48,854
======= ======= =======
Net increase (decrease) ...... $(2,619) $(4,170) $(1,130)
======= ======= =======
Percent increase (decrease) .. (4.6)% (7.7)% (2.6)%
==== ==== ====
</TABLE>
The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs offered by Mutual Bank as of the dates
indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------------------------------
1993 1994 1995
------------------- ----------------- -------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
Transactions and Savings Deposits:
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passbook Accounts (2.75%) .................. $ 4,373 8.0% $ 4,507 9.0% $ 3,750 7.7%
NOW Accounts (2.85% - 2.95%) ............... 3,060 5.6 2,371 4.7 3,575 7.3
Money Market Accounts (2.75% - 3.00%) ...... 5,526 10.2 5,459 10.9 1,738 3.6
------- ----- ------- ----- ------- -----
Total Non-Certificates ................... 12,959 23.8 12,337 24.6 9,063 18.6
------- ----- ------- ----- ------- -----
Certificates:
- ------------
0.00% - 2.99% ............................ 741 1.4 114 .2 55 .1
3.00% - 3.99% ............................ 17,195 31.7 19,101 38.1 1,967 4.0
4.00% - 4.99% ............................ 10,398 19.1 11,813 23.5 8,055 16.5
5.00% - 5.99% ............................ 3,324 6.1 3,757 7.5 25,536 52.3
6.00% - 6.99% ............................ 3,172 5.8 662 1.3 2,696 5.5
7.00% - 7.99% ............................ 2,857 11.8 1,309 2.6 548 1.1
8.00% and over ........................... 3,688 .3 1,071 2.2 934 .9
------- ----- ------- ----- ------- -----
Total Certificates ....................... 41,375 76.2 37,827 75.4 39,791 81.4
------- ----- ------- ----- ------- -----
Total Deposits ......................... $54,334 100.0% $50,164 100.0% $48,854 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
50
<PAGE>
The following table sets forth rate and maturity information for Mutual
Bank's certificates of deposit as of June 30, 1995.
<TABLE>
<CAPTION>
0.00- 4.00- 6.00- 8.00% OR PERCENT
3.99% 5.99% 7.99% GREATER TOTAL OF TOTAL
------- ------- ------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
Certificate accounts maturing
in quarter ending :
-----------------------------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1995 .................... $ 1,162 $ 9,274 614 $ 315 $11,365 28.57%
December 31, 1995 ..................... 723 8,775 586 566 10,650 28.76
March 31, 1996 ........................ 5 4,453 735 --- 5,193 13.05
June 30, 1996 ......................... 11 3,118 42 --- 3,171 7.97
September 30, 1996 .................... 6 607 20 --- 633 1.59
December 31, 1996 ..................... 56 982 16 --- 1,054 2.65
March 31, 1997 ........................ --- 779 --- --- 779 1.96
June 30, 1997 ......................... 6 741 --- --- 747 1.88
September 30, 1997 .................... 8 502 --- --- 510 1.28
December 31, 1997 ..................... --- 874 --- --- 874 2.20
March 31, 1998 ....................... 8 674 --- --- 682 1.71
June 30, 1998 ......................... --- 523 48 --- 571 1.43
Thereafter ............................ 13 2,304 1,245 --- 3,562 8.95
------- ------- ------ ------ ------- ------
Total .............................. $ 1,998 $33,606 $3,306 $ 881 $39,791 100.00%
======= ======= ====== ====== ======= ======
Percent of total ................... 5.02% 84.46% 8.31% 2.21%
==== ===== ==== ====
</TABLE>
The following table sets forth the amount of Mutual Bank's certificates of
deposit by time remaining until maturity as of June 30, 1995.
<TABLE>
<CAPTION>
MATURITY
---------------------------------------------
OVER OVER
3 MONTHS 3 TO 6 6 TO 12 OVER
OR LESS MONTHS MONTHS 12 MONTHS TOTAL
-------- ------- ------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $10,651 $10,002 $8,159 $9,035 $37,847
Certificates of deposit of $100,000 or more 714 647 209 374 1,944
------- ------- ------ ------ -------
Total certificates of deposit $11,365 $10,649 $8,368 $9,409 $39,791
======= ======= ====== ====== =======
</TABLE>
Borrowings. Mutual Bank's other available sources of funds include
advances from the FHLB of Des Moines and other borrowings. As a member of the
FHLB of Des Moines, Mutual Bank is required to own capital stock in the FHLB of
Des Moines and is authorized to apply for advances from the FHLB of Des Moines.
Each FHLB credit program has its own interest rate, which may be fixed or
variable, and range of maturities. The FHLB of Des Moines may prescribe the
acceptable uses for these advances, as well as limitations on the size of the
advances and repayment provisions.
Mutual Bank may obtain advances from the FHLB of Des Moines upon the
security of its capital stock in the FHLB of Des Moines and certain of its
mortgage loans and mortgage-backed securities. Such advances may be made
pursuant to several different credit programs, each of which has its own
interest rate and range of maturities.
51
<PAGE>
In the past, Mutual Bank has not generally relied upon borrowings to fund
its operations. At June 30, 1993 and 1994, Mutual Bank had no borrowings
outstanding. However, during 1995, Mutual Bank borrowed from the FHLB to fund
loan demand in light of deposit outflows. At June 30, 1995, Mutual Bank had $1.3
million in FHLB advances outstanding at a weighted average interest rate of
5.95%. During the year ended June 30, 1995, Mutual Bank had an average balance
of $2.2 million and a maximum month-end balance of $4.3 million in FHLB
advances.
SUBSIDIARIES
Federal associations generally may invest up to 2% of their assets in
service corporations, plus an additional 1% of assets for community purposes. In
addition, federal associations may invest up to 50% of their total capital in
conforming loans to their service corporations in which they own more than 10%
of the capital stock. In addition, federal associations are permitted to invest
an unlimited amount in operating subsidiaries engaged solely in activities which
a federal association may engage in directly.
On December 10, 1993, Mutual Bank incorporated Mutual Savings Service
Corporation ("MSSC"), a Missouri corporation, in order to facilitate the sale of
annuities and other insurance products to its customers and members of the
general public. These products are offered on an agency basis through BancServ.
For the fiscal year ended June 30, 1995, MSSC has net income of $4,000. In
April 1995, Mutual Bank closed all assets of MSSC into Mutual Bank. At June 30,
1995, MSSC was an inactive corporation.
COMPETITION
Savings institutions generally face strong competition both in originating
real estate loans and in attracting deposits. Competition in originating loans
comes primarily from other savings institutions, commercial banks and mortgage
bankers who also make loans secured by real estate located in Mutual Bank's
market area. Mutual Bank competes for loans principally on the basis of the
interest rates and loan fees it charges, the types of loans it originates and
the quality of services it provides to borrowers.
Mutual Bank faces substantial competition in attracting deposits from other
savings institutions, commercial banks, securities firms, money market and
mutual funds, credit unions and other investment vehicles. The ability of Mutual
Bank to attract and retain deposits depends on its ability to provide an
investment opportunity that satisfies the requirements of investors as to rate
of return, liquidity, risk, convenient locations and other factors. Mutual Bank
competes for these deposits by offering a variety of deposit accounts at
competitive rates, convenient business hours and a customer-oriented staff.
Mutual Bank estimates its market share of the savings deposits in its market
area to be less than 10%.
EMPLOYEES
At June 30, 1995, Mutual had a total of 16 full-time employees. None of
Mutual's employees are represented by any collective bargaining group.
Management considers its employee relations to be good.
PROPERTIES OF MUTUAL BANCOMPANY, INC.
The office of Mutual Bank located at 101 West McCarty, Jefferson City,
Missouri was built by Mutual Bank in 1975, and at June 30, 1995, had a net book
value of $894,000. At June 30, 1995, Mutual Bank's premises and equipment had an
aggregate net book value of approximately $968,000.
Mutual Bank believes that its current facilities are adequate to meet the
present and immediately foreseeable needs of Mutual Bank and Mutual.
Mutual Bank's accounting and record-keeping activities are maintained on an
on-line basis with an independent service bureau.
52
<PAGE>
LEGAL PROCEEDINGS INVOLVING MUTUAL BANCOMPANY, INC.
From time to time, Mutual and Mutual Bank are involved as plaintiffs or
defendants in various legal proceedings arising in the normal course of their
respective businesses. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of management
that the resolution of these legal actions should not have a material effect on
Mutual's consolidated financial position or results of operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MUTUAL BANCOMPANY, INC.
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of Mutual. The information contained in this section
should be read in conjunction with the financial statements and accompanying
notes thereto contained elsewhere herein.
Mutual's results of operations are dependent primarily on net interest
income, which is the difference ("spread") between the interest income earned on
its loans, mortgage-backed securities and investment portfolio, and on its cost
of funds, consisting primarily of interest paid on its deposits. Mutual's
operating expenses principally consist of salaries and employee benefits,
occupancy, federal deposit insurance premiums and other general and
administrative expenses. Mutual's results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
market interest rates, government policies and actions of regulatory
authorities.
Mutual's goal has been to provide financial services to the communities
served by its office. In seeking to accomplish this mission, management has
adopted a business strategy designed to (i) maintain Mutual's capital in excess
of regulatory requirements, (ii) maintain a high level of credit quality at
current levels, (iii) manage Mutual's exposure to changes in market interest
rates, and (iv) maintain or improve Mutual's interest rate spread. In pursuing
this strategy, Mutual has focused on (i) the origination and purchase of one- to
four-family adjustable-rate loans for retention in its portfolio, (ii) the
origination and sale of certain long-term, fixed-rate residential loans on a
servicing-retained basis, and (iii) to a lesser extent, the origination of
consumer loans and investment in mortgage-backed and investment securities.
FINANCIAL CONDITION
March 31, 1996 compared to June 30, 1995. Total assets decreased $3.5
million, or 6.23%, to $53.3 million at March 31, 1996 from $56.9 million at June
30, 1995. The decrease was primarily attributable to decreases in mortgage-
backed securities of $1.1 million, net loans receivable of $1.2 million and
investment securities of $1.2 million partially off-set by an increase in cash
and cash equivalents of $146,000.
The decrease in net loans receivable of $1.2 million or 2.99% was primarily
the result of loan repayments and a decline in demand for adjustable rate
product in light of recent decreases in market rates of interest as well as a
seasonal decline in loan demand.
Cash and cash equivalents increased $146,000, or 25.09%, to $728,000 at
March 31, 1996 from $582,000 at June 30, 1995 due to the increase in interest
bearing deposits. Mortgage-backed securities decreased $1.1 million, or 18.67%,
to $4.7 million at March 31, 1996 from $5.8 million at June 30, 1995. Investment
securities decreased $1.2 million, or 15.49% to $6.7 million at March 31, 1996
from $7.9 million at June 30, 1995. These decreases were the result of principal
repayments and maturities in the mortgage-backed portfolio and the sale of a
$1.2 million investment security and were primarily used to fund net savings
withdrawals and repay borrowings from the FHLB during the nine month period.
Deposits decreased $3.0 million, or 6.21%, to $45.8 million at March 31, 1996
from $48.9 million at June 30, 1995.
53
<PAGE>
Management continues to be concerned with the decrease in deposits which
are attributable to depositors' desire and ability to receive higher yields from
alternative investment products. Rates offered on Mutual Bank's deposits are
kept competitive with the average rates paid by most local institutions.
Borrowings from the FHLB of Des Moines decreased $425,000, or 32.08%, during the
period to $900,000 at March 31, 1996 from $1.3 million at June 30, 1995.
Stockholders' equity increased $31,000 during the period to $6.2 million.
This increase was the result of an $18,000 increase in additional paid-in
capital, a $25,000 reduction in deferred compensation-Mutual ESOP shares, and a
$7,000 increase in retained earnings, partially offset by a $19,000 increase in
unrealized losses on Mutual's available-for-sale investment portfolio net of tax
benefits. The increase in unrealized loss on the available-for-sale portfolio is
primarily due to the net effect of the reclassification of the held-to-maturity
portfolio as available-for-sale as discussed in Note 6 of the Notes to
Consolidated Financial Statements for the Nine Months Ended March 31, 1996
contained elsewhere in this Proxy Statement/Prospectus.
June 30, 1995 compared to June 30, 1994. Total assets increased $2.9
million, or 5.4%, to $56.9 million at June 30, 1995 from $54.0 million at June
30, 1994. The increase was attributable to an increase in loans receivable of
$8.1 million, offset by decreases of $1.4 million in cash and interest-bearing
accounts, $337,000 in Federal funds sold, $1.7 million in investment securities
and $1.6 million in mortgage-backed securities.
Deposits decreased $1.3 million, or 2.6%, to $48.9 million at June 30, 1995
from $50.2 million at June 30, 1994. The decrease was attributable to depositors
seeking improved yields on alternative investments. Net deposit outflows were
funded by the pay-down and maturity of interest-bearing assets, and borrowings
from the FHLB of Des Moines.
Net loans receivable increased $8.1 million, or 25.1%, to $40.4 million at
June 30, 1995 from $32.3 million at June 30, 1994. The increase was attributable
to the origination of $12.9 million in loans, consisting primarily of one- to
four-family adjustable-rate loans, and the purchase of $3.0 million of single
family loans from a mortgage loan broker.
Investment securities decreased $1.7 million, or 17.7%, to $7.9 million at
June 30, 1995 from $9.6 million at June 30, 1994. Mortgage-backed securities
decreased $1.6 million, or 21.6%, to $5.8 million at June 30, 1995 from $7.4
million at June 30, 1994. The net decrease in investment and mortgage-backed
securities of $3.3 million was a result of the maturity and sale of these
securities with the proceeds used to fund the origination of loans receivable.
The reallocation of funds from investment and mortgage-backed securities to
loans receivable was due to management's decision to position Mutual to earn a
higher yield than was currently available on the investment and mortgage-backed
securities through the origination and purchase of new loans which would adjust
to a higher rate after an initial one to three year period.
Stock in the FHLB decreased $351,000, or 45.9%, to $414,000 at June 30,
1995 from $765,000 at June 30, 1994. The decrease resulted from Mutual's
determination to utilize a net capital loss tax carryforward that would have
expired on June 30, 1995. The stock that was sold had no tax basis. No tax
liability resulted on the gain from the sale of the stock since the net capital
loss carryforward was utilized.
Net deferred income taxes receivable increased $70,000 to $135,000 at June
30, 1995 from $65,000 at June 30, 1994. This increase resulted primarily from
the reduction of a deferred tax asset valuation allowance for a net capital loss
tax carryforward Mutual utilized during 1995.
Stock issuance costs decreased $160,000 to $0 at June 30, 1995. The
deferred expenses related to Mutual Bank's mutual to stock conversion and stock
offering by Mutual, and were deducted from the net stock issuance proceeds in
1995.
Net equity increased $2.6 million, or 72.2%, to $6.2 million at June 30,
1995 from $3.6 million at June 30, 1994. The increase resulted primarily from
net cash proceeds received from Mutual Bank's mutual to stock conversion and
Mutual's stock offering of $2.5 million (net of stock issuance costs of
$600,000). Net earnings
54
<PAGE>
contributed an additional $176,000 to stockholders' equity, while an unrealized
loss on securities available-for-sale reduced net stockholders' equity by
$48,000. See Notes 1, 2 and 5 of the Notes to Consolidated Financial Statements
for the Years Ended June 30, 1993, 1994 and 1995 contained elsewhere in this
Proxy Statement/Prospectus for further explanation.
June 30, 1994 compared to June 30, 1993. Total assets decreased $4.1
million, or 7.0%, to $54.1 million at June 30, 1994 from $58.2 million at June
30, 1993. The decrease was attributable to decreases in deposits of $4.1
million, in net loans receivable of $3.2 million, in investment securities of
$2.4 million, in cash and interest-bearing deposits of $1.1 million, partially
offset by increases in mortgage-backed securities of $2.5 million, in income tax
receivable of $183,000, in deferred income tax net assets of $127,000 and in
reorganization and stock issuance costs of $160,000 associated with Mutual
Bank's conversion to stock form.
Deposits decreased $4.1 million, or 7.7%, to $50.2 million at June 30, 1994
from $54.3 million at June 30, 1993. The decrease in deposits was attributable
to depositors seeking improved yields through other investment vehicles as a
result of the low interest rate environment. The net deposit outflows were
funded by cash on hand and the excess of loan repayments over loan originations
during the year ended June 30, 1994.
Net loans receivable decreased $3.2 million, or 9.0%, to $32.3 million at
June 30, 1994 from $35.5 million at June 30, 1993. This decrease in net loans
receivable was the result of customers continuing to refinance their existing
adjustable-rate loans to fixed-rate loans and principal repayments which
exceeded originations. Since Mutual generally only retains fixed-rate loans with
maturities of less than ten years in its portfolio, the refinancing referred to
above generally results in a reduction in loan balances.
Investment securities decreased $2.4 million, or 18.8%, to $10.4 million at
June 30, 1994 from $12.8 million at June 30, 1993. This decrease in investment
securities was a result of maturities of investment securities with the proceeds
reinvested in mortgage-backed securities which increased $2.5 million, or 51.0%,
to $7.4 million at June 30, 1994 from $4.9 million at June 30, 1993. The
reallocation of funds to mortgage-backed securities from investment securities
was due to management's decision to seek the increased yields available on the
mortgage-backed securities.
Income taxes receivable decreased $183,000 to a $64,000 benefit at June 30,
1994 from a $119,000 payable at June 30, 1993. This increase resulted from the
settlement with the IRS relating to its examination of Mutual's income tax
returns from the calendar years 1988 through 1990 which allowed Mutual to
recognize a benefit of approximately $125,000 relating to previously accrued
income tax liabilities and the overpayment of current year estimated tax
payments.
Net deferred income tax assets increased $127,000 to $65,000 at June 30,
1994 from a $62,000 tax liability at June 30, 1993. The change was the result of
adopting Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS 109") and additional deferred items resulting from the IRS
settlement discussed above.
Stock issuance costs of $160,000 were incurred in fiscal 1994 related to
Mutual Bank's mutual to stock conversion and stock offering. These expenses were
deferred and will be deducted from the proceeds of the stock offering when
complete or expensed upon the termination of the stock conversion. Costs
incurred related to the initial mutual holding company formation were expensed
in fiscal 1994.
Retained earnings increased $320,000 as a result of net earnings.
RESULTS OF OPERATIONS
Mutual's results of operations depend primarily on the level of its net
interest income and non-interest income and its amount of non-interest expenses.
Net interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.
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COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND
1996
General. Mutual Bank reported net income of $69,000 during the nine month
period ended March 31, 1995 compared to $7,000 during the nine month period
ended March 31, 1996, a decrease of $62,000. This decrease was primarily the
result of a decrease in net interest income of $8,000, an increase in other
income of $2,000, an increase in other expenses of $64,000, an increase in the
provision for loan losses of $19,000, and partially offset by a decrease in
income taxes of $27,000. Mutual Bank reported net income of $20,000 during the
quarter ended March 31, 1995 compared to $7,000 during the quarter ended March
31, 1996, a decrease of $13,000. This decrease was the result of an increase in
net interest income of $9,000, an increase in other income of $1,000, a decrease
in taxes of $4,000, and a decrease in the provision for loan losses of $2,000,
offset by an increase in other expenses of $29,000.
Due to the predominantly adjustable rate nature of Mutual Bank's loan
portfolio, yield adjustments on the portfolio occur periodically over time and
may tend to lag behind the changes in interest rates experienced in the market.
The average yield earned on its interest-earning assets increased from 6.22%
during the nine month period ended March 31, 1995 to 6.70% during the nine month
period ended March 31, 1996. The higher interest rates on the loan portfolio
were primarily the result of upward repricing of the adjustable rate mortgage
loan portfolio.
The average rates paid on its interest-bearing liabilities also increased
from 4.25% during the nine month period ended March 31, 1995 to 4.97% during the
nine month period ended March 31, 1996.
Interest Income. Interest income increased $146,000, or 5.71% from $2.6
million during the nine month period ended March 31, 1995, to $2.7 million
during the nine month period ended March 31, 1996. This increase resulted from
the net effect of an increase in interest on loans of $275,000, offset by
decreases in interest on investment securities of $77,000, interest on mortgage-
backed securities of $46,000 and other income of $6,000. Interest income
increased $13,000, or 1.49%, from $874,000 during the quarter ended March 31,
1995, to $887,000 during the quarter ended March 31, 1996. This increase
resulted primarily from the net effect of increases in interest on loans of
$57,000, offset by decreases in interest on investment securities of $20,000, in
interest on mortgage-backed securities of $18,000 and other income of$6,000. The
increase in interest income on loans for the nine month period ended March 31,
1996 resulted from an increase in the average yield on loans from 6.68% for the
nine month period ended March 31, 1995 to 7.26% during the nine month period
ended March 31, 1996, as well as the increase in the average balance of loans
outstanding from $38.1 million in the 1995 period to $40.2 million in the 1996
period. The increase in interest income on loans for the quarter ended March 31,
1995, resulted from an increase in the average yield on loans from 6.67% during
the quarter ended March 31, 1995 to 7.30% during the quarter ended March 31,
1996, and partially offset by the decrease in the average balance of loans
outstanding from $40.1 million in 1995 to $39.8 million in 1996 for the same
periods. The higher interest rates on the loan portfolio were primarily the
result of upward repricing of the adjustable rate mortgage loan portfolio.
The decrease in interest income on investment securities for the nine month
period resulted primarily from the decrease in the average balance of such
securities from $9.4 million for the nine month period ended March 31, 1995 to
$7.6 million for the nine month period ended March 31, 1995. The decrease in the
balance was due to the need for cash to fund depositors' withdrawals. Similarly,
the decrease in interest income on investment securities during the quarter
ended March 31, 1996 resulted from the decrease in the average balance of such
securities from $8.0 million for the quarter ended March 31, 1995, to $6.9
million for the quarter ended March 31, 1996, and by a decrease in their average
yield from 5.22% during the quarter ended March 31, 1995, to 4.90% during the
quarter ended March 31, 1996. The investment portfolio is primarily invested in
adjustable rate instruments with indices that lag behind the interest rate yield
curve. A FHLB structured note with a low rate of return due to the effect of the
inverse yield curve was sold during the quarter at a loss. The decrease in
interest income on mortgage-backed securities during the nine month period
resulted from decreases in the average balance of such securities from $6.8
million for the nine month period ended March 31, 1995 to $5.3 million for the
nine month period ended March 31, 1996, partially offset by an increase in their
average yield from 5.53% for the nine month period ended March 31, 1995 to 5.90%
for the nine month period ended March 31, 1996.
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<PAGE>
The decrease in interest income on mortgage-backed securities for the
quarter ended March 31, 1996 resulted from decreases in the average balance of
such securities from $6.7 million for the quarter ended March 31, 1995 to $4.9
million for the quarter ended March 31, 1996, partially offset by an increase in
their average yield from 5.51% for the quarter ended March 31, 1995 to 6.02% for
the quarter ended March 31, 1996.
Interest Expense. Interest expense increased $154,000, or 9.29%, from $1.7
million during the nine month period ended March 31, 1995 to $1.8 million during
the nine month period ended March 31, 1996. This increase resulted from an
increase in interest expense on deposits and an increase in interest paid on
advances from the FHLB during the nine months ended March 31, 1996. The increase
in interest expense on deposits of $210,000 resulted from an increase in the
average rates paid on deposits from 4.18% during the nine month period ended
March 31, 1995 to 4.98% during the nine month period ended March 31, 1996,
partially offset by a decrease in the average balance of such deposits from
$49.1 million during the nine month period ended March 31, 1995 to $46.9 million
during the nine month period ended March 31, 1996.
Interest expense increased $4,000, or .68%, from the quarter ended March
31, 1995 compared to the quarter ended March 31, 1996. This increase resulted
primarily from an increase in interest expense on deposits, partially offset by
a decrease in interest paid on reduced balances of advances from the FHLB during
the quarter ended March 31, 1996. The increase in interest expense on deposits
of $33,000 resulted from an increase in the average rates paid on deposits from
4.39% during the quarter ended March 31, 1995 to 5.01% during the quarter ended
March 31, 1996, partially offset by a decrease in the average balance of such
deposits from $49.1 million during the quarter ended March 31, 1995, to $45.7
million during the quarter ended March 31, 1996. The lower average balance of
deposits between the 1995 and 1996 periods reflected the effect of deposit
outflows caused by depositors seeking improved yields, partially offset by
interest credited to depositors' accounts. The increase in the average rate paid
on deposits resulted from Mutual Bank increasing rates offered to depositors in
conjunction with the increase in local market rates during the last half of
1995. Borrowings from the FHLB during the nine months ended March 31, 1996 were
used to fund savings withdrawals discussed above. Mutual Bank had an outstanding
average balance of total borrowings from a commercial bank and the FHLB of $2.7
million during the nine month period ended March 31, 1995 compared to an average
of $1.3 million exclusively from the FHLB for the nine month period ended March
31, 1996. At March 31, 1996, Mutual Bank was paying 5.67% on the outstanding
FHLB balance of $900,000.
Provision (Benefit) for Loan Losses. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level which is considered adequate to absorb losses inherent in the loan
portfolio in accordance with generally accepted accounting principles. During
the nine month period ended March 31, 1996, Mutual Bank recorded a $5,000
benefit in the provision for loan losses compared to a $24,000 benefit recorded
during the nine month period ended March 31, 1995. During the quarter ended
March 31, 1996, Mutual Bank recorded a $5,000 benefit from the provision for
loan losses compared to a $3,000 benefit during the quarter ended March 31,
1995. Loan losses have been minimal in recent years due to Mutual Bank's primary
emphasis on single family lending and the relatively stable economy in the
Jefferson City, Missouri area. Mutual Bank evaluates its loan portfolio
quarterly to determine the adequacy of its loan loss reserves. At March 31, 1995
the evaluation resulted in $388,000 of its loan portfolio being classified
substandard compared to $522,000 at March 31, 1996. Although classified loans
increased $134,000 during the nine month period, Mutual Bank was able to
decrease its loan loss reserves because $183,000 of the balance classified as
substandard were loans in bankruptcy; potential losses on those loans were
determined to be minimal. Future additions to Mutual Bank's allowance for loan
losses are dependent upon the performance of Mutual Bank's loan portfolio, the
economy, changes in real estate values and interest rates, the view of the
regulatory authorities toward adequate reserve levels and inflation.
Other income increased $2,000 during the nine month period ended March 31,
1996 to $76,000, compared to $74,000 for the same period ended March 31, 1995.
This increase was due to an increase of $3,000 in service charges and fees to
$27,000 during the nine month period ended March 31, 1996, compared to $24,000
during the same period ended March 31, 1995, partially offset by a decrease of
$1,000 in Other Income to $49,000, compared to $50,000 for the same period ended
March 31, 1995.
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<PAGE>
Other Expenses. Other expenses consist of compensation related expenses,
occupancy-related expenses, federal deposit insurance premiums and other general
and administrative expenses. Other expenses increased $64,000, or 7.14%, to
$960,000 during the nine month period ended March 31, 1996 from $896,000 for the
same period ended March 31, 1995, resulting from increases in Compensation
Expense for Directors Fees of $36,000, Occupancy Expense of $14,000 and Other
General and Administrative Expenses of $34,000, offset by decreases in Federal
Insurance Premiums of $2,000 and Loss on Sale of Investments classified as
Available-for-Sale of $18,000. Other expenses increased $29,000 or 9.90% to
$322,000, during the quarter ended March 31, 1996 from $293,000 for the same
period ended March 31, 1995, primarily from an increase in Compensation Expense
of $21,000, Loss on Sale of Investments classified as Available-for-Sale of
$11,000 and offset by decreases in Occupancy Expense of $1,000, and Other
General and Administrative Expenses of $2,000.
The deposits of savings associations such as Mutual Bank are presently
insured by the SAIF which, along with the BIF, is one of the two insurance funds
administered by the FDIC. Financial institutions which are members of the BIF
are experiencing substantially lower deposit insurance premiums because the BIF
has achieved its required level of reserves while the SAIF has not yet achieved
its required reserves. In November 1995, the FDIC further revised the premium
schedule for BIF-insured banks to provide for a range of 0% to 0.27% of deposits
(as compared to the current range of 0.23% to 0.31% of deposits of SAIF-insured
institutions) with an annual statutory minimum payment of $2,000. The revised
premium schedule took effect January 1, 1996. A recapitalization plan for the
SAIF under consideration by Congress reportedly provides for a special
assessment of 0.80% to 0.90% of deposits to be imposed on all SAIF-insured
institutions to enable the SAIF to achieve its required level of reserves. If
the proposed assessment of 0.80% to 0.90% was effected based on deposits of
March 31, 1995 (the date reportedly contemplated by the proposed legislation),
Mutual Bank's special assessment would amount to approximately $383,000 to
$431,000, respectively. Accordingly, this special assessment would significantly
increase non-interest expense and adversely affect Mutual's results of
operations for the period when assessed. Conversely, depending upon Mutual
Bank's capital level and supervisory rating and assuming the insurance premium
levels for SAIF members are equalized with current BIF rates, future deposit
insurance premiums could decrease significantly to as low as $2,000 from the
0.23% of deposits currently being paid by Mutual Bank, which would reduce non
interest expense and adversely affect Mutual's results of operations for future
periods.
Income Taxes. The provision for income tax expense decreased $27,000 during
the nine month period ended March 31, 1996 to $6,000 from $33,000 during the
same period ended March 31, 1995 and decreased $4,000 for the quarter ended
March 31, 1996 to $7,000 from $11,000 during the same period ended March 31,
1995, due to the reduced levels of income.
COMPARISON OF OPERATING RESULTS FOR YEARS ENDED JUNE 30, 1994 AND 1995
General. Mutual reported net income of $320,000 for the year ended June 30,
1994 compared to $176,000 for the year ended June 30, 1995. The $144,000
decrease in net income between 1994 and 1995 resulted from a decrease in
interest income of $20,000, an increase in interest expense of $233,000, a
decrease in non-interest income of $59,000, an increase in income tax expense of
$8,000, and a decrease of $74,000 for the benefit of a recognition of a
cumulative effect change in accounting principle that increased net income in
1994, which did not recur in fiscal 1995 which more than offset decreases in the
provision for loan losses of $169,000 and in non-interest expense of $81,000.
The overall increasing interest rate environment experienced during fiscal 1995
significantly impacted the results of operation of Mutual by decreasing the
average yield on its interest-earning assets from 6.46% in fiscal 1994 to 6.25%
in fiscal 1995, and increasing rates paid on interest-bearing liabilities from
3.92% in fiscal 1994 to 4.42% in fiscal 1995, resulting in a decline in Mutual's
average interest rate spread.
Interest Income. Interest income decreased $20,000, or 0.6%, from $3.5
million in 1994 to $3.4 million in 1995. The net decrease resulted from the net
effect of decreased interest earned on investment securities of $133,000, and
interest-bearing deposits of $78,000, which offset increases in interest earned
on loans of $107,000, and on mortgage-backed securities of $84,000. Of the
$107,000 increase in interest income on loans, $396,000 was due to increases in
the average balance of loans from $32.5 million in fiscal 1994 to $38.4 million
in fiscal 1995, and a decrease of $289,000 was due to a decline in the average
yield on loans from 7.65% in fiscal 1994 to 6.76%
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in fiscal 1995. The increase in the average balance of loans was principally
attributable to an increased loan demand for adjustable-rate loans, resulting
from the offering by Mutual of adjustable-rate loans at slightly below market
rates, and the purchase of $3.0 million in single family loans.
The net decline in interest income on investment and mortgage-backed
securities of $49,000 resulted from a decrease of $83,000 caused by a reduction
in the average balance from $17.0 million in fiscal 1994 to $13.7 million in
fiscal 1995, offset by an increase of $34,000 resulting from an increase in the
average yield on these securities from 4.79% in fiscal 1994 to 5.08% in fiscal
1995. Interest income on interest-bearing deposits decreased $78,000 in fiscal
1995 compared to the same period in fiscal 1994, primarily as a result of the
use of interest-bearing deposits to fund deposit outflows.
Interest Expense. Interest expense increased from $2.0 million in fiscal
1994 to $2.3 million in fiscal 1995. The increase of $233,000 resulted from an
increase in interest expense on certificates of deposit of $177,000, and on FHLB
advances of $128,000 which was offset by a decrease in interest expense on
demand and savings deposits of $72,000. The decrease in demand and savings
deposits interest expense of $72,000 resulted primarily from a decrease in the
average principal balances outstanding from fiscal 1994 to fiscal 1995. Interest
expense on certificates of deposit increased $177,000 of which $192,000 was due
to an increase in rates paid on such accounts from an average yield of 4.27% in
fiscal 1994 to 4.77% in fiscal 1995, and was partially offset by $15,000 due to
a decline in the average balance of certificates of deposit outstanding. The
increase in the average rate paid on deposits resulted from Mutual Bank
competing for deposits in an increasing interest rate environment in fiscal
1995. The increase in interest paid on advances was due to the increase in the
average balance of such advances to $2.2 million in fiscal 1995. The increase in
advances was due to management's use of advances to fund operations in light of
deposit outflows. There were no outstanding advances in fiscal 1994.
Provision (Benefit) for Loan Losses. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level which is considered adequate to absorb losses inherent in the loan
portfolio in accordance with generally accepted accounting principles. During
the year ended June 30, 1995, Mutual recorded a net loan loss benefit of
$52,000. This compares with a net loan loss provision of $117,000 recorded for
the same period in 1994. The decrease in the allowance and provision for loan
losses results from a lower level of loan delinquencies, and management's asset
classification analysis. See "--Asset Quality."
Other Income. Other income decreased $58,000, or 53.7%, for the year ended
June 30, 1995 compared with the same period in fiscal 1994. This decrease
primarily was due to a net loss on the sale of securities of $43,000 in fiscal
1995. Management decided to sell the securities to provide funding to originate
loans, and to position Mutual to obtain a higher yield than was provided by the
securities. Gains on sales of fixed rate loans decreased $14,000 from $15,000 in
fiscal 1994 to $1,000 in fiscal 1995. This decrease resulted primarily from
lower customer demand for fixed-rate loan products in light of the increase in
market rates of interest.
Other Expenses. Other expenses decreased $81,000, or 6.4%, for the year
ended June 30, 1995, compared with the same period in fiscal 1994, primarily
from reorganization and stock issuance costs totalling $72,000 related to Mutual
Bank's planned mutual holding company formation during fiscal 1994 which was
subsequently abandoned. Mutual did not have a corresponding expense in fiscal
1995. Other increases in expenses include $30,000 in compensation and benefits
and $20,000 in occupancy costs. Of the increase in compensation and benefits
expenses, $17,000 resulted from shares held by the Mutual ESOP being committed
to plan participants. These increases were offset by a $17,000 decrease in
federal deposit insurance premiums and a $41,000 decrease in miscellaneous
operating expenses.
COMPARISON OF OPERATING RESULTS FOR YEARS ENDED JUNE 30, 1993 AND 1994
General. Mutual reported net income of $371,000 for the year ended June 30,
1993 compared to $320,000 for the year ended June 30, 1994. The decrease in net
income between 1993 and 1994 was the result of the net effect of a decrease in
interest income of $795,000, a decrease in interest expense of $639,000, an
increase in other expenses of $184,000, an increase in the provision for loan
losses of $106,000, an increase in other income of
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<PAGE>
$24,000, a decrease in income taxes of $298,000, and a benefit for the
recognition of a cumulative effect of a change in accounting principle of
$73,000. The overall declining interest rate environment experienced during
fiscal 1994 significantly impacted the results of operations of Mutual by
decreasing both the average yield earned on its interest-earning assets from
7.35% in fiscal 1993 to 6.46% in fiscal 1994 and the rates paid on its interest-
bearing liabilities from 4.78% in fiscal 1993 to 3.92% in fiscal 1994.
Interest Income. Interest income decreased $795,000, or 18.7%, from $4.3
million in fiscal 1993 to $3.5 million in fiscal 1994. This decrease resulted
from the net effect of a decrease in interest on loans of $834,000, on
investment securities of $47,000, and on interest-bearing deposits of $33,000,
partially offset by an increase in interest income on mortgage-backed securities
of $119,000. Of the $834,000 decrease in interest income on loans, $542,000 was
due to decreases in the average balance of loans from $39.4 million in fiscal
1993 to $32.5 million in fiscal 1994 and $292,000 was due to a decrease in the
average yield on loans from 8.44% in fiscal 1993 to 7.65% in fiscal 1994. The
decrease in the average balance of loans was principally attributable to reduced
loan demand for adjustable-rate loans and increased numbers of customers
refinancing their existing adjustable-rate loans to fixed-rate loans. Since
Mutual Bank generally only retains fixed-rate loans with maturities of less than
ten years in its portfolio, the refinancings referred to above generally
resulted in a reduction in loan balances outstanding. The declining interest
rate on such loans is reflective of the overall declining interest rate
environment experienced during the fiscal year.
The decrease in interest income on investment securities resulted from a
decrease in their average yield from 5.59% in fiscal 1993 to 4.65% in fiscal
1994, partially offset by an increase in the average balance of such securities
from $11.1 million in fiscal 1993 to $12.4 million in fiscal 1994. The decrease
in interest income on interest-bearing deposits resulted from a decrease in the
average balance of such deposits from $4.3 million in fiscal 1993 to $2.9
million in fiscal 1994, partially offset by an increase in their average yield
from 3.16% in fiscal 1993 to 3.55% in fiscal 1994. The increase in interest
income on mortgage-backed securities resulted from an increase in the average
balance of such securities from $3.0 million in fiscal 1993 to $5.7 million in
fiscal 1994, partially offset by a decrease in their average yield from 5.69% in
fiscal 1993 to 5.10% in fiscal 1994.
In May 1993, the OTS instructed Mutual Bank to cease, with certain limited
exceptions, originating commercial real estate and multi-family loans based upon
Mutual Bank's failure to fully comply with underwriting policies and procedures
agreed upon by Mutual Bank and the OTS. Since commercial real estate and multi-
family loans generally afford Mutual Bank an opportunity to receive a higher
rate of interest than that available from one- to four-family real estate loans,
Mutual Bank's inability to originate new loans secured by commercial real estate
and multi-family may result in a reduced yield on its loan portfolio and a
corresponding reduction in interest income. However, given the fact that Mutual
Bank is primarily a single family lender, management does not believe that the
OTS prohibition on the origination of new commercial real estate or multi-family
loans has significantly restricted Mutual's operations.
Interest Expense. Interest expense decreased from $2.7 million in fiscal
1993 to $2.0 million in fiscal 1994. The decrease of $639,000 resulted from a
decrease in interest expense on deposits which resulted from a decrease in the
average rates paid on deposits from 4.78% in fiscal 1993 to 3.92% in fiscal 1994
and a decrease in the average balance of such deposits from $55.7 million in
fiscal 1993 to $51.6 million in fiscal 1994. Interest expense on certificates of
deposit declined $625,000 of which $231,000 was due to a decline in certificates
of deposits outstanding and $394,000 was due to decrease in rates paid on such
accounts. The lower average balance of deposits between fiscal 1993 and fiscal
1994 reflected the effect of deposit outflows caused by depositors seeking
improved yields, partially offset by interest credited to depositors' accounts.
The decline in the average rate paid on deposits resulted from a shift of
deposits from traditionally higher paying certificates of deposit into lower
paying transaction accounts, coupled with the overall declining rate environment
during the fiscal year. This shift occurred as the rates paid on certificates of
deposit and the transaction accounts narrowed.
Provision for Loan Losses. The provision for loan losses is determined by
management as the amount to be added to the allowance for loan losses after net
charge-offs have been deducted to bring the allowance to a level which is
considered adequate to absorb losses inherent in the loan portfolio in
accordance with generally accepted accounting principles. During the year ended
June 30, 1994, Mutual recorded a provision for loan losses of
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$117,000 compared to $11,000 for the year ended June 30, 1993. Prior to 1994,
Mutual established loan loss provisions based on its actual loss experience in
its loan portfolio, which losses have been and continue to be relatively low in
comparison with other savings institutions. In 1994, management of Mutual deemed
it prudent to increase the provision for loan losses based upon the allocation
of certain percentages to non-performing loans, after evaluating Mutual's
existing loan portfolio for probable losses, reviewing existing delinquencies
and troubled loans, evaluating historical loan loss trends and considering the
interest rate environment experienced and its impact on borrowers' continuing
ability to repay their loans. Future additions to Mutual's allowance for loan
losses are dependent upon the performance of Mutual's loan portfolio, the
economy, changes in real estate values and interest rates and inflation.
Other Income. Other income increased $24,000, or 28.9%, for the year ended
June 30, 1994. The increase resulted primarily from increased gains on sales of
fixed-rate loans originated for resale (sold on a servicing-retained basis) and
the related servicing income. During fiscal 1994, Mutual Bank created a service
corporation to sell annuities and insurance products. These activities generated
net income of $5,000. These services were not offered prior to fiscal 1994.
Other Expenses. Other expenses consist of salary and employee benefit
expenses, occupancy-related expenses, federal deposit insurance premiums,
reorganization and stock issuance costs and other general and administrative
expenses. Other expenses increased $184,000, or 17.5%, for the year ended June
30, 1994 primarily from reorganization and stock issuance costs totalling
$72,000 related to Mutual Bank's planned mutual holding company formation (which
plan was subsequently abandoned) during fiscal 1994, a $54,000 increase in
pension and post-retirement benefits expense, a $27,000 increase in deposit
insurance premiums and a $17,000 increase in Board of Directors fees related to
meetings regarding the mutual holding company reorganization and the mutual-to-
stock conversion of Mutual Bank.
Future increases in other expenses are anticipated as a result of Mutual
becoming a public company. An increase in other expenses without a corresponding
increase in other income could result in a decrease in net income in future
periods.
Income Taxes. The provision for income taxes decreased $298,000, or 127.4%,
for the year ended June 30, 1994 compared to fiscal 1993. The decrease for
fiscal 1994 resulted primarily from a settlement reached in August 1993 with the
IRS relating to its examination of Mutual Bank's federal income tax returns for
the calendar years 1988, 1989 and 1990 and from taxes being based on reduced
levels of income before income taxes.
Cumulative Effect of Change in Accounting Principle. Mutual recorded a net
benefit of $73,000 from the cumulative effect of an accounting change as a
result of adopting SFAS 109 as of July 1, 1993. The cumulative effect primarily
represents the impact of recognizing a deferred tax asset for the benefit of
loss allowances that could not be recorded under Accounting Principles Board
Opinion No. 11. See Notes 1 and 9 of the Notes to Consolidated Financial
Statements for the Years Ended June 30, 1993, 1994 and 1995 contained elsewhere
in this Proxy Statement/Prospectus for further explanation.
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AVERAGE BALANCES, INTEREST RATES AND YIELDS
The following table sets forth for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances. Non-accruing loans have been
included in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------------
1993 1994 1995
----------------------------- ----------------------------- -------------------------------
AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
----------- -------- ------ ----------- -------- ------ ----------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans receivable/(1)/ ............... $39,377 $3,322 8.44% $32,542 $2,488 7.65% $38,401 $2,595 6.76%
Mortgage-backed securities .......... 2,990 170 5.69 5,666 289 5.10 6,586 373 5.66
Investment securities/(2)/ .......... 11,123 622 5.59 12,365 575 4.65 9,470 442 4.67
Interest-bearing deposits ........... 4,329 137 3.16 2,930 104 3.55 478 26 5.44
------- ------ ------- ------ ------- ------
Total interest-earning assets/(1)/ . $57,819 4,251 7.35 $53,503 3,456 6.46 $54,935 3,436 6.25
======= ------ ======= ------ ======= ------
Interest-Bearing Liabilities:
Demand and NOW deposits ............. $ 7,937 251 3.16 $ 8,209 241 2.94 $ 6,126 180 2.94
Savings deposits .................... 4,351 132 3.03 4,652 128 2.75 4,310 117 2.71
Certificate accounts ................ 43,456 2,281 5.25 38,744 1,656 4.27 38,431 1,834 4.77
FHLB advances ....................... --- --- --- --- --- --- 2,197 128 5.83
------- ------ ------- ------ ------- ------
Total interest-bearing liabilities . $55,744 2,664 4.78 $51,605 2,025 3.92 $51,064 2,259 4.42
======= ------ ======= ------ ======= ------
Net interest income .................. $1,587 $1,431 $1,177
====== ====== ======
Net interest rate spread ............. 2.57% 2.54% 1.83%
==== ==== ====
Net earning assets ................... $ 2,075 $ 1,898 $ 3,871
======= ======= =======
Net interest margin .................. 2.74% 2.67% 2.14%
==== ==== ====
Average interest-earning assets to
average interest-bearing liabilities . 1.04x 1.04x 1.08x
==== ==== ====
</TABLE>
_________________
/(1)/ Calculated net of deferred loan fees, loan discounts, loans in process
and loss reserves.
/(2)/ Includes U.S. Treasury and agency obligations and stock in the FHLB of
Des Moines.
62
<PAGE>
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
The following table sets forth the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and those due to the changes in interest rates. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1993 VS. 1994 1994 VS. 1995
------------------------------ -----------------------------
INCREASE INCREASE
(DECREASE) TOTAL (DECREASE) TOTAL
DUE TO INCREASE DUE TO INCREASE
------------------- -----------------
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
-------- ------ ---------- -------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable................................ $ (542) $ (292) $ (834) $ 396 $ (289) $ 107
Mortgage-backed securities...................... 138 (19) 119 52 32 84
Investment securities........................... 65 (112) (47) (135) 2 (133)
Interest-bearing deposits....................... (48) 15 (33) (133) 55 (78)
------- ------ ------ ----- ------ -----
Total interest-earning assets................. $ (387) $ (408) $ (795) $ 180 $ (200) $ (20)
------- ------ ------ ----- ------ -----
Interest-bearing liabilities:
Demand and NOW deposits......................... $ 9 $ (19) $ (10) $ (61) $ --- $ (61)
Savings deposits................................ 9 (13) (4) (9) (2) (11)
Certificate accounts............................ (231) (394) (625) (15) 192 177
FHLB advances................................... --- --- --- 128 --- 128
----- ----- ----- ----- ----- -----
Total interest-bearing liabilities............ $(213) $(426) $(639) $ 43 $ 190 $ 233
===== ===== ----- ----- ===== -----
Net interest income.............................. $(156) $(253)
===== =====
</TABLE>
63
<PAGE>
The following table sets forth the weighted average yields on interest-
earning assets, the weighted average interest rates on interest-bearing
liabilities and the interest rate spread between the weighted average yields and
rates as of and for the periods indicated. Non-accruing loans have been included
in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, AT JUNE 30,
----------------------------
1993 1994 1995 1995
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Weighted average yield on:
Loans receivable...................................................... 8.44% 7.65% 6.76% 6.80%
Mortgage-backed securities............................................ 5.69 5.10 5.66 6.50
Investment securities................................................. 5.59 4.65 4.67 4.63
Interest-bearing deposits............................................. 3.16 3.55 5.44 5.97
Combined weighted average yield on interest-earning assets.......... 7.35 6.46 6.25 6.44
Weighted average rate paid on:
Demand and NOW deposits................................................ 3.16 2.94 2.94 2.85
Savings deposits....................................................... 3.03 2.75 2.71 2.75
Certificate accounts................................................... 5.25 4.27 4.77 5.30
FHLB advances.......................................................... --- --- 5.83 6.46
Combined weighted average rate paid on interest-bearing
liabilities........................................................ 4.78 3.92 4.42 4.87
Net interest rate spread................................................. 2.57 2.54 1.83 1.57
</TABLE>
ASSET/LIABILITY MANAGEMENT
One of Mutual's principal financial objectives is to achieve long-term
profitability while reducing its exposure to fluctuating interest rates and
maintaining asset quality. Mutual has sought to reduce exposure of its earnings
to changes in market interest rates by managing the mismatch between asset and
liability maturities and interest rates. The principal element in achieving this
objective is to increase the interest-rate sensitivity of Mutual's assets by
originating loans with interest rates subject to periodic adjustment to market
conditions. Accordingly, since 1985, Mutual Bank has emphasized the origination
of ARMs loans and fixed-rate loans with terms to maturity of ten years or less
for retention in its portfolio. Mutual Bank relies on retail deposits as its
primary source of funds. Management believes retail deposits, compared to
brokered deposits, reduce the effects of interest rate fluctuations because they
generally represent a more stable source of funds.
The OTS has issued a regulation which uses a net market value methodology
to measure the interest rate risk exposure of thrift institutions. This exposure
is a measure of the potential decline in the net portfolio value of the
institution based upon the effect of an assumed 200 basis point ("bp") increase
or decrease in interest rates. Net Portfolio Value ("NPV") is the present value
of the expected net cash flows from the institution's assets, liabilities and
off-balance sheet contracts. Under OTS regulations, an institution's "normal"
level of interest rate risk in the event of this assumed change in interest
rates is a decrease in the institution's NPV in an amount not exceeding 2% of
the present value of its assets. Thrift institutions with greater than "normal"
interest rate exposure must take a deduction from their total capital available
to meet their risk-based capital requirement. The amount of that deduction is
one-half of the difference between (a) the institution's actual calculated
exposure to the 200 basis point interest rate increase or decrease (whichever
results in the greater pro forma decrease in NPV) and (b) its "normal" level of
exposure which is 2% of the present value of its assets. Utilizing this
measurement concept, at June 30, 1995, the change in Mutual Bank's net portfolio
value as a percent of the present value of its assets was consistent with the
amount treated as "normal" under the OTS regulations. The OTS has postponed the
implementation of the capital deduction component of this regulation until it
completes its analysis of the methods of interest rate risk measurements
proposed by the other banking regulators.
The following table, prepared by and furnished to Mutual Bank by the OTS,
sets forth Mutual Bank's NPV and its NPV as a percentage of the present value of
its assets as of June 30, 1995, assuming a 200 basis-point increase or decrease
in interest rates.
64
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30, 1995
--------------------------------------------------------------------------------
NET PORTFOLIO VALUE AS %
NET PORTFOLIO VALUE OF PRESENT VALUE OF ASSETS
------------------------------------------------- ----------------------------
CHANGE IN RATES AMOUNT CHANGE CHANGE NPV RATIO CHANGE
--------------- ------ -------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+200 bp $4,470 $(816) (15)% 8.05% (122)bp
+100 bp 4,963 (322) (6) 8.80 (46)
0 5,286 --- --- 9.27 ---
-100 bp 5,488 202 4 9.53 26
-200 bp 5,645 359 7 9.71 45
</TABLE>
As indicated in the table above, management has structured its assets and
liabilities to minimize its exposure to interest rate risk. In the event of a
200 basis point change in interest rates, Mutual Bank would experience a 7%
increase in NPV in a declining rate environment and a 15% decrease in a rising
rate environment. Mutual Bank's asset and liability structure results in a
decrease in NPV in rising interest rate scenarios and an increase in NPV in a
declining interest rate scenario. During periods of rising rates, the value of
monetary assets and monetary liabilities decline. Conversely, during periods of
falling rates, the value of monetary assets and liabilities increase. However,
the amount of change in value of specific assets and liabilities due to changes
in rates is not the same in a rising rate environment as in a falling rate
environment (i.e., the amount of value increase under a specific rate decline
may not equal the amount of value decrease under an identical upward rate
movement).
In evaluating Mutual's exposure to interest rate risk, certain shortcomings
inherent in the method of analysis presented in the foregoing table must be
considered. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Further, in the event of a change in interest rates, prepayments and
early withdrawal levels would likely deviate significantly from those assumed in
calculating the table. Finally, the ability of many borrowers to service their
debt may decrease in the event of an interest rate increase. As a result, the
actual effect of changing interest rates may differ from that presented in the
foregoing table.
ASSET QUALITY
Asset quality is an important factor in the successful operation of a
financial institution. The loss of interest income and principal that may result
from non-performing assets has an adverse effect on earnings, while the
resolution of those assets requires the use of capital and managerial resources.
Mutual maintains strict underwriting guidelines, loan quality monitoring
policies and systems that require detailed monthly and quarterly analyses of
delinquencies and non-performing assets.
At June 30, 1995, Mutual's total non-performing assets were $5,000, or
.01%, of total assets compared to $150,000, or .28%, at June 30, 1994. Non-
performing assets at June 30, 1995 consisted of non-accruing loans. Due to an
uncertain real estate market and the economy in general, no assurances can be
given that Mutual's level of non-performing assets may not increase in the
future.
Mutual maintains an allowance for loan losses to provide for estimated
potential losses in its loan portfolio. The allowance for estimated loan losses
is established through a provision for losses on loans based on management's
evaluation of the risk inherent in its loan portfolio and changes in the nature
and volume of its loan activity. Such evaluation, which includes a review of all
loans of which full collectibility may not be reasonably assured, considers the
estimated net realizable value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate allowance for loan losses. In the past,
Mutual's policies have had the effect of increasing Mutual's allowance for loan
losses in recent periods as management deemed it prudent to increase the
provision for loan losses after considering various factors, including the
continuing uncertainty regarding local economic recovery and its impact on
borrowers' continuing
65
<PAGE>
ability to repay their loans. During 1995, Mutual decreased its allowance for
losses on loans by $56,000 to $187,000 due to a decline in non-performing
assets. At June 30, 1995, the total allowance of $187,000 was predominantly a
general allowance with approximately $97,000 reserved against specific loans. In
addition, Mutual Bank has not experienced any significant charge-offs to its
loan loss reserve ($4,000, $42,000 and $38,000, for the years ended June 30,
1995, 1994 and 1993, respectively). Although management believes it uses the
best information available, future adjustments to reserves may be necessary.
LIQUIDITY AND CAPITAL RESOURCES
Mutual's primary sources of funds are deposits, proceeds from principal and
interest payments on loans (both scheduled and prepayments) and investment and
mortgage-backed securities. While maturities and scheduled amortization of loans
and mortgage-backed securities are a predictable source of funds, deposit flows
and mortgage prepayments are greatly influenced by market interest rates,
economic conditions and competition. In a period of declining interest rates, it
is anticipated that mortgage prepayments would increase. As a result, these
proceeds from mortgage prepayments would be invested in lower yielding loans or
other investments which have the effect of reducing interest income. In a period
of rising interest rates, it is anticipated that mortgage prepayments would
decrease and the proceeds from such prepayments would be invested in higher
yielding loans or investments which would have the effect of increasing interest
income. Mutual attempts to price its deposits to meet asset/liability objectives
discussed above, consistent with local market conditions.
Mutual's most liquid assets are cash and cash equivalents. The levels of
these assets are dependent on Mutual Bank's operating, financing and investing
activities. At June 30, 1993, 1994 and 1995, cash and cash equivalents totaled
$3.3 million, $2.2 million and $580,000, respectively.
Liquidity management is both a short- and long-term responsibility of
management. Mutual adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) projected purchases of
investment and mortgage-backed securities, (iii) expected deposit flows, (iv)
yields available on interest-bearing deposits, and (v) liquidity of its
asset/liability management program. Excess liquidity is generally invested in
interest-earning short-term deposits and other short-term U.S. Agency
obligations. If Mutual requires funds beyond its ability to generate them
internally, it has the ability to borrow funds from the FHLB of Des Moines under
a blanket agreement which assigns all investments in FHLB stock as well as
qualifying first mortgage loans equal to 150% of the outstanding balance as
collateral to secure the amounts borrowed. This borrowing arrangement is limited
to a maximum of 30% of Mutual's total assets. At June 30, 1995, Mutual had
approximately $15.8 million available under the above-mentioned borrowing
arrangement. At June 30, 1995, Mutual had $1.3 million in borrowings outstanding
from the FHLB of Des Moines.
Mutual Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions, is based upon a
percentage of deposits and short-term borrowings. The required ratio at June 30,
1995 was 5.00%. Mutual Bank's liquidity ratios have consistently been maintained
at levels in excess of regulatory requirements and at June 30, 1993, 1994, and
1995 were 31.6%, 30.1% and 21.3%, respectively.
At June 30, 1995, Mutual had outstanding commitments to originate loans of
approximately $830,000 of which six loans with an aggregate balance of $349,000
were at fixed rates. These loans were to be secured by properties in Mutual's
market area. Mutual anticipates that it will have sufficient funds available to
meet its current commitments through a combination of short-term borrowings and
liquidity.
66
<PAGE>
At March 31, 1996, Mutual Bank exceeded all of its capital requirements
on a fully phased-in basis. The following table sets forth Mutual Bank's
historical compliance with its capital requirements as of March 31, 1996.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------
AMOUNT/(1)/ PERCENT
------------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Tangible Capital:
Capital level........................... $ 5,844 10.9%
Requirement............................. 801 1.5
-------- ----
Excess.................................. $ 5,043 9.4%
======== ====
Core Capital:
Capital level........................... $ 5,844 10.9%
Requirement............................. 1,602 3.0
-------- ----
Excess.................................. $ 4,242 7.9%
======== ====
Current Risk-Based Capital:
Capital level........................... $ 6,017 24.2%
Requirement............................. 1,992 8.0
-------- ----
Excess.................................. $ 4,025 16.2%
======== ====
</TABLE>
______________
/(1)/ Tangible and core capital levels are shown as a percentage of adjusted
total assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
POTENTIAL IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and notes thereto presented elsewhere
in this Proxy Statement/Prospectus have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of
Mutual's operations. Unlike most industrial companies, nearly all the assets and
liabilities of Mutual are monetary in nature. As a result, interest rates have a
greater impact on Mutual's performance than do the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.
REGULATORY DEVELOPMENTS
Federal law requires that the FDIC maintain the reserve level of both the
SAIF and the BIF at 1.25% of insured deposits. The reserves are funded through
the payment of insurance premiums by the insured institution members of each
fund. The BIF reached this level during 1995 and the FDIC reduced insurance
premiums applicable to BIF-insured institutions effective January 1, 1996 while
retaining the premiums applicable to SAIF members, such as Mutual Bank, at their
current levels until the SAIF reaches its required reserve level, which the FDIC
anticipates will not occur until 2002. While the magnitude of the competitive
advantage of BIF-insured institutions and its impact on Mutual Bank's results of
operations cannot be determined at this time, this decrease in BIF premiums
places Mutual Bank at a material competitive disadvantage. See "Regulation--
Insurance of Accounts and Regulation by the FDIC" and "Recent Developments" for
discussion on proposed legislation currently under consideration by the United
States Congress related to a special assessment on all SAIF deposits.
67
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS AND CHANGES IN FEDERAL TAX LAW
The Omnibus Budget Reconciliation Act of 1993 (the "1993 Act") was signed
into law on August 10, 1993. Management of Mutual Bank has reviewed the 1993 Act
and believes that it will not have a significant impact on Mutual Bank's
financial statements or results of operations.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS
115. Adoption of SFAS 115 is required for fiscal years beginning after December
15, 1993. The provisions of SFAS 115 require the classification of all debt
securities and equity securities that have readily determinable fair values into
one of the following three categories: held-to-maturity, which are reported at
amortized cost; available for sale, which are reported at fair value with
unrealized gains and losses reported as a separate component of retained
earnings; and trading, which are reported at fair value with unrealized gains
and losses reported in income.
Mutual Bank adopted SFAS 115 effective July 1, 1994 and classified all
variable rate securities as held to maturity and all fixed-rate securities as
available for sale. Accordingly, the adoption of SFAS 115 reduced retained
earnings by approximately $111,000 on July 1, 1994. See Note 1 of the Notes to
Consolidated Financial Statements for the Years Ended June 30, 1993, 1994 and
1995 contained elsewhere in this Proxy Statement/Prospectus for additional
information.
In December 1991, FASB issued SFAS No. 107, Disclosure About Fair Value of
Financial Instruments ("SFAS 107"). Adoption of SFAS 107 is required for fiscal
years ending after December 15, 1992 except for entities with less than $150
million in total assets. For those entities, the effective date is for fiscal
years ending after December 15, 1995. Adoption of SFAS 107 requires Mutual to
disclose additional information about the fair value of financial instruments,
both on- and off-balance sheet. SFAS 107 has not changed the requirements for
recognition, measurement or classification of financial instruments in Mutual's
Consolidated Financial Statements.
In May 1993, FASB issued SFAS No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"). The adoption of SFAS 114 is required for
fiscal years beginning after December 15, 1994. It requires that impaired loans
be measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate or the loan's market price, or the fair
value of the collateral if the loan is collateral dependent. When adopted in
fiscal 1995, SFAS 114 did not have a material effect on Mutual's Consolidated
Financial Statements.
In October 1994, FASB issued SFAS 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures (an amendment to SFAS
Statement No. 114). SFAS 118, also applicable for fiscal years beginning after
December 15, 1994, addresses the accounting by creditors for impairment of a
loan and amends SFAS 114 by allowing creditors to use existing methods for
recognizing interest income on impaired loans. The statement eliminates the
provisions in SFAS 114 which described how a creditor should report income on an
impaired loan. Statement 118 also amends the disclosure requirements in
Statement 114 to require information about the recorded investment in certain
impaired loans and about how a creditor recognized interest income related to
those impaired loans. When adopted in fiscal 1995, SFAS 118 did not have a
material effect on Mutual's Consolidated Financial Statements.
In October 1994, FASB issued SFAS 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments. This statement is
effective for financial statements issued for fiscal years ending after December
15, 1994. The statement requires disclosures about derivative financial
instruments - futures, swap, and option characteristics. The statement also
requires disclosure about amounts, nature, and terms of derivative financial
instruments that are not subject to SFAS No. 105 because they do not result in
off-balance-sheet risk of accounting loss. It requires that a distinction be
made between financial instruments held or issued for trading purposes.
For entities that hold or issue derivative financial instruments for
trading purposes, this statement requires disclosure of average fair value and
of net trading gains or losses. For entities that hold or issue derivative
financial instruments for purposes other than trading, it requires disclosure
about those purposes and about how the instruments are reported in the financial
statements.
68
<PAGE>
The statement also encourages, but does not require, quantitative
information about market risks of derivative financial instruments and also of
other assets and liabilities that is consistent with the way the entity manages
or adjusts risks and that is useful for comparing the results of applying the
entity's strategies to its objectives for holding or issuing the derivative
financial instruments.
On November 22, 1993, the AICPA issued SOP 93-6. SOP 93-6 supersedes SOP
76-3, "Accounting Practices for Certain Employee Stock Ownership Plans," which
was issued in December 1976. SOP 93-6 is effective for fiscal years beginning
after December 15, 1993. Employers are required to apply the provisions of the
SOP to shares purchased by Employee Stock Ownership Plans ("ESOPs") after
December 31, 1992, that have not been committed to be released as of the
beginning of the year of adoption. SOP 93-6, among other things, changes the
measure of compensation expense recorded by employers from the cost of ESOP
shares to the fair value of ESOP shares. Assuming that Mutual Common Stock
appreciates in value over time, to the extent that the fair value of Mutual's
ESOP shares differ from the cost of such shares, compensation expense recorded
in Mutual's consolidated financial statements for ESOP shares will be impacted
upon adoption of the SOP.
Mutual adopted SOP 93-6 on July 1, 1994. The initial adoption of this
pronouncement had no impact on earnings, as Mutual did not have an ESOP at July
1, 1994.
REGULATION OF MUTUAL BANCOMPANY, INC. AND MUTUAL SAVINGS BANK, F.S.B.
GENERAL
As a federally chartered savings bank, Mutual Bank is regulated by the OTS.
The deposits of Mutual Bank are federally insured and backed by the full faith
and credit of the United States Government. Accordingly, Mutual Bank is subject
to broad federal regulation and oversight extending to all its operations.
Mutual Bank is a member of the FHLB of Des Moines and is subject to certain
limited regulation by the FRB. As the savings and loan holding company of Mutual
Bank, Mutual also is subject to federal regulation and oversight. The purpose of
the regulation of Mutual and other holding companies is to protect subsidiary
savings associations. Mutual Bank is a member of the SAIF and the deposits of
Mutual Bank are insured by the FDIC. As a result, the FDIC has certain
regulatory and examination authority over Mutual Bank.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS
The OTS has extensive authority over the operations of savings
associations. As part of this authority, Mutual Bank is required to file
periodic reports with the OTS and is subject to periodic examinations by the OTS
and the FDIC. The last regular examination of Mutual Bank was as of October
1995. When these examinations are conducted by the OTS and the FDIC, the
examiners may require Mutual Bank to provide for higher general or specific loan
loss reserves.
The OTS has established a schedule for the assessment of fees upon all
savings associations to fund the operations of the OTS. The general assessment,
to be paid on a semi-annual basis, is computed upon the savings association's
total assets as reported in the association's latest quarterly thrift financial
report. Mutual Bank's OTS assessment for the fiscal year ended June 30, 1995 was
$19,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Mutual Bank and Mutual. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS. Except under certain
circumstances, public disclosure of final enforcement actions by the OTS is
required.
69
<PAGE>
In addition, the investment, lending and branching authority of Mutual Bank
is prescribed by federal laws, and it is prohibited from engaging in any
activities not permitted by such laws. For instance, no savings association may
invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of total capital, except with
approval of the OTS. Federal savings associations are also generally authorized
to branch nationwide. Mutual Bank is in compliance with the noted restrictions.
Mutual Bank's general permissible lending limit for loans-to-one borrower
is equal to the greater of $500,000 or 15% of unimpaired capital and surplus
(except for loans fully secured by certain readily marketable collateral, in
which case this limit is increased to 25% of unimpaired capital and surplus). At
June 30, 1995, Mutual Bank's lending limit under this restriction was $1.2
million. Mutual Bank is in compliance with the loans-to-one borrower limitation.
The OTS, as well as the other federal banking agencies, have issued safety
and soundness standards on matters such as loan underwriting and documentation,
internal controls and audit systems, interest rate risk exposure, asset growth
and compensation and other employee benefits. Any institution which fails to
comply with these standards must submit a compliance plan. A failure to submit a
plan or to comply with an approved plan will subject the institution to further
enforcement action. The OTS and the other federal banking agencies have also
proposed additional guidelines on asset quality and earnings standards. No
assurance can be given as to whether or in what form the proposed regulations
will be adopted.
INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC
Mutual Bank is a member of the SAIF, which is administered by the FDIC.
Deposits are insured up to applicable limits by the FDIC and such insurance is
backed by the full faith and credit of the United States Government. As insurer,
the FDIC imposes deposit insurance premiums and is authorized to conduct
examinations of and to require reporting by FDIC-insured institutions. It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by regulation or order to pose a serious risk to the FDIC. The FDIC
also has the authority to initiate enforcement actions against savings
associations, after giving the OTS an opportunity to take such action, and may
terminate the deposit insurance if it determines that the institution has
engaged or is engaging in unsafe or unsound practices, or is in an unsafe or
unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.
For the first six months of 1995, the assessment schedule for BIF members and
SAIF members ranged from .23% to .31% of deposits.
The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
As is the case with the SAIF, the FDIC is authorized to adjust the
insurance premium rates for banks that are insured by the BIF of the FDIC in
order to maintain the reserve ratio of the BIF at 1.25% of BIF insured deposits.
As a result of the BIF reaching its statutory reserve ratio the FDIC revised the
premium schedule for BIF insured institutions to provide a range of .04% to .31%
of deposits. The revisions became effective in the third quarter of 1995. In
addition, the BIF rates were further revised, effective January 1996, to provide
a range of 0%
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to .27% with a minimum annual assessment of $2,000. The SAIF rates, however,
were not adjusted. As a result of these revisions, BIF members will generally
pay lower premiums.
The SAIF is not expected to attain the designated reserve ratio until the
year 2002 due to the shrinking deposit base for SAIF assessments and the
requirement that SAIF premiums be used to make the interest payments on bonds
issued by the Financing Corporation ("FICO") in order to finance the costs of
resolving thrift failures in the 1980s. As a result, SAIF members will generally
be subject to higher deposit insurance premiums than BIF members until, all
things being equal, the SAIF attains the required reserve ratio.
The effect of this disparity on Mutual Bank and other SAIF members is
uncertain at this time. It may have the effect of permitting BIF insured
institutions to offer loan and deposit products on more attractive terms than
SAIF members due to the cost savings achieved through lower deposit premiums,
thereby placing SAIF members at a competitive disadvantage. In order to
eliminate this disparity a number of proposals to recapitalize the SAIF have
been recently considered by the United States Congress. One plan under current
consideration provides for a one-time assessment, anticipated to be
approximately .70% to be imposed on all deposits assessed at the SAIF rates as
of March 31, 1995, including those held by commercial banks, and for a portion
of BIF deposit insurance premiums to be used to pay the FICO bond interest
together with SAIF premiums. The proposal also provides for the eventual merger
of the BIF and SAIF. There can be no assurance that any particular proposal will
be enacted or that premiums for either BIF or SAIF members will not be adjusted
in the future by the FDIC or by legislative action. See "Recent Developments."
REGULATORY CAPITAL REQUIREMENTS
Federally insured savings associations, such as Mutual Bank, are required
to maintain a minimum level of regulatory capital. The OTS has established
capital standards, including a tangible capital requirement, a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable to
such savings associations. These capital requirements must be generally as
stringent as the comparable capital requirements for national banks. The OTS is
also authorized to impose capital requirements in excess of these standards on
individual associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital. At June 30, 1995, Mutual Bank
had no intangible assets.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries, the debt and equity investments in such subsidiaries are deducted
from assets and capital. At June 30, 1995, Mutual Bank had one subsidiary, the
investment in which was not required to be deducted from Mutual Bank's capital.
At June 30, 1995, Mutual Bank had tangible capital of $5.2 million, or 9.0%
of adjusted total assets, which is approximately $4.3 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date.
The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation). Core capital generally
consists of tangible capital plus certain intangible assets, including a limited
amount of purchased credit card relationships. As a result of the prompt
corrective action provisions discussed below, however, a savings association
must maintain a core capital ratio of at least 4% to be considered adequately
capitalized unless its supervisory condition is such to allow it to maintain a
3% ratio. At June 30, 1995, Mutual Bank had no intangibles which were subject to
these tests.
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At June 30, 1995, Mutual Bank had core capital equal to $5.2 million, or
9.0% of adjusted total assets, which is $3.4 million above the minimum leverage
ratio requirement of 3% as in effect on that date.
The OTS risk-based requirement requires savings associations to have total
capital of at least 8% of risk-weighted assets. Total capital consists of core
capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At June 30, 1995, Mutual Bank had no
capital instruments that qualify as supplementary capital and $175,000 of
general loss reserves, which was less than 1.25% of risk-weighted assets.
Certain exclusions from capital and assets are required to be made for the
purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. Mutual Bank had no such
exclusions from capital and assets at June 30, 1995.
In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging
from 0% to 100%, based on the risk inherent in the type of asset. For example,
the OTS has assigned a risk weight of 50% for prudently underwritten permanent
one- to four-family first lien mortgage loans not more than 90 days delinquent
and having a loan-to-value ratio of not more than 80% at origination unless
insured to such ratio by an insurer approved by the Federal National Mortgage
Association ("FNMA") or the FHLMC.
The OTS has adopted a final rule that requires every savings association
with more than normal interest rate risk to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule provides for a two quarter lag between
calculating interest rate risk and recognizing any deduction from capital. The
OTS announced that it will delay the effectiveness of the rule until it
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation will be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Asset/Liability Management."
On June 30, 1995, Mutual Bank had total risk-based capital of $5.3 million
(including $5.2 million in core capital and $175,000 in qualifying supplementary
capital) and risk-weighted assets of $25.5 million, or total capital of 20.9% of
risk-weighted assets. This amount was $3.3 million above the 8% requirement in
effect on that date.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against associations that fail to meet their
capital requirements. The OTS is generally required to take action to restrict
the activities of an "undercapitalized association" (generally defined to be one
with less than either a 4% core capital ratio, a 4% Tier 1 risked-based capital
ratio or an 8% risk-based capital ratio). Any such association must submit a
capital restoration plan and until such plan is approved by the OTS may not
increase its assets, acquire another institution, establish a branch or engage
in any new activities, and generally may not make capital distributions. The OTS
is authorized to impose the additional restrictions, discussed below, that are
applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that it will enter into a
limited capital maintenance guarantee with respect to the institution's
achievement of its capital requirements.
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Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less than 3% or a risk-based capital ratio of less than 6%) must be made
subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a receiver or conservator.
The OTS is also generally authorized to reclassify an association into a
lower capital category and impose the restrictions applicable to such category
if the association is in an unsafe or unsound condition or is engaged in an
unsafe or unsound practice.
The imposition by the OTS or the FDIC of any of these measures on Mutual
Bank may have a substantial adverse effect on Mutual Bank's operations and
profitability and the value of the Common Stock. Mutual Stockholders do not have
preemptive rights, and therefore, if Mutual is directed by the OTS or the FDIC
to issue additional shares of Common Stock, such issuance may result in the
dilution in the percentage of ownership of Mutual.
LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS
OTS regulations impose various restrictions or requirements on associations
with respect to their ability to make distributions of capital, including
dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account. OTS regulations prohibit an
association from declaring or paying any dividends or from repurchasing any of
its stock if, as a result, the regulatory capital of the association would be
reduced below the amount required to be maintained for the liquidation account
established in connection with its mutual to stock conversion.
Generally, savings associations, such as Mutual Bank, that before and after
the proposed distribution meet their capital requirements, may make capital
distributions during any calendar year equal to the greater of 100% of net
income for the year-to-date plus 50% of the amount by which the lesser of the
association's tangible, core or risk-based capital exceeds its capital
requirement for such capital component, as measured at the beginning of the
calendar year, or 75% of its net income for the most recent four quarter period.
However, an association deemed to be in need of more than normal supervision by
the OTS may have its dividend authority restricted by the OTS. Mutual Bank may
pay dividends in accordance with this general authority.
Savings associations proposing to make any capital distribution need only
submit written notice to the OTS 30 days prior to such distribution. Savings
associations that do not, or would not meet their current minimum capital
requirements following a proposed capital distribution, however, must obtain OTS
approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns. See "--Regulatory Capital Requirements."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. Under the proposal a savings
association may make a capital distribution without notice to the OTS (unless it
is a subsidiary of a holding company) provided that it has a CAMEL 1 or 2
rating, is not in troubled condition and would remain adequately capitalized (as
defined in the OTS prompt corrective action regulations) following the proposed
distribution. Savings associations that would remain adequately capitalized
following the proposed distribution but do not meet the other noted requirements
must notify the OTS 30 days prior to declaring a capital distribution. The OTS
has stated it will generally regard as permissible that amount of capital
distributions that do not exceed 50% of the institution's excess regulatory
capital plus net income to date during the calendar year. A savings association
may not make a capital distribution without prior approval of the OTS and the
FDIC if it is undercapitalized before, or as a result of, such a distribution.
As under the current rule, the OTS may object to a capital distribution if it
would constitute an
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unsafe or unsound practice. No assurance may be given as to whether or in what
form the regulations may be adopted.
LIQUIDITY
All savings associations, including Mutual Bank, are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. For a discussion of what Mutual Bank
includes in liquid assets, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Mutual Bancompany, Inc.--
Liquidity and Capital Resources." This liquid asset ratio requirement may vary
from time to time (between 4% and 10%) depending upon economic conditions and
savings flows of all savings associations. At the present time, the minimum
liquid asset ratio is 5%.
In addition, short-term liquid assets (e.g., cash, certain time deposits,
certain bankers acceptances and short-term United States Treasury obligations)
currently must constitute at least 1% of the association's average daily balance
of net withdrawable deposit accounts and current borrowings. Penalties may be
imposed upon associations for violations of either liquid asset ratio
requirement. At June 30, 1995, Mutual Bank was in compliance with both
requirements, with an overall liquid asset ratio of 21.3% and a short-term
liquid assets ratio of 1.1%.
ACCOUNTING
An OTS policy statement applicable to all savings associations clarifies
and re-emphasizes that the investment activities of a savings association must
be in compliance with approved and documented investment policies and
strategies, and must be accounted for in accordance with GAAP. Under the policy
statement, management must support its classification of and accounting for
loans and securities (i.e., whether held for investment, sale or trading) with
appropriate documentation. Mutual Bank is in compliance with these amended
rules.
The OTS has adopted an amendment to its accounting regulations, which may
be made more stringent than GAAP by the OTS, to require that transactions be
reported in a manner that best reflects their underlying economic substance and
inherent risk and that financial reports must incorporate any other accounting
regulations or orders prescribed by the OTS.
QUALIFIED THRIFT LENDER TEST
All savings associations, including Mutual Bank, are required to meet a
qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. This test requires a savings association to have at least 65% of its
portfolio assets (as defined by regulation) in qualified thrift investments on a
monthly average for nine out of every 12 months on a rolling basis. Such assets
primarily consist of residential housing- related loans and investments. At June
30, 1995, Mutual Bank met the test and has always met the test since its
effectiveness.
Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If an association that fails the test has not yet requalified and has
not converted to a national bank, its new investments and activities are limited
to those permissible for both a savings association and a national bank, and it
is limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. See "--Holding Company Regulation."
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COMMUNITY REINVESTMENT ACT
Under the CRA, every FDIC insured institution has a continuing and
affirmative obligation consistent with safe and sound banking practices to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with the examination of Mutual Bank, to assess
the institution's record of meeting the credit needs of its community and to
take such record into account in its evaluation of certain applications, such as
a merger or the establishment of a branch, by Mutual Bank. An unsatisfactory
rating may be used as the basis for the denial of an application by the OTS.
The federal banking agencies, including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years, Mutual Bank may be required to devote additional funds for investment
and lending in its local community. Mutual Bank was examined for CRA compliance
in October 1995 and received a rating of "satisfactory." Management does not
expect Mutual Bank to be required to devote significant additional funds to its
CRA compliance efforts in the foreseeable future.
TRANSACTIONS WITH AFFILIATES
Generally, transactions between a savings association or its subsidiaries
and its affiliates are required to be on terms as favorable to the association
as transactions with non-affiliates. In addition, certain of these transactions,
such as loans to an affiliate, are restricted to a percentage of the
association's capital. Additionally, a savings association may not lend to any
affiliate engaged in activities not permissible for a bank holding company or
acquire the securities of most affiliates. Mutual Bank's subsidiaries are not
deemed affiliates; however, the OTS has the discretion to treat subsidiaries of
savings association as affiliates on a case by case basis.
Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.
FEDERAL RESERVE SYSTEM
The FRB requires all depository institutions to maintain non-interest
bearing reserves at specified levels against their transaction accounts
(primarily checking, NOW and Super NOW checking accounts). At June 30, 1995,
Mutual Bank was in compliance with these reserve requirements. The balances
maintained to meet the reserve requirements imposed by the FRB may be used to
satisfy liquidity requirements that may be imposed by the OTS. See "--
Liquidity."
Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but FRB regulations require associations to exhaust other
reasonable alternative sources of funds, including FHLB borrowings, before
borrowing from the Federal Reserve Bank.
FEDERAL HOME LOAN BANK SYSTEM
Mutual Bank is a member of the FHLB of Des Moines, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
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As a member, Mutual Bank is required to purchase and maintain stock in the
FHLB of Des Moines. At June 30, 1995, Mutual Bank had $414,000 in FHLB stock,
which was in compliance with this requirement. In past years, Mutual Bank has
received substantial dividends on its FHLB stock. Over the past five fiscal
years, such dividends have averaged 8.95% and were 7.75% for fiscal year 1995.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of Mutual Bank's FHLB stock may result in a corresponding
reduction in Mutual Bank's capital.
HOLDING COMPANY REGULATION
Mutual is a unitary savings and loan holding company subject to regulatory
oversight by the OTS. As such, Mutual is registered and files reports with the
OTS and is subject to regulation and examination by the OTS. In addition, the
OTS has enforcement authority over Mutual and its non-savings association
subsidiary which also will permit the OTS to restrict or prohibit activities
that are determined to be a serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, Mutual generally will not be
subject to activity restrictions. If Mutual acquires control of another savings
association as a separate subsidiary, it would become a multiple savings and
loan holding company, and the activities of Mutual and any of its subsidiaries
(other than Mutual Bank or any other SAIF-insured savings association) would
become subject to such restrictions unless such other associations each qualify
as a QTL and were acquired in a supervisory acquisition.
If Mutual Bank fails the QTL test, Mutual must obtain the approval of the
OTS prior to continuing after such failure, directly or through its other
subsidiaries, any business activity other than those approved for multiple
savings and loan holding companies or their subsidiaries. In addition, within
one year of such failure Mutual must register as, and will become subject to,
the restrictions applicable to bank holding companies. The activities authorized
for a bank holding company are more limited than are the activities authorized
for a unitary or multiple savings and loan holding company. See "--Qualified
Thrift Lender Test."
Mutual must obtain approval from the OTS before acquiring control of any
other SAIF-insured association. Such acquisitions are generally prohibited if
they result in a multiple savings and loan holding company controlling savings
associations in more than one state. However, such interstate acquisitions are
permitted based on specific state authorization or in a supervisory acquisition
of a failing savings association.
FEDERAL SECURITIES LAWS
The Mutual Common Stock is registered with the SEC under the Exchange Act.
Mutual is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.
The Mutual Common Stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of Mutual may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If Mutual meets specified current public information requirements,
each affiliate of Mutual is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF ROOSEVELT FINANCIAL GROUP, INC.
AND MUTUAL BANCOMPANY, INC.
INTRODUCTION
Upon consummation of the Merger, holders of Mutual Common Stock, whose
rights currently are governed by Missouri corporate law and Mutual's articles of
incorporation and bylaws, and indirectly by applicable federal regulations and
Mutual Bank's charter and bylaws, will become stockholders of Roosevelt, a
Delaware corporation. Accordingly, their rights will be governed by Delaware
corporate law and the certificate of incorporation and bylaws of Roosevelt, and
indirectly by applicable federal regulations and Roosevelt Bank's charter and
bylaws. Certain differences arise from differences between the articles and
certificate of incorporation and bylaws of Mutual and Roosevelt and between the
charter and bylaws of Mutual Bank and Roosevelt Bank. The following discussion
is not intended to be a complete statement of all differences affecting the
rights of stockholders and is qualified in its entirety by reference to the
articles and certificate of incorporation and bylaws of Roosevelt and Mutual and
applicable Missouri, Delaware and federal law. See "Available Information."
ISSUANCE OF CAPITAL STOCK
The articles of incorporation of Mutual authorize the issuance of 2,000,000
shares of common stock, par value $.01 per share, and 500,000 shares of
preferred stock, par value $.01 per share. The certificate of incorporation of
Roosevelt authorizes the issuance of 90,000,000 shares of common stock, par
value $.01 per share, 999,100 shares of Class I serial preferred stock, par
value $.01 per share, and 2,000,000 shares of Class II serial preferred stock,
no par value. At September 13, 1996, 333,500 and 42,152,474 shares of common
stock of Mutual and Roosevelt, respectively, were issued and outstanding, and
1,000,000 shares of 6.5% Non-Cumulative Convertible Preferred Stock, Series A
(Class I) and 301,000 shares of 6.5% Non-Cumulative Convertible Preferred Stock,
Series F (Class II) of Roosevelt were issued and outstanding. Under Mutual's and
Roosevelt's respective articles and certificate of incorporation, Mutual and
Roosevelt are authorized to issue additional shares of capital stock up to the
amount authorized without stockholder approval.
PAYMENT OF DIVIDENDS
The ability of Mutual and Roosevelt to pay dividends on their common stock
is governed by Missouri and Delaware corporate law, respectively. Under Missouri
corporate law, dividends generally may be paid so long as they would not reduce
Mutual's assets below its stated capital and, if they are paid from paid-in
surplus, any cumulative dividends accrued on any preferred stock have been fully
paid. Under Delaware corporate law, dividends generally may be paid either out
of Roosevelt's surplus (defined as the excess of the net assets of over the
stated capital of Roosevelt) or, in case there is no surplus, out of the net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. The ability of Mutual and Roosevelt to pay dividends on
their common stock also is affected by restrictions upon their receipt of
dividends from their respective subsidiary savings institutions. For additional
information, see "Regulation of Mutual Bancompany, Inc. and Mutual Savings Bank,
f.s.b. --Limitations on Dividends and Other Capital Distributions."
SHAREHOLDER ACTION BY UNANIMOUS CONSENT
Mutual's bylaws provide that any action required to be taken at a meeting
of shareholders, or any action which may be taken at a meeting of shareholders,
may be taken without a meeting if consents in writing, setting forth the action
so taken, are signed by all of the shareholders entitled to vote thereon.
Roosevelt's certificate of incorporation provides that all actions required or
permitted to be taken by shareholders shall be voted upon at a meeting of
shareholders, rather than by written consent in lieu of a meeting.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS AND PROPOSALS FOR NEW
BUSINESS AT ANNUAL MEETINGS OF STOCKHOLDERS
Mutual's articles of incorporation generally provide that nominations for
the election of directors and proposals for new business to be taken up at an
annual meeting of shareholders may be made by the Mutual Board or by
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any shareholder entitled to vote generally in the election of directors. In
order for a shareholder of Mutual to make any such nomination and/or proposal,
he or she must give notice in writing to the secretary of Mutual not fewer than
30 days or more than 60 days prior to any such meeting; provided, however, that
if notice or public disclosure of the meeting is effected fewer than 40 days
before the meeting, such written notice must be delivered or mailed to the
secretary of Mutual not later than the close of business on the tenth day
following the date of such notice or disclosure.
Roosevelt's bylaws provide that Roosevelt stockholders may make nominations
for the election of directors by delivering written notice of such nominations
to the secretary of Roosevelt at least 15 days prior to the date of the annual
meeting of stockholders. Furthermore, if the Roosevelt Board fails to nominate
candidates for the board at least 20 days prior to the annual meeting, then
nominations may be made at the meeting by any stockholder entitled to vote and
such nominations shall be voted upon. Roosevelt's Bylaws generally provide that
any stockholder desiring to make a proposal for new business at the annual
meeting of stockholders must submit a written statement of the proposal which
must be received by the secretary of Roosevelt at least 20 days in advance of
the meeting; provided, however, if less than 30 days notice of the date of the
meeting is given to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the annual meeting was mailed. The
stockholder's notice must include a brief description of the proposal, the
stockholder's name and address and the class and number of shares owned of
record by the stockholder. If a stockholder fails to comply with these advance
notice requirements, no action will be taken on the proposal at the meeting.
REMOVAL OF DIRECTORS
Mutual's articles of incorporation and bylaws provide that one or more
directors may be removed at a meeting called expressly for that purpose only for
cause and only upon the affirmative vote of the holders of at least 80% of the
total votes eligible to be cast generally in an election of directors, provided
that if not all directors are removed no individual director may be removed if
the votes cast against removal would be sufficient to elect the director under
cumulative voting. Roosevelt's certificate of incorporation provides that no
director may be removed except for cause as defined by OTS regulations and then
only by the affirmative vote of a majority of the directors in office and the
holders of a majority of the outstanding shares entitled to vote in director
elections, provided that if not all directors are removed no individual director
may be removed if the votes cast against removal would be sufficient to elect
the director under cumulative voting.
LIMITATIONS ON VOTING OR ACQUISITIONS OF CAPITAL STOCK
The articles of incorporation of Mutual provide that in no event shall any
record owner of any outstanding Mutual Common Stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the then-outstanding shares of common stock (the "Limit") be entitled or
permitted to any vote in respect of the shares held in excess of the Limit.
Beneficial ownership is determined pursuant to Rule 13d-3 of the General Rules
and Regulations of the Exchange Act and includes shares beneficially owned by
such person or any of his or her affiliates (as defined in the articles of
incorporation), shares which such person or his or her affiliates have the right
to acquire upon the exercise of conversion rights or options and shares as to
which such person and his or her affiliates have or share investment or voting
power, but shall not include shares beneficially owned by the Mutual ESOP or
directors, officers and employees of the Mutual Bank or Mutual or shares that
are subject to a revocable proxy and that are not otherwise beneficially, or
deemed by Mutual to be beneficially owned by such person and his or her
affiliates. The articles of incorporation further provide that this provision
limiting voting rights may be amended only upon the vote of 80% of the
stockholders entitled to vote thereon.
The certificate of incorporation of Roosevelt generally provides that so
long as Roosevelt Bank remains a majority-owned subsidiary of Roosevelt, no
person may acquire control (i.e., sole or shared power to vote 10% or more of
the outstanding voting stock) of Roosevelt without the prior approval of either
the holders of two-thirds of the outstanding voting stock or two-thirds of the
directors and the holders of a majority of the outstanding voting stock or
without the prior receipt of all required federal regulatory approvals. If any
person acquires control in violation of this limitation, the excess shares will
not be counted as shares entitled to vote and
78
<PAGE>
may not be voted by any person or counted as voting shares in connection with
any matter submitted to the shareholders for a vote.
APPROVAL OF MERGERS, CONSOLIDATIONS, ETC.
Mutual's articles of incorporation require the approval of the holders of
at least 80% of Mutual's outstanding shares of voting stock to approve certain
"Business Combinations," as defined therein, and related transactions. Under
Missouri law, absent this provision, business combinations, including mergers,
consolidations and sales of substantially all of the assets of a corporation
must, subject to certain exceptions, be approved by the vote of the holders of
two-thirds of the outstanding shares of Mutual Common Stock and any other
affected class of stock. Under the articles of incorporation, the approval of at
least 80% of the outstanding voting stock is required in connection with any
Business Combination (as defined) involving a 10% stockholder or his affiliates,
except in the cases where the proposed transaction has been approved in advance
by a majority of those members of the Mutual Board. This provision of the
articles of incorporation applies to any "Business Combination," which is
defined to include (i) any merger or consolidation of Mutual's or any of its
subsidiaries with or into any 10% stockholder or affiliate (as defined in the
articles of incorporation); (ii) any sale, lease, exchange, mortgage, transfer
or other disposition of 25% or more of the assets of Mutual or combined assets
of Mutual and its subsidiaries; (iii) the issuance or transfer by Mutual (or any
of its subsidiaries) of any securities of Mutual in exchange for any assets,
cash or securities the value of which equals or exceeds 25% of the fair market
value of the Mutual Common Stock; (iv) the adoption of any plan for the
liquidation or dissolution of Mutual; and (v) any reclassification of
securities, recapitalization, merger or consolidation of Mutual which has the
effect of increasing the proportionate share of Common Stock or any class of
equity or convertible securities of Mutual.
In connection with certain "Business Combinations" (as defined below) and
related transactions between Roosevelt and a "Related Person" (generally any
person or entity who, together with affiliates, controls 10% of more of the
outstanding shares of voting stock of Roosevelt), Roosevelt's certificate of
incorporation requires the approval of the holders of at least 75% of
Roosevelt's outstanding shares of voting stock voting as a single class unless
the transaction is approved by the affirmative vote of at least 75% of the
directors who are not affiliated with the Related Person and who were directors
at the time the Related Person became a Related Person or unless certain fair
price criteria are met. Roosevelt's certificate of incorporation defines a
"Business Combination" as: (1) any merger or consolidation of Roosevelt or any
of its subsidiaries with or into any Related Person; (ii) any sale, lease,
exchange, mortgage, pledge, transfer, or other disposition other than in the
ordinary course of business to or with a Related Person of any assets of
Roosevelt or any subsidiary thereof having an aggregate fair market value of
$1,000,000 or more; (iii) the issuance or transfer by Roosevelt of any shares of
its voting stock or securities convertible into such shares (other than by way
of a pro rata distribution to all stockholders) to a Related Person; (iv) the
adoption of any plan or proposal for the liquidation or dissolution of Roosevelt
or any of its subsidiaries proposed, directly or indirectly, by or on behalf of
a Related Person; (v) any recapitalization, merger or consolidation that would
have the effect of increasing the voting power of a Related Person; (vi) any
merger or consolidation of Roosevelt with another person proposed, directly or
indirectly, by or on behalf of a Related Person unless the surviving or
resulting entity has a provision in its governing instrument which is
substantially identical to this provision of Roosevelt's certificate of
incorporation; and (vii) any agreement, contract or other arrangement or
understanding providing, directly or indirectly, for any of the transactions
described in this paragraph.
The State of Missouri has enacted legislation which provides that subject
to certain exceptions a resident domestic corporation may not engage in any
business combination with an "interested stockholder" for five years after such
stockholder became an interested stockholder, unless, among other things, the
transaction with the interested stockholder is approved by the board of
directors of the corporation on or prior to the stockholder becoming an
interested stockholder. A "resident domestic corporation" is defined under
Missouri law to include a Missouri-chartered corporation with 100 or more
stockholders which has its principal place of business or substantial assets in
Missouri and satisfies one of the following conditions: (i) more than 10% of its
stockholders reside in Missouri; (ii) more than 10% of its shares are owned by
Missouri resident; or (iii) at least 10,000 of the corporation's stockholders
reside in Missouri. This legislation generally defines "interested stockholder"
as any person or entity that owns, directly or indirectly, 20% of more of the
corporation's voting stock. The term "business combination" is defined broadly
to cover a wide range of corporate transactions, including mergers, sales, lease
or exchanges of assets, issuances of stock, transactions with subsidiaries,
plans of liquidation, reclassification
79
<PAGE>
of securities and receipt of disproportionate financial benefits. Under certain
circumstances, if the business combination satisfies certain price and
procedural requirements or either the board of directors or a majority of the
stockholders, other than the acquiror, approve a given business combination, the
corporation would be exempt from the operation of the statute.
The State of Missouri has also enacted 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 "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 his, her or 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 shares of voting stock, and (ii) a majority of
the outstanding shares of voting stock after exclusion of "interested shares."
"Interested shares" are defined as shares owned by the acquiring person, by
directors who are also employees of the corporation, and by officers of the
corporation. Shareholders receive dissenters' rights with respect to the vote
on control share acquisitions and may demand payment of the fair value of their
shares.
Delaware law generally provides for the merger or consolidation of
Roosevelt with another corporation, the sale of all or substantially all of
Roosevelt's assets or the dissolution of Roosevelt upon the approval of the
holders of a majority of Roosevelt's outstanding voting stock. However, a merger
or consolidation or disposition of assets or securities issued by Roosevelt
involving an interested stockholder (generally defined as a stockholder owning,
directly or indirectly, 15% or more of the outstanding voting stock of
Roosevelt) generally would be prohibited under Delaware law for three years
after the interested stockholder acquired 15% of Roosevelt's voting stock,
unless either (i) before such acquisition, the Roosevelt Board approved either
the acquisition or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon such acquisition, the interested stockholder
owned at least 85% of Roosevelt's voting stock, or, (iii) on or after the
acquisition date, the proposed transaction is approved by the Roosevelt Board
and the holders of two-thirds of Roosevelt's outstanding voting stock not owned
by the interested stockholder.
AMENDMENT OF ARTICLES OR CERTIFICATE OF INCORPORATION AND BYLAWS
Amendments to Mutual's articles of incorporation must be approved by a
majority vote of the entire Mutual Board and also by a majority of the
outstanding shares of its voting stock, provided, however, that an affirmative
vote of at least 80% of the outstanding voting stock entitled to vote (after
giving effect to the provision limiting voting rights) is required to amend or
repeal certain provisions of the articles of incorporation, including the
provision limiting voting rights, the provisions relating to approval of certain
business combinations, calling special meetings, the number and classification
of directors and director and officer indemnification by Mutual. Mutual's bylaws
may be amended by a majority of the entire Mutual Board.
Roosevelt's certificate of incorporation may be amended only if first
approved by two-thirds of the directors then in office at a duly constituted
meeting called expressly for that purpose and if thereafter approved by the
affirmative vote of a majority of the total votes eligible to be cast at a duly
constituted meeting of stockholders called expressly for that purpose, except
that the affirmative vote of the holders of at least 75% of the total votes
eligible to be cast as such meeting shall be required to amend, add to, change
or repeal the provisions of Roosevelt's certificate of incorporation governing
(i) Roosevelt's internal affairs, (ii) the calling of special meetings of
stockholders, (iii) indemnification of directors, officers, employees and
agents, (iv) limitation on the personal liability of directors, (v) approval for
acquisitions of control and offers to acquire control, and (vi) amendment of
Roosevelt's certificate of incorporation, and that the provisions of Roosevelt's
certificate of incorporation governing Business Combinations may be amended,
added to, changed or repealed only as set forth therein. Roosevelt's certificate
of incorporation provides that Roosevelt's bylaws may be amended or repealed by
a two-thirds vote of the entire Roosevelt Board then in office at a meeting
called expressly for such purpose or by the holders of at least 75% of the
outstanding capital stock of Roosevelt entitled to vote thereon at a meeting
called expressly for such purpose.
LEGAL MATTERS
The validity of the shares of Roosevelt Common Stock offered hereby will be
passed upon for Roosevelt by Silver, Freedman & Taff, L.L.P. (a limited
liability partnership including professional corporations), Washington, D.C.
Certain other legal matters in connection with the Merger will be passed upon
for Roosevelt by Silver, Freedman & Taff, L.L.P., and for Mutual by Housley
Kantarian & Bronstein, P.C., Washington, D.C., and Cook, Vetter, Doerhoff &
Landwehr, P.C., Jefferson City, Missouri.
EXPERTS
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, and incorporated by reference in this Proxy
80
<PAGE>
Statement/Prospectus, 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 Mutual as of June 30, 1995 and for
the year then ended included in this Proxy Statement/Prospectus have been
included herein in reliance upon the report of the accounting firm of Williams-
Keepers LLP, and upon the authority of such firm as an expert in accounting and
auditing.
The consolidated financial statements of Mutual Bank and subsidiary as of
June 30, 1994, and for each of the two years in the period then ended included
in this Proxy Statement/Prospectus have been included herein in reliance upon
the report (which report expresses an unqualified opinion and includes an
explanatory paragraph regarding Mutual Bank changing its method of accounting
for income taxes, effective July 1, 1993, to conform with Statement of Financial
Accounting Standards No. 109) of the accounting firm of Deloitte & Touche LLP,
and upon the authority of such firm as an expert in accounting and auditing.
STOCKHOLDER PROPOSALS
Mutual will hold a 1996 Annual Meeting of Stockholders only if the Merger
is not consummated before the time of such meeting. In such event, as disclosed
in the proxy materials for Mutual's 1995 Annual Meeting of Stockholders, in
order to be eligible for inclusion in Mutual's proxy materials for the 1996
Annual Meeting of Stockholders, any stockholder proposal to take action at such
meeting must have been received at the main office of Mutual, 101 West McCarty
Street, Jefferson City, Missouri 65101, by May 24, 1996. However, if such 1996
Annual Meeting is held after late-October 1996, any stockholder proposal must be
received by Mutual a reasonable time before the solicitation of proxies for such
Annual Meeting is made. Any such proposal shall be subject to the requirements
of the proxy rules adopted under the Exchange Act.
As disclosed in the proxy materials for Roosevelt's 1996 Annual Meeting of
Stockholders, in order to be eligible for inclusion in Roosevelt's proxy
materials for the 1997 Annual Meeting of Stockholders, any stockholder proposal
to take action at such meeting must be received at the main office of Roosevelt,
900 Roosevelt Parkway, Chesterfield, Missouri 63017, no later than November 26,
1996. Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
INDEPENDENT ACCOUNTANTS
Representatives of Williams-Keepers LLP, Mutual's independent accountants,
are expected to be present at the Special Meeting. They will be afforded the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
OTHER MATTERS
The Mutual Board is not aware of any business to come before the Special
Meeting other than those matters described above in this Proxy
Statement/Prospectus. If any other matter should properly come before the
Special Meeting, it is intended that holders of the proxies will act in
accordance with their best judgment. However, proxies instructed to vote against
the proposal to approve the Merger Agreement and the Merger will not be voted
for a proposal to approve adjournment of the Special Meeting in the event that
there are not sufficient shares present in person or by proxy at the Special
Meeting to approve the Merger.
BY ORDER OF THE BOARD OF DIRECTORS OF
MUTUAL BANCOMPANY, INC.
DONALD L. CONNOR
President and Chief Executive Officer
81
<PAGE>
MUTUAL BANCOMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR REPORTS FOR THE
YEARS ENDED JUNE 30, 1993, 1994, AND 1995
Independent Accountants' Report of Williams-Keepers LLP (August 25, 1995)............................. F-2
Independent Auditors' Report of Deloitte & Touche LLP (July 29, 1994)................................. F-3
Consolidated Statements of Financial Condition for the Years Ended June 30, 1994 and 1995............. F-4
Consolidated Statements of Income for the Years Ended June 30, 1993, 1994 and 1995.................... F-5
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
June 30, 1993, 1994 and 1995........................................................................ F-6
Consolidated Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and 1995................ F-7
Notes to Consolidated Financial Statements for the Years Ended June 30, 1993, 1994 and 1995........... F-9
CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE AND NINE MONTHS ENDED AS OF
MARCH 31, 1996
Consolidated Balance Sheets for the Nine Months Ended March 31, 1996
(unaudited) and for the Year Ended June 30, 1995.................................................... M-1
Consolidated Statements of Income for the Three and Nine Months Ended
March 31, 1996 (unaudited).......................................................................... M-2
Consolidated Statements of Stockholders' Equity for the Nine Months Ended
March 31, 1996 (unaudited).......................................................................... M-3
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1996
and 1995 (unaudited)................................................................................ M-4
Notes to Consolidated Financial Statements for the Nine Months Ended
March 31, 1996 (unaudited).......................................................................... M-6
</TABLE>
F-1
<PAGE>
[LETTERHEAD OF WILLIAMS - KEEPERS, JEFFERSON CITY, MISSOURI]
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
Mutual Bancompany, Inc. and Subsidiary
We have audited the accompanying consolidated statement of financial condition
of Mutual Bancompany, Inc. (Company) and subsidiary as of June 30, 1995, and
the related consolidated statements of income, changes in 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. The consolidated financial statements of Mutual Savings Bank, as of June
30, 1994, and for each of the two years in the period then ended, were audited
by other auditors whose report dated July 29, 1994, expressed an unqualified
opinion on those statements.
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 in the first
paragraph present fairly, in all material respects, the consolidated financial
position of Mutual Bancompany, Inc., and subsidiary as of June 30, 1995, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
As discussed in Notes 2 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective July 1,
1993, and changed its method of accounting for mortgage-backed and investment
securities, effective July 1, 1994.
/s/ Williams - Keepers
August 25, 1995
F-2
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP, ST. LOUIS, MISSOURI]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Mutual Savings Bank
Jefferson City, Missouri:
We have audited the accompanying consolidated balance sheet of Mutual Savings
Bank (the "Bank") and subsidiary as of June 30, 1994, and the related
consolidated statements of income, retained earnings and cash flows for
each of the two years in the period ended June 30, 1994. These consolidated
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mutual Savings Bank and
subsidiary at June 30, 1994, and the results of its operations and its cash
flows for each of the two years in the period ended June 30, 1994 in conformity
with generally accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements, the Bank
changed its method of accounting for income taxes, effective July 1, 1993,
to conform with Statement of Financial Accounting Standards No. 109.
/s/ Deloitte & Touche LLP
- --------------------------------------
July 29, 1994
F-3
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from depository institutions (including interest-bearing accounts
totalling $1,512,393 in 1994 and $42,243 in 1995) $ 1,755,307 $ 432,825
Federal funds sold 485,666 148,545
Investment securities (fair value of $9,289,000 in 1994 and $7,640,518 in 1995)
(Note 2) 9,596,367 7,908,538
Mortgage-backed securities (fair value of $7,395,000 in 1994 and $5,857,067 in 1995)
(Note 2) 7,421,616 5,837,118
Stock in Federal Home Loan Bank (Note 2) 765,400 414,300
Loans receivable, net (Note 3) 32,330,958 40,421,304
Loans held for sale (Note 3) 70,729 87,500
Premises and equipment, net (Note 4) 996,309 968,445
Accrued interest receivable (Note 5) 304,880 300,413
Income tax receivable (Note 9) 63,620 61,666
Deferred income tax asset, net (Note 9) 64,961 135,203
Reorganization and stock issuance costs (Note 15) 159,632 -
Other assets 79,782 135,494
------------ ------------
Total assets $54,095,227 $56,851,351
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 7) $50,163,824 $48,854,007
Borrowed funds (Note 8) - 1,325,000
Advances from borrowers for taxes and insurance 165,841 188,348
Accrued expenses and other liabilities 160,597 278,754
------------ ------------
Total liabilities 50,490,262 50,646,109
------------ ------------
Stockholders' equity
Preferred stock, $.01 par value:
Authorized, 0 and 500,000 shares in 1994 and 1995 respectively; none outstanding
Common stock, $.01 par value: - -
Authorized, 0 and 2,000,000 shares in 1994 and 1995 respectively; outstanding 0
and 333,500 in 1994 and 1995, respectively - 3,335
Additional paid-in-capital - 2,721,582
Retained earnings, restricted (Notes 14) 3,604,965 3,781,330
------------ ------------
3,604,965 6,506,247
Deferred compensation - Employee Stock Ownership Plan (ESOP) (Note 10) - (252,680)
Unrealized losses on securities available-for-sale, net of deferred taxes of $24,892
(Notes 2 & 9) - (48,325)
------------ ------------
Total stockholders' equity (Note 14) 3,604,965 6,205,242
------------ ------------
Total liabilities and stockholders' equity $54,095,227 $56,851,351
============ ============
</TABLE>
The notes to financial statements are an integral part of these statements.
F-4
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 3,321,590 $ 2,488,329 $ 2,594,594
Investment securities 622,565 574,386 441,835
Mortgage-backed securities 169,890 288,889 372,581
Other 136,868 104,064 27,102
---------------- ---------------- ----------------
4,250,913 3,455,668 3,436,112
---------------- ---------------- ----------------
INTEREST EXPENSE
Deposits (Note 7) 2,663,964 2,024,810 2,130,186
Borrowed funds (Note 8) - - 128,479
---------------- ---------------- ----------------
Total interest expense 2,663,964 2,024,810 2,258,665
---------------- ---------------- ----------------
Net interest income 1,586,949 1,430,858 1,177,447
PROVISION (BENEFIT) FOR LOAN LOSSES (Note 3) 10,638 117,452 (52,262)
---------------- ---------------- ----------------
Net interest income after provision for loan losses 1,576,311 1,313,406 1,229,709
---------------- ---------------- ----------------
NON-INTEREST INCOME
Service charges and fees 29,908 30,481 32,517
Gain (loss) on sale of securities - 1,227 (43,350)
Other 53,041 75,977 60,897
---------------- ---------------- ----------------
Total non-interest income 82,949 107,685 50,064
---------------- ---------------- ----------------
NON-INTEREST EXPENSE
Compensation and benefits 527,766 610,534 640,139
Occupancy and equipment 129,016 151,519 172,171
Federal insurance premiums 103,611 130,544 114,143
Reorganization and stock issuance costs (Note 15) - 71,801 -
Other expenses 293,736 274,071 232,735
---------------- ---------------- ----------------
Total non-interest expense 1,054,129 1,238,469 1,159,188
---------------- ---------------- ----------------
Income before provision for income taxes and
cumulative effect of accounting change 605,131 182,622 120,585
PROVISION (BENEFIT) FOR INCOME TAXES (Note 9) 233,608 (64,048) (55,780)
---------------- ---------------- ----------------
Income before cumulative effect of accounting
change 371,523 246,670 176,365
Cumulative effect of accounting change (Note 9) - 73,780 -
---------------- ---------------- ----------------
Net income $ 371,523 $ 320,450 $ 176,365
================ ================ ================
</TABLE>
The notes to financial statements are an integral part of these statements.
F-5
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
Unrealized
Losses on
Additional Deferred Securities
Common Paid-in Retained Compensation Available-
-------------------
Shares Amount Capital Earnings ESOP for-Sale Total
---------- ------ ------------ ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1992 - $ - $ - $ 2,912,992 $ - $ - $ 2,912,992
Net income - - - 371,523 - - 371,523
---------- ------ ------------ ------------ ------------- -------------- -------------
Balance, June 30, 1993 - - - 3,284,515 - - 3,284,515
Net income - - - 320,450 - - 320,450
---------- ------ ------------ ------------ ------------- -------------- -------------
Balance, June 30, 1994 - - - 3,604,965 - - 3,604,965
Net proceeds from common
stock issued in conversion 306,820 3,068 2,452,669 - - - 2,455,737
Issuance of ESOP shares 26,680 267 266,533 - (266,800) -
(Note 10)
Compensation expense
recognized for ESOP 2,380 14,120 16,500
Unrealized losses on
securities available-for-sale,
net of deferred taxes - - - - - (48,325) (48,325)
Net income - - - 176,365 - - 176,365
---------- ------ ------------ ------------ ------------- -------------- -------------
Balance, June 30, 1995 333,500 $3,335 $2,721,582 $3,781,330 $ (252,680) $ (48,325) $ 6,205,242
========== ====== ============ ============ ============= ============== =============
</TABLE>
The notes to financial statements are an integral part of these statements.
F-6
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 371,523 $ 320,450 $ 176,365
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion:
Premises and equipment 36,273 49,673 63,164
Discounts and premiums, net 60,450 37,274 35,376
Provision (benefit) for loan losses 10,638 117,452 (52,262)
Provision for losses on real estate acquired in settlement of
loans 42,470 7,609 -
Gains on sales of real estate acquired in settlement of loans,
net (3,261) (4,633) (1,138)
(Gain) loss on sale of investment and mortgage-backed
securities - (1,227) 43,350
Federal Home Loan Bank (FHLB) stock dividend (61,500) - -
Origination of loans for sale to Federal Home Loan
Mortgage Corporation (FHLMC) (7,556,637) (5,973,615) (460,276)
Proceeds from sales of loans to FHLMC 7,307,127 6,259,948 443,505
Gains on sales of loans to FHLMC (18,104) (15,014) (1,049)
Compensation expense - ESOP - - 16,500
Adjustments for (increases) decreases in operating assets
and increases (decreases) in operating liabilities:
Accrued interest receivable 48,190 51,859 4,467
Income tax receivable 22,208 (126,754) (43,396)
Other assets (27,386) (220,129) 105,058
Other liabilities 25,784 (152,412) 118,157
------------ ------------ ------------
Net cash provided by operating activities 257,775 350,481 447,821
------------ ------------ ------------
INVESTING ACTIVITIES
(Loan origination) and principal payment on loans receivable,
net 6,483,398 3,438,931 (5,018,712)
Purchases of loans receivable - (320,645) (3,018,323)
Purchases of:
Mortgage-backed securities (3,585,496) (4,126,785) -
Investment securities (6,247,812) (5,974,188) -
Proceeds from maturity of:
Mortgage-backed securities 266,019 1,147,229 991,018
Investment securities 3,925,000 7,557,400 675,000
Proceeds from sales of:
Mortgage-backed securities (available-for-sale in 1995) - 457,958 485,153
Investment securities (available-for-sale in 1995) - 793,000 969,213
Proceeds from sale of stock in Federal Home Loan Bank - - 351,100
Proceeds from sale of real estate acquired in settlement of
loans 108,883 -
Capital additions to premises and equipment, net (53,409) (162,328) (35,300)
------------ ------------ ------------
Net cash provided (used) by investing activities 896,583 2,810,572 (4,600,851)
============ ============ ============
</TABLE>
The notes to fiancial statements are an integral part of these statements.
F-7
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED JUNE 30, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---------------- ---------------- ---------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net decrease in deposits (2,618,845) (4,170,484) (1,309,817)
Net increase in borrowed funds - - 1,325,000
Net increase (decrease) in advances from borrowers for
taxes and insurance (38,189) (14,083) 22,507
Net proceeds from stock issuance - - 2,455,737
---------------- ---------------- ---------------
Net cash provided (used) by financing activities (2,657,034) (4,184,567) 2,493,427
---------------- ---------------- ---------------
Net (decrease) in cash and cash equivalents (1,502,676) (1,023,514) (1,659,603)
Cash and cash equivalents, beginning of year 4,767,163 3,264,487 2,240,973
---------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 3,264,487 $ 2,240,973 $ 581,370
================ ================ ===============
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 2,685,568 $ 2,030,773 $ 2,253,830
Income taxes 207,462 171,681 -
Non-cash transactions:
Real estate acquired in settlement of loans 144,657 15,000 15,257
Loans to facilitate sales of real estate owned - 120,760 -
Exchange of common stock for loan receivable
ESOP - - 266,800
</TABLE>
The notes to financial statements are an integral part of these statements.
F-8
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mutual Bancompany, Inc. (Company) is a Missouri corporation incorporated on
August 22, 1994, for the purpose of becoming the holding company of Mutual
Savings Bank, f.s.b. (Bank). The Bank converted from a mutual savings bank
to a stock savings bank, and the Company completed its initial public
offering with one-half of the net proceeds used to acquire all of the
issued and outstanding capital stock of the Bank.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of Mutual Bancompany, Inc., and its wholly
owned subsidiary Mutual Savings Bank, f.s.b. All significant intercompany
transactions and balances are eliminated in the consolidation.
REGULATION: The Bank is subject to examination and regulation by the Office
of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation
(FDIC).
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and
cash equivalents include cash and amounts due from depository institutions
and federal funds sold.
INVESTMENT AND MORTGAGE-BACKED SECURITIES: On July 1, 1994, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
Investments in debt and equity securities are classified as follows:
* Trading Securities. Government bonds held principally for resale in
the near term and mortgage-backed securities held for sale in
conjunction with the Company's mortgage banking activities are
classified as trading securities and recorded at their fair values.
Unrealized gains and losses on trading securities are included in
other income. The Company did not have any trading securities in 1995.
* Securities held-to-maturity. Bonds, notes, debentures and mortgage-
backed securities for which the Company has the positive intent and
ability to hold to maturity are reported at cost, adjusted for
amortization of premiums and accretion of discounts which are
recognized as interest income using the interest method over the
period to maturity.
* Securities available-for-sale. Bonds, notes, debentures, and mortgage-
backed securities not classified as trading securities or as
securities held-to-maturity are recorded at fair value. Unrealized
gains and losses, net of tax, on securities available-for-sale are
reported as a net amount in a separate component of stockholders'
equity until realized.
Any declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary result in write-downs of the individual securities to their fair
value. The related write-downs are included in earnings as realized losses.
Gains and losses on the sale of securities are determined using the
specific-identification method.
F-9
<PAGE>
Prior to adoption of SFAS No. 115, the Company's accounting policy regarding
investment in securities was as follows:
Investment securities and mortgage-backed securities are stated at cost,
adjusted for amortization of premiums and accretion of discounts, as management
has both the intent and ability to hold them to maturity or for the long term.
Such premiums and discounts are amortized and accreted utilizing the level yield
method. Gains and losses, if any, from sales of investment securities are
determined on a specific identification basis.
LOANS RECEIVABLE: Loans receivable are stated at unpaid principal balances, less
an allowance for loan losses, net deferred loan-origination fees, discounts and
loans in process. Interest on loans is computed using the simple interest method
on the unpaid principal balance.
The allowance for loan losses is increased by charges to income and decreased by
benefits to income, and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is based,
among other factors, on the Company's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
Loans are placed on nonaccrual when, in the judgement of management, the
probability of collection of interest is deemed to be insufficient to warrant
accrual. Interest income is subsequently recognized only to the extent cash
payments are received until, in management's judgment, the borrower's ability to
resume making scheduled principal and interest payments has improved such that
collectibility of the principal and interest is no longer in doubt.
In accordance with Statement of Financial Accounting Standards No. 91,
Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases, loan fees and certain direct
loan origination costs are deferred, and the net fee or cost is recognized as an
adjustment to interest income using the interest method over the contractual
life of the loans, adjusted for estimated prepayments based on the Company's
historical prepayment experience. Commitment fees and costs relating to
commitments the likelihood of exercise of which is remote are recognized over
the commitment period on a straight-line basis. If the commitment is
subsequently exercised during the commitment period, the remaining unamortized
commitment fee at the time of exercise is recognized over the life of the loan
as an adjustment of yield.
LOANS HELD FOR SALE: Loans held for sale are carried at the lower of cost or
estimated market value on an individual loan basis. Loans held for sale are
covered by investor commitments and, accordingly, market values for such loans
are based on commitment prices. Gains or losses on loan sales are recognized at
the time of sale and are determined by the differences between net sales
proceeds and the principal balance of the loans sold, adjusted for deferred loan
fees. Loan origination and commitment fees, net of certain direct loan
origination costs, are deferred until the sale of the loan.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS: Real estate acquired in settlement
of loans is initially recorded on an individual asset basis at the lower of (1)
fair value minus estimated cost to sell or (2) cost, with any writedown charged
to the allowance for loan losses. If, subsequent to foreclosure, the fair value
of the real estate acquired through foreclosure is determined to have declined
based upon periodic evaluations by management, valuation allowances are
established through a charge to income. Subsequent increases in the fair value
are recorded through a reversal of the valuation allowance, but not below zero.
Costs relating to the development or improvement of real estate owned are
capitalized, whereas those relating to holding and maintaining the property are
charged to expense.
F-10
<PAGE>
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed on accelerated and straight-
line methods based on the estimated useful lives of the assets of three to forty
years.
INCOME TAXES: In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes,
which requires an asset-liability approach to measuring the impact of income
taxes. SFAS 109 requires the recognition of deferred tax assets or liabilities
based upon temporary differences in the tax basis of an asset or liability and
its related financial statement balance. The deferred tax asset or liability is
calculated using the enacted tax rates expected to apply in the period in which
the deferred asset or liability is expected to be settled or realized.
Effective July 1, 1993, the Bank adopted the requirements of SFAS 109. The
effect of adopting the statement has been reported as a cumulative effect of a
change in accounting principle in the income statement for the year ended June
30, 1994. Prior years financial statements have not been restated.
BENEFIT PLANS: The Company accounts for its pension plan in accordance with
Statement of Financial Accounting Standards No. 87, Employers Accounting for
Pensions.
EMPLOYEE STOCK OWNERSHIP PLAN: On July 1, 1994, the Company adopted Statement of
Position (SOP) 93-6, Employers' Accounting for Employee Stock Ownership Plans.
Under this pronouncement, stock acquired for an ESOP is recorded as deferred
compensation, which is a reduction to stockholders' equity. ESOP shares are
considered uncommitted until such time the shares are released (committed) to
the ESOP trustee for distribution to the plans' participants. As the committed
shares are released, compensation expense is recognized for the then fair value
of the stock and deferred compensation for the committed shares is reduced by
the amount of the shares' acquisition cost. Any difference between the
acquisition cost and the then fair value is charged or credited to additional
paid-in capital. Dividends paid on uncommitted ESOP shares are recognized as
compensation expense, and dividends paid on allocated shares are recognized as a
reduction of retained earnings.
Only committed shares are considered outstanding for earnings per share
calculations.
EARNINGS PER SHARE: Since the Company's common stock was only outstanding
approximately six months during the year ended June 30, 1995, management
believes that presentation of earnings per share information would not be
meaningful.
PRESENTATION OF FINANCIAL STATEMENTS: Certain reclassifications have been made
to the 1994 consolidated financial statements to conform with the 1995
presentation.
F-11
<PAGE>
2. INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized cost and fair values of investment and mortgage-backed securities
at June 30 are as follows:
<TABLE>
<CAPTION>
1994 Gross Gross
Unrealized Unrealized
Amortized Cost Gains Losses Fair Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. government and federal
agency $ 9,596,367 $ 296 $ 307,663 $ 9,289,000
Mortgage-backed securities 7,421,616 98,478 125,094 7,395,000
-------------- -------------- -------------- --------------
$ 17,017,983 $ 98,774 $ 432,757 $ 16,684,000
============== ============== ============== ==============
<CAPTION>
1995 Gross Gross
Unrealized Unrealized
Amortized Cost Gains Losses Fair Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Held-to-Maturity
U.S. government and federal
agency $ 7,400,568 $ - $ 268,020 $ 7,132,548
Mortgage-backed securities 2,097,327 20,835 886 2,117,276
-------------- -------------- -------------- --------------
$ 9,497,895 $ 20,835 $ 268,906 $ 9,249,824
============== ============== ============== ==============
Available-for-Sale
U.S. government and federal
agency $ 512,439 $ - $ 4,469 $ 507,970
Mortgage-backed securities 3,808,539 4,659 73,407 3,739,791
-------------- -------------- -------------- --------------
$ 4,320,978 $ 4,659 $ 77,876 $ 4,247,761
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995
--------------
<S> <C>
Investment securities:
Held-to-maturity $ 7,400,568
Available-for-sale 507,970
--------------
$ 7,908,538
==============
Mortgage-backed securities:
Held-to-maturity $ 2,097,327
Available-for-sale 3,739,791
--------------
$ 5,837,118
==============
</TABLE>
Gross realized gains and losses on sales of securities for the year ended June
30 were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Gross realized gains $ - $ 8,227 $ 970
Gross realized (losses) (7,000) (44,320)
------------ ------------ ------------
Net realized gains (losses) $ - $ 1,227 $ (43,350)
============ ============ ============
</TABLE>
F-12
<PAGE>
The amortized cost and fair value of securities held-to-maturity and available-
for-sale at June 30, 1995, by contractual maturity are shown below. Expected
maturities will differ from contractual maturities as securities may have the
right to call or prepay with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities held-to-maturity Securities available-for-sale
Amounts maturing in: Amortized Cost Fair Value Amortized Cost Fair Value
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
One year or less $ 996,321 $ 969,880 $ - $ -
After one through five years 6,404,247 6,162,668 512,439 507,970
-------------- -------------- -------------- ---------------
7,400,568 7,132,548 512,439 507,970
Mortgage-backed securities 2,097,327 2,117,276 3,808,539 3,739,791
-------------- -------------- -------------- ---------------
$ 9,497,895 $ 9,249,824 $ 4,320,978 $ 4,247,761
============== ============== ============== ===============
</TABLE>
The Company has pledged mortgage-backed securities to secure deposits of certain
customers which exceeded the maximum insurance or those not covered by the
Savings Association Insurance Fund (SAIF). At June 30, 1994 and 1995, these
pledged assets had a carrying value of $0 and $500,000.
The investment in FHLB stock of $765,400 and $414,300 at June 30, 1994 and 1995,
respectively, is recorded at cost, and is considered a restricted asset.
3.LOANS
Loans receivable at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
First mortgage loans (principally conventional):
Principal balances secured by:
One-to-four family residences $ 27,625,677 $ 37,015,986
Multi-family and commercial 4,365,341 2,927,886
Construction 426,975 237,070
------------- -------------
32,417,993 40,180,942
Loans in process (207,111) (43,153)
Net deferred loan-origination costs 5,780 10,276
------------- -------------
Total first mortgage loans 32,216,662 40,148,065
Consumer and other loans 357,296 460,239
------------- -------------
Total loans receivable 32,573,958 40,608,304
Allowance for loan losses (243,000) (187,000)
------------- -------------
Loans receivable, net $ 32,330,958 $ 40,421,304
============= =============
</TABLE>
Adjustable rate loans have interest rate adjustment limitations and are
generally indexed to the National Average Contract Rate or the Eighth District
Quarterly Cost of Funds. Future market factors may affect the correlation of
the interest rate adjustment with the rates the Bank pays on the short-term
deposits that have been primarily utilized to fund these loans.
F-13
<PAGE>
The Bank holds multi-family and commercial real estate loans totalling
$4,365,341 and $2,927,886, respectively, at June 30, 1994 and 1995. These loans
are considered by management to possess somewhat greater credit risk due to the
dependency on the income production of the related real estate. Of these loans,
$1,535,475 and $1,391,187 are secured by multi-family properties, $909,042 and
$477,922 by office buildings, $235,263 and $191,548 by nursing and retirement
homes, $661,369 and $491,385 by warehouses, $541,732 and $31,468 by retail
buildings and $482,460 and $344,376 by other property at June 30, 1994 and 1995,
respectively.
The Bank has granted loans to officers, directors and employees. Changes in
loans to officers, directors, and employees for the year ended June 30, 1994 and
1995 are summarized as follows (rounded to nearest thousand):
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Balance, beginning of year $ 157,000 $ 123,000
Additions 134,000 360,000
Repayments (34,000) (150,000)
Sales to FHLMC (134,000) -
------------ ------------
Balance, end of year $ 123,000 $ 333,000
============ ============
</TABLE>
Activity in the allowance for loan losses is summarized as follows for the years
ended June 30:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 195,016 $ 168,000 $ 243,000
Provision (benefit) charged to
income 10,638 117,452 (52,262)
Charge-offs (37,654) (42,452) (3,738)
Recoveries - - -
------------ ------------ ------------
Balance, end of year $ 168,000 $ 243,000 $ 187,000
============ ============ ============
</TABLE>
Nonaccrual loans totaled approximately $25,000, $150,000 and $5,000 as of June
30, 1993, 1994 and 1995, respectively. Interest income on nonaccrual loans that
would have been recorded under the original terms of such loans was $1,135,
$2,641 and $339 for the years ended June 30, 1993, 1994 and 1995. No income was
recognized in any period for nonaccrual loans. The Bank had no renegotiated
loans during any of these periods.
The Bank originates loans for resale to the FHLMC. During 1993, 1994 and 1995,
the Bank originated loans totalling $7,556,637, $5,973,615 and $460,276,
respectively, and sold such loans to FHLMC totaling $7,307,167, $6,259,948 and
$443,505, respectively. The Bank recognized gains on these sales of $18,104,
$15,014 and $1,049 in 1993, 1994 and 1995, respectively. At June 30, 1994 and
1995, the Bank had loans held for sale totaling $70,729, and $87,500,
respectively. These sales include provisions that require the Bank to
repurchase the loans upon certain events of default relating to documentation
deficiencies for periods up to one year from the date of the loan sale.
At June 30, 1994 and 1995, the Bank was servicing loans for others amounting to
approximately $11,768,000, and $10,587,000, respectively. Servicing loans for
others generally consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing. Loan
servicing income is recorded when received and includes servicing fees from
investors and certain charges collected from borrowers, such as late payment
fees. In connection with these loans serviced
F-14
<PAGE>
for others, the Bank holds borrowers' escrow balances of $70,349 and $57,522 at
June 30, 1994 and 1995, respectively.
4. PREMISES AND EQUIPMENT
Premises and equipment at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
---------------- ----------------
<S> <C> <C>
Land $ 296,060 $ 296,060
Buildings and improvements 1,030,666 1,052,896
Furniture, fixtures and equipment 425,114 438,184
---------------- ----------------
1,751,840 1,787,140
Less accumulated depreciation and amortization 755,531 818,695
---------------- ----------------
$ 996,309 $ 968,445
================ ================
</TABLE>
Depreciation expense for the years ended June 30, 1993, 1994, and 1995 totalled
$36,273, $49,673 and $63,164 respectively.
5. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at June 30 is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
---------------- ----------------
<S> <C> <C>
Loans receivable $ 168,113 $ 174,498
Investment securities 97,284 88,353
Mortgage-backed securities 39,483 37,562
---------------- ----------------
304,880 $ 300,413
================ ================
</TABLE>
6. REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
There was no real estate acquired in settlement of loans at June 30, 1994 or
1995.
Activity in the allowance for losses is summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, beginning of year $ 6,530 $ 49,000 $ -
Provision charged to expense 42,470 7,609 -
Charge-offs
Recoveries - (57,500) -
- 891 -
---------------- --------------- ---------------
Balance, end of year $ 49,000 $ - $ -
================ =============== ===============
</TABLE>
F-15
<PAGE>
7. DEPOSITS
Deposits at June 30 are summarized as follows:
<TABLE>
<CAPTION>
Weighted 1994 1995
--------------------------- -------------------------------
Average Rate at
June 30, 1995 Amount Percent Amount Percent
----------------- -------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Now, and Super NOW 2.75% $ 2,370,770 4.7 $ 1,738,913 3.6
Money market 2.90% 5,459,068 10.9 3,574,934 7.3
Passbook savings 2.75% 4,507,461 9.0 3,749,613 7.7
----------------- -------- ---------------- ----------
2.80% 12,337,299 24.6 9,063,460 18.6
----------------- -------- ---------------- ----------
Certificates of deposit
2.0% to 2.99% 2.75% 113,509 0.2 54,771 0.1
3.0% to 3.99% 3.82% 19,101,407 38.1 1,967,116 4.0
4.0% to 4.99% 4.34% 11,813,168 23.5 8,055,363 16.5
5.0% to 5.99% 5.44% 3,756,651 7.5 25,535,932 52.3
6.0% to 6.99% 6.58% 662,299 1.3 2,696,272 5.5
7.0% to 7.99% 7.36% 1,308,791 2.6 547,696 1.1
8.0% to 8.99% 8.03% 1,070,700 2.1 933,397 1.9
----------------- -------- ----------------- ----------
5.30% 37,826,525 75.4 39,790,547 81.4
----------------- -------- ----------------- ----------
5.48% $ 50,163,824 100.0 $ 48.854,007 100.0
================= ======== ================= ==========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit with a minimum
denomination of $100,000 was approximately $1,198,000 and $1,944,000 at June 30,
1994 and 1995 respectively.
Certificates of deposit at June 30 mature approximately as follows (rounded to
nearest thousand):
<TABLE>
<CAPTION>
1994 1995
------------------------------------ ------------------------------------
Weighted Weighted
Average Rate Amount Average Rate Amount
----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
One year 3.89% $ 24,587,000 5.27% $ 30,382,000
Two years 4.91% 7,040,000 4.90% 3,211,000
Three years 4.66% 2,036,000 5.42% 2,637,000
Four years 4.89% 2,052,000 5.42% 1,808,000
Over four years 4.86% 2,112,000 6.38% 1,753,000
--------------- ---------------
4.23% $ 37,827,000 5.30% $ 39,791,000
=============== ===============
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Money market, NOW, and Super NOW $ 250,924 $ 240,743 $ 179,981
Passbook savings 131,948 127,584 116,836
Certificates of deposit 2,281,092 1,656,483 1,833,369
-------------- -------------- ---------------
$ 2,663,964 $ 2,024,810 $ 2,130,186
============== ============== ===============
</TABLE>
F-16
<PAGE>
8. BORROWED FUNDS
Borrowed funds at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Advances from FHLB $ - $ 1,325,000
============== ==============
</TABLE>
Information concerning advances from FHLB is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Average balance during the year $ - $ 2,197,374
Average interest rate at year end - 6.46%
Maximum month end balance during the year $ - $ 4,250,000
</TABLE>
The Bank has signed a blanket pledge agreement with the FHLB under which it can
draw advances on an open line-of-credit of $4,500,000 from the FHLB. The Bank
must hold an unencumbered portfolio of eligible one-to-four family residential
mortgages with a book value of not less than 150% of the indebtedness. The line-
of-credit has an expiration date of November 2, 1995.
Interest expense on borrowed funds for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Advances from the FHLB $ - $ - $ 128,479
============== ============== ==============
</TABLE>
9. INCOME TAXES
The Company and its subsidiary file consolidated federal income tax and separate
state tax returns on a fiscal year basis. If certain conditions are met in
determining taxable income, the Bank is allowed a special bad-debt deduction
based on a percentage of taxable income (presently 8 percent) or on specified
experience formulas. The Bank used the percentage method in 1993, 1994, and
1995.
Effective July 1, 1993, the Bank adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," (SFAS 109) which requires,
among other things, a change from the deferred method to the asset and liability
method of accounting for deferred income taxes. The cumulative effect of this
change on years prior to July 1, 1993 was to increase net income for the year
ended June 30, 1994 by $73,780.
Under the deferred method applied in prior years, deferred income taxes were
recognized for income and expense items that were reported in different periods
for financial reporting and income tax purposes based on the tax rate applicable
in the period of the calculation and were not adjusted for subsequent changes in
tax laws or rates. Deferred tax assets were not recognized for provisions for
losses on loans and investments in real estate in excess of the bad debt
deductions allowed under the Federal Internal Revenue Code. Under the asset and
liability method required by SFAS 109, deferred income taxes are recognized,
with certain exceptions, for temporary differences between the financial
reporting basis and income tax basis of assets and liabilities based on enacted
tax rates expected to be in effect when such amounts are realized or settled.
Deferred tax assets are recognized only to the extent that it is more likely
than not that such amounts will be realized based on consideration of available
evidence, including tax planning strategies and other factors.
SFAS 109 continues the exception for providing a deferred tax liability on bad
debt reserves for tax purposes of qualified thrift lenders such as the Bank that
arose in fiscal years beginning before June 30, 1988. Such
F-17
<PAGE>
bad debt reserve for the Bank amounted to approximately $1,130,000 with an
income tax effect of $385,000 at June 30, 1995. This bad debt reserve would
become taxable if the Bank does not maintain certain qualifying assets as
defined, if the reserve is charged for other than bad debt losses, or if the
Bank does not maintain its thrift charter.
Provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Current $ 211,400 $ (11,074) $ (10,430)
Deferred 22,208 (52,974) (45,350)
-------------- -------------- --------------
Total $ 233,608 $ (64,048) $ (55,780)
============== ============== ==============
</TABLE>
Provision (benefit) for income taxes differs from that computed at the Federal
statutory rate of 34 percent as follows:
<TABLE>
<CAPTION>
Percent Percent Percent
Pre-tax Pre-tax Pre-tax
1993 Income 1994 Income 1995 Income
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Tax at Federal tax
rate $ 205,745 34.0 $ 62,091 34.0 $ 41,000 34.0
Surtax exemption - - - - (19,294) (16.0)
Tax-exempt interest
income (6,232) (1.0) (2,489) (1.4) (1,946) (1.6)
Resolution of prior
year federal tax
issues - - (124,662) (68.3) - -
Real estate acquired
in settlement of
loans:
Gains on sales (1,109) (0.2) (1,575) (0.8) (1,067) (0.9)
Provision for
losses 14,440 2.4 2,587 1.4 680 0.6
Change in deferred
tax valuation
allowance - - - - (87,829) (72.8)
Other, net 20,764 3.4 - - 12,676 10.5
------------ --------- ------------ --------- ------------ ---------
Provision
(benefit) $ 233,608 38.6 $ (64,048) (35.1) $ (55,780) (46.2)
============ ========= ============ ========= ============ =========
</TABLE>
In 1994, the Bank recognized a $124,662 income tax benefit relating to its
previously recorded income tax liability following a settlement with the
Internal Revenue Service relating to their examination of the Bank's income tax
returns for the calendar years 1988 through 1990.
F-18
<PAGE>
The components of the deferred tax assets and liability, net of the valuation
allowance, at June 30, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
State intangibles tax $ 32,126 $ 28,120
Allowance for loan losses 99,630 80,036
Deferred expenses 6,452 6,255
Premises and equipment 1,760 (4,100)
Unrealized loss on securities available-for-sale - 24,892
Capital loss carryforward 87,829 -
------------ ------------
Total deferred tax assets 227,797 135,203
Valuation allowance (87,829) -
------------ ------------
Net deferred tax assets 139,968 135,203
------------ ------------
Deferred Tax Liabilities:
FHLB stock dividends 68,634 -
Other, net 6,373 -
------------ ------------
Total deferred tax liabilities 75,007 -
------------ ------------
Net deferred tax asset $ 64,961 $ 135,203
============ ============
</TABLE>
Changes in the deferred tax valuation allowance for the years ended June 30, are
as follows:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Balance, beginning of year $ - $ 87,829
Increase (decrease) 87,829 (87,829)
------------ ------------
Balance, end of year $ 87,829 $ -
============ ============
</TABLE>
10. EMPLOYEE BENEFITS
Pension Plan: The Bank has a noncontributory, defined benefit pension plan (the
"Plan") covering full-time employees who have completed six months of service
and have attained the age of 20.5 years. Participants become fully vested after
seven years of vesting service, as defined by the Plan. The benefits for the
Plan are based on years of service and the projected participants' salary at
normal retirement. The Bank's funding policy is to make, as a minimum
contribution, the equivalent of the minimum required by the Employee Retirement
Income Security Act of 1974. Plan assets include cash equivalents, certificates
of deposit, government agency securities and insurance contract annuities.
Net periodic pension expense for the years ended June 30 included the following
components:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost $ 30,755 $ 30,321 $ 36,680
Interest on projected benefit obligation 37,565 35,658 40,740
Return on plan assets (20,464) (25,400) 1,403
Net amortization and deferral (35,603) (7,352) (37,856)
------------ ------------ ------------
Net periodic pension expense $ 12,253 $ 33,227 $ 40,967
============ ============ ============
</TABLE>
F-19
<PAGE>
The following table sets forth the funding status of the Bank's pension plan and
amounts recognized in the balance sheets at June 30:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated benefits
obligation:
Vested benefits $ 460,946 $ 522,467
Non-vested benefits 1,842 3,154
------------ ------------
Accumulated benefit obligation 462,788 525,621
Effect of projected future salary increases 129,251 133,424
------------ ------------
Projected benefit obligation 592,039 659,045
Plan assets at fair value 490,331 545,259
------------ ------------
Plan assets less than projected benefit obligation (101,708) (113,786)
Unrecognized net transition asset (21,355) (19,712)
Unrecognized net loss 171,919 198,070
------------ ------------
Net pension asset $ 48,856 $ 64,572
============ ============
</TABLE>
Assumptions used to determine net periodic pension cost were:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Assumed discount rate 7.0% 7.0%
Expected rate of return on plan assets 7.5% 7.5%
Assumed rate of compensation increase 5.0% 5.0%
</TABLE>
Employee Stock Ownership Plan: In conjunction with the Bank's conversion, the
Company formed an ESOP which covers substantially all employees with more than
one year of employment, have completed 1,000 hours of service, and who have
attained the age of 21. The ESOP borrowed $266,800 from the Company and
purchased 26,680 common shares, equal to 8% of the total number of shares issued
in the conversion. The ESOP debt is secured by shares of the Company. The Bank
will make scheduled discretionary contributions to the ESOP sufficient to
service the debt. At June 30, 1995, the balance outstanding on this debt was
$255,683. As the debt is paid down, the number of shares to be released from
serving as collateral is computed as the ratio of the current principal plus
interest to the total original principal plus interest to be paid.
As committed ESOP shares are released, compensation expense is recognized for
the then fair value of the stock and deferred compensation for the committed
shares is reduced by the amount of the shares' acquisition cost. Any difference
between the acquisition cost and the then fair value is credited or charged to
additional paid-in capital. Compensation expense recognized for the year ended
June 30, 1995 totalled $16,500. Deferred compensation relating to the ESOP was
$252,680 at June 30, 1995, and is reported as a reduction of stockholders'
equity.
F-20
<PAGE>
The following is a summary of ESOP shares at June 30, 1995:
<TABLE>
<S> <C>
Allocated shares -
Committed-to-be-released shares 1,412
Uncommitted shares 25,268
-----------
Total ESOP shares 26,680
===========
Fair value of uncommitted shares $ 334,800
===========
</TABLE>
ESOP participants entitled to a distribution have the right to demand such
distribution in the form of the Company's common stock. In the event that the
Company's common stock is not readily tradeable on an established market,
participants are entitled to require that the Company repurchase the common
stock under a fair valuation formula, as provided by governmental regulations.
Management Recognition Plan: The Company intends to form a Management
Recognition Plan (MRP) for the benefit of providing key officers and directors
of the Company with a proprietary interest in the Company in a manner designed
to encourage such employees to remain with the Company. If the plan is approved
by the stockholders of the Company, restricted stock awards covering shares
representing an aggregate of up to 4% of the shares of Common Stock issued in
the Conversion, or 13,340 common shares, may be granted to directors and
executive officers of the Company.
Stock Option and Incentive Plan: In conjunction with the Bank's conversion, the
Company established a stock option and incentive plan for the benefit of
directors and employees of the Company and Bank. The plan shall become
effective upon its adoption by the Board of Directors of the Company, and
approval of the plan by the stockholders' of the Company. If the plan is
adopted, stock options, stock appreciation rights, and restricted stock awards
covering shares representing an aggregate of up to 10% of the shares of Common
stock issued in the conversion, or 33,350 common shares, would be authorized.
11. CONTINGENCIES
The Bank, along with various other savings and loan associations, challenged in
lawsuits filed against the State of Missouri, the validity and constitutionality
of the state intangibles tax as applied to savings and loan associations. In
February 1982, the Supreme Court of Missouri ruled in favor of the associations.
The Bank has filed a claim with the Missouri Department of Revenue for a refund
of state intangible taxes paid during the years 1975 through 1980 in the amount
of approximately $249,000.
In 1989, a settlement was reached with the Missouri Department of Revenue which
provides for payment of the refund claims plus interest at 6% per annum through
a combination of credits against previous and future state franchise taxes and
cash payments. At June 30, 1994 and 1995, the remaining claim for refund of
state intangible taxes plus accrued interest totaled approximately $78,355 and
$75,120, respectively, which is available to offset future state franchise
taxes.
From time to time, the Bank is involved as plaintiff or defendant in various
legal proceedings arising in the normal course of its business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Bank's financial position or
results of operations.
F-21
<PAGE>
12. INTEREST RATE RISK
The Bank is engaged principally in providing first mortgage loans to
individuals. At June 30, 1994 and 1995, the Bank's assets consist primarily of
assets that earned interest at both variable and fixed interest rates. Those
assets were funded primarily with short-term liabilities that have interest
rates that vary with market rates over time.
At June 30, 1994 and 1995, the Bank had interest-earning assets of approximately
$51,934,000 and $54,742,000, having a weighted average effective yield of 6.37%
and 5.82%, respectively, and interest-bearing liabilities of approximately
$50,164,000 and $50,179,000 having a weighted average effective interest rate of
3.90% and 4.87%, respectively. The Bank's interest-sensitive liabilities
reprice faster than the interest-sensitive assets and accordingly, in a rising
rate environment, liabilities will be repricing faster at higher interest rates,
thereby reducing the market value of net long-term assets and net interest
income.
13. FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Bank 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 in the
way of commitments to extend credit. 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. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained, if it is deemed necessary upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held generally includes one-to-four family properties,
multi-family properties and income-producing commercial properties.
At June 30 the Bank had commitments to originate loans:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Fixed $ 10,000 $ 348,606
Variable 1,916,936 1,083,440
-------------- --------------
$ 1,926,936 $ 1,432,046
============== ==============
Interest rate ranges 4.50% - 10.75% 6.38% - 10.75%
</TABLE>
The Bank's loans are principally collateralized by properties located in Central
Missouri.
F-22
<PAGE>
14. REGULATORY CAPITAL
At June 30, 1995, the Bank's equity amounted to $5,103,000 or 8.97% of total
assets.
In connection with the issuance of deposit accounts, the Bank is required to
maintain a specified minimum amount of capital in accordance with regulatory
requirements. Under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) and the capital regulations implemented by the
OTS, the Bank's regulatory capital at June 30, 1995 was as follows (dollars
rounded to nearest thousand):
<TABLE>
<CAPTION>
Actual Requirement Excess
-------------- ---------------- --------------
<S> <C> <C> <C>
GAAP capital $ 5,103,000
Plus: Unrealized loss on securities available-for-sale 48,000
--------------
Tangible capital $ 5,151,000 $ 854,000 $ 4,297,000
============== =============== ==============
Tangible capital to adjusted assets (1) 9.0% 1.5% 7.5%
============== =============== ==============
Core capital $ 5,151,000 $ 1,708,000 $ 3,443,000
============== =============== ==============
Core capital to adjusted assets (1) 9.0% 3.0% 6.0%
============== =============== ==============
Risk-based capital $ 5,151,000
Plus:General loan loss allowance component 175,000
--------------
Risk-based capital $ 5,326,000 $ 2,042,000 $ 3,284,000
============== =============== ==============
Risk-based capital to risk weighted assets (2) 20.9.% 8.0% 12.9%
============== =============== ==============
</TABLE>
(1) Percentage of adjusted assets totalling $56,927,000
(2) Percentage of risk-weighted assets totalling $25,529,000
At June 30, 1995, the Bank exceeded its tangible, core, and risk-based capital
requirements currently imposed by Federal regulators.
Section 38 of the Federal Deposit Insurance Act (FDIA), as amended by the
Federal Deposit Insurance Corporation Improvement Act (FDICIA) effective
December 19, 1991, requires that Federal banking agencies establish five capital
levels for insured depository institutions - "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized" - and requires or permits such agencies to take
certain supervisory actions as an insured institution's capital level falls.
Under regulations adopted by the Federal banking agencies to implement these
requirements, the Bank is classified as a "well capitalized institution" for
this purpose. A "well capitalized institution" significantly exceeds the
required minimum level for each relevant capital measure.
15. CONVERSION TO STOCK OWNERSHIP
On July 20, 1994, the Board of Directors of the Bank adopted a plan of
conversion pursuant to which the Bank converted from a federal mutual savings
bank to a federal stock savings bank with the concurrent formation of the
holding company, which acquired all of the common stock of the Bank. On January
31, 1995, the Company sold 333,500 shares of common stock at $10 per share to
eligible purchasers, including depositors of the Bank. Net proceeds from the
conversion, after deducting conversion expenses of $612,463,
F-23
<PAGE>
were $2,722,537 and are reflected as common stock and additional paid-in capital
in the accompanying consolidated statements of financial condition. The Company
utilized $1,361,269 of the net proceeds to acquire all of the common stock of
the Bank. The net conversion costs of $612,463 includes $159,632 of deferred
expenses that was recorded as an asset in 1994. In 1994, the company expensed
$71,801 of costs relating to a previous conversion attempt that failed.
As part of the conversion, the Bank established a liquidation account for the
benefit of eligible depositors who continue to maintain their deposit accounts
in the Bank after conversion. The initial balance of the liquidation account
was $3,484,000. In the unlikely event of a complete liquidation of the Bank,
and only in such event, each eligible depositor will be entitled to receive a
liquidation distribution from the liquidation account in the proportionate
amount of the then-current adjusted balance (but not above the original eligible
deposit balance) for deposit accounts held, before distribution may be made with
respect to the Bank's capital stock. The Bank may not declare or pay a cash
dividend to the Company, or repurchase any of its capital stock, if the effect
thereof would cause the retained earnings of the Bank to be reduced below the
amount required for the liquidation account. Except for such restrictions, the
existence of the liquidation account does not restrict the use or application of
retained earnings.
The Bank's capital exceeds all of the fully phased-in capital requirements
imposed by FIRREA. OTS regulations provide that an institution that exceeds all
fully phased-in capital requirements before and after a proposed capital
distribution and, like the Bank, has not been notified of a need for more than
normal supervision could, after prior notice but without approval by the OTS,
make capital distributions during the calendar year of up to 100% of its net
income to date during the calendar year plus the amount that would reduce by
one-half its "surplus capital ratio" (the excess capital over its fully phased-
in capital requirements) at the beginning of the calendar year. Any additional
capital distributions would require prior regulatory approval.
Unlike the Bank, the Company is not subject to these regulatory restrictions on
the payment of dividends to its stockholders. However, the source of future
dividends may depend upon dividends from the Bank.
16. SUBSEQUENT EVENT
On August 25, 1995, the Board of Directors of the Company approved an additional
$600,000 capital contribution to the Bank and was recorded as additional paid-in
capital. The actual distribution to the Bank was made on August 31, 1995.
17. SUPERVISORY AGREEMENT
On April 22, 1992, the Bank entered into a Supervisory Agreement ("Agreement")
with the OTS in which the OTS agreed to forego the initiation of cease and
desist proceedings against the Bank for so long as the Bank is in compliance
with the provisions of the Agreement. During the year ended June 30, 1993, the
OTS conducted a regular examination of the Bank during which they reviewed the
Bank's compliance with the Agreement. The OTS found that the Bank had violated
the Agreement, principally in the area of commercial real estate lending. As a
result of the above-mentioned violations, among other things, the OTS directed
the Bank to not make any commercial real estate loans, excluding one to four
family nonowner occupied mortgage loans of $100,000 or less, until such time as
appropriate policies, procedures and expertise are obtained by the Bank and
approved by the OTS (the "Supervisory Directive"). On August 2, 1994, the
Agreement was terminated by the OTS as the Bank was found to be in compliance
with the Agreement during the OTS's March 14, 1994 examination; however, the
Supervisory Directive remains in effect.
F-24
<PAGE>
18. PARENT COMPANY FINANCIAL INFORMATION
The following tables present condensed financial information of the parent
company, Mutual Bancompany, Inc.
<TABLE>
<CAPTION>
Condensed Statement of Financial Condition
June 30, 1995
1995
------------
<S> <C>
ASSETS
Cash and due from depository institutions $ 841,786
Investment in subsidiary 5,103,014
Other assets 260,443
------------
Total assets $6,205,243
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity $6,205,243
------------
Total liabilities and stockholders' equity $6,205,243
============
Condensed Statement of Income
From Inception (August 22, 1994) through June 30, 1995
Income
Other interest $ 18,998
Expenses
Other 11,238
------------
Income before income taxes and equity in undistributed
earnings of subsidiary 7,760
Provision for income taxes -
Equity in undistributed earnings of subsidiary 168,605
------------
Net income $ 176,365
============
</TABLE>
F-25
<PAGE>
Condensed Statement of Cash Flows
From Inception (August 22, 1994) through June 30, 1995
<TABLE>
<CAPTION>
1995
------------
<S> <C>
Cash Flows From Operating Activities
Net income $ 176,365
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed earnings of subsidiary (168,605)
Change in other assets (4,760)
-------------
Net cash provided by operating activities 3,000
-------------
Cash Flows From Investing Activities
Investment in Mutual Savings Bank, f.s.b. (1,361,268)
Loan to ESOP, net of repayments (255,683)
-------------
Net cash (used) by investing activities (1,616,951)
-------------
Cash Flows From Financing Activities
Net proceeds from stock issuance 2,455,737
-------------
Net cash provided by financing activities 2,455,737
-------------
Net increase in cash and cash equivalents 841,786
Cash and cash equivalents, beginning of period -
-------------
Cash and cash equivalents, end of period $ 841,786
=============
Supplemental Disclosure of Non-Cash Transactions
Exchange of common stock for loan receivable from
ESOP (other asset) $ 266,800
</TABLE>
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly data for 1995 are presented below:
<TABLE>
(Dollars in thousands)
---------------------------------------------------------
September December March 31, June 30,
30, 1994 31, 1994 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total interest income $ 824 $ 859 $ 874 $ 879
Total interest expense (504) (569) (584) (601)
------------ ------------ ------------ ------------
Net interest income 320 290 290 278
Benefit for loan losses - 21 3 28
------------ ------------ ------------ ------------
Net interest income after benefit for
loan losses 320 311 293 306
Total noninterest income 24 19 31 (25)
Total noninterest expense (282) (321) (293) (263)
------------ ------------ ------------ ------------
Income before income taxes 62 9 31 18
(Provision) benefit for income taxes (20) (2) (11) 89
------------ ------------ ------------ ------------
Net income $ 42 $ 7 $ 20 $ 107
============ ============ ============ ============
</TABLE>
F-26
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1996 (UNAUDITED) AND JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
=====================================================================================
March 31 June 30
1996 1995
=====================================================================================
<S> <C> <C>
ASSETS:
Cash & amounts due from depository institutions $ 37 $ 391
Federal funds sold 161 149
Interest-bearing deposits in other depository institutions 530 42
-------- --------
Total cash & cash equivalents 728 582
Investment securities held-to-maturity 0 7,401
Investment securities available-for-sale 6,684 508
Mortgage-backed securities held-to-maturity 0 2,097
Mortgage-backed securities available-for-sale 4,747 3,740
Stock in Federal Home Loan Bank 426 414
Loans receivable, net 39,213 40,421
Loans held for sale 0 87
Premises and equipment 935 968
Accrued Interest Receivable:
Loans 206 175
Investment securities 51 88
Mortgage-backed securities 30 38
Income tax receivable 11 62
Deferred income tax assets, net 145 135
Other assets 135 135
-------- --------
Total Assets $ 53,311 $ 56,851
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 45,818 $ 48,854
Advances from the FHLB & other borrowings 900 1,325
Advance payments by borrowers for taxes & insurance 114 188
Accrued interest payable 33 30
Other liabilities 210 249
-------- --------
Total Liabilities 47,075 50,646
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 500,000
shares; none issued & outstanding
Common stock, $.01 par value; authorized 2,000,000 3 3
shares; issued & outstanding, 333,500 shares
Additional paid-in capital 2,740 2,722
Deferred compensation - ESOP shares (228) (253)
Retained earnings, substainally restricted 3,788 3,781
Unrealized loss on securities available for sale, net ( 67) ( 48)
-------- --------
Total Stockholders' Equity 6,236 6,205
-------- --------
Total Liabilities & Stockholders' Equity $ 53,311 $ 56,851
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
M-1
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
================================================================================
Three Months Ended Nine Months Ended
March 31 March 31
================================================================================
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 726 $ 669 $ 2,187 $ 1,912
Investment securities 84 104 267 344
Mortgage-backed securities 74 92 235 281
Other 3 9 14 20
------ ------ ------- -------
Total interest income 887 874 2,703 2,557
------ ------ ------- -------
INTEREST EXPENSE:
Deposits 572 539 1,753 1,543
FHLB advances 16 45 58 14
------ ------ ------- -------
Total interest expense 588 584 1,811 1,657
------ ------ ------- -------
NET INTEREST INCOME 299 290 892 900
PROVISION (BENEFIT) FOR LOAN LOSSES ( 5) ( 3) ( 5) (24)
------- ------- -------- --------
NET INTEREST INCOME AFTER PROVISION
(BENEFIT) FOR LOAN LOSSES 304 293 897 924
------ ------ ------- -------
OTHER INCOME:
Service charges and fees 8 8 27 24
Other 24 23 49 50
------ ------ ------- -------
Total other income 32 31 76 74
------ ------ ------- -------
OTHER EXPENSES:
Salaries and employee benefits 170 149 507 471
Occupancy expense 46 47 141 127
Federal insurance premiums 28 28 84 86
Loss on sale of investments
available-for-sale 25 14 25 43
Other 53 55 203 169
------- ------- ------- --------
Total other expenses 322 293 960 896
------- ------- ------- --------
INCOME BEFORE INCOME TAXES 14 31 13 102
INCOME TAXES 7 11 6 33
------- ------- -------- --------
NET INCOME $ 7 $ 20 $ 7 $ 69
======= ======= ======== =========
<CAPTION>
EARNINGS PER SHARE
Three Months Ended
March 31, 1996
<S> <C>
1. Net Income $ 7,014
2. Weighted average common shares outstanding* 310,170
3. Primary earnings per share .20
</TABLE>
* The weighted average common shares outstanding has been computed in accordance
with SOP 93-6, which requires the exclusion of ESOP shares totaling 22,793 at
March 31, 1996 that have not been committed to be released, from earnings per
share computations.
See notes to unaudited consolidated financial statements
M-2
<PAGE>
MUTUAL BANCOMPANY, INC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
==============================================================================================================================
UNREALIZED
LOSS ON
ADDITIONAL DEFFERED SECURITIES
COMMON PAID-IN COMPENSATION RETAINED AVAILABLE
STOCK CAPITAL ESOP EARNINGS FOR SALE-NET TOTAL
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 $3 $2,722 ($253) $3,781 ($48) $6,205
Compensation expense recognized for
Employee Stock Ownership Plan 0 18 25 0 0 43
Net Income 0 0 0 7 0 7
Change in unrealized losses on securities
available for sale - net of taxes 0 0 0 0 (19) (19)
======================================================================================
BALANCE MARCH 31, 1996 $3 $2,740 ($228) $3,788 ($67) $6,236
======================================================================================
</TABLE>
See notes to unaudited consolidated financial statments
M-3
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 7 $ 69
Adjustment to reconcile net income to net cash provided by
operating activities:
FHLB Stock Dividends (9) 0
Depreciation, amortization and accretion:
Premises and equipment 43 44
Loan fees, discounts and premiums, net 36 24
Provision (benefit) for loan losses (5) (24)
Deferred tax expense (benefit) 0 21
Loss on sales of investments available-for-sale, net 25 43
Originations of loans for sale to Federal Home Loan Mortgage Corp. (2,216) (226)
Proceeds from sales of loans to Federal Home Loan Mortgage Corp. 2,306 297
Gains on sales of loans to Federal Home Loan Mortgage Corp. (3) 0
Compensation Expense - ESOP 43 5
Decrease in accrued interest receivable 14 35
(Increase) Decrease in other assets 51 (8)
Increase (Decrease)in other liabilities (36) 11
-------- --------
Net cash provided by operating activities 256 291
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities available for sale 0 175
Proceeds from maturities of investment securities held-to-maturity 24 500
Proceeds from sale of investment securities available-for-sale 1,125 971
Proceeds from sale of mortgage-backed securities available-for-sale 0 486
Principal repayments on mortgage-backed securities available-for-sale 659 635
Principal repayments on mortgage-backed securities held-to-maturity 417 199
FHLB Stock Purchases (3) 0
Purchases of loans receivable (990) (2,856)
Loan originations (in excess of) less than repayments 2,203 (4,948)
Additions to premises and equipment, net (10) (30)
-------- --------
Net cash provided by (used in) investing activities 3,425 (4,868)
-------- --------
(Continued)
</TABLE>
M-4
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
(Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits $(3,036) $ (2,227)
Proceeds from advances from the FHLB 5,125 13,863
Payments of advances from the FHLB (5,550) (11,213)
Increase in reorganization and stock issuance costs 0 160
Decrease in advance payments by borrowers for taxes & insurance (74) (26)
Net proceeds from issuance of common stock 0 2,468
------- -----
Net cash provided by (used in) financing activities (3,535) 3,025
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 146 (1,552)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 582 2,241
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD 728 689
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Income taxes 0 (31)
Interest on deposits 1,750 1,543
Interest on borrowings from the FHLB and other borrowings 58 114
Non-cash investing activities:
Real estate acquired in settlement of loans 0 14
Loans to facilitate sales of real estate owned 0 17
Unrealized losses on securities available for sale, net of taxes 19 109
Transfer of investment securities held-to-maturity to
available-for-sale 7,377 0
Transfer of mortgage backed securities held-to-maturity to
available-for-sale 1,680 0
</TABLE>
See notes to unaudited consolidated financial statements. (Concluded)
M-5
<PAGE>
MUTUAL BANCOMPANY, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of Mutual Bancompany, Inc. and
its subsidiaries, principally MutualSavings Bank (the "Bank") and its Subsidiary
(collectively referred to as the "Company"), included herein reflect all
adjustments which are, in the opinion of management, necessary to present a fair
statement of the results for the interim period presented. All significant
intercompany accounts and transactions have been eliminated. All such
adjustments are of a normal recurring nature. The results of operations for the
nine months ended March 31, 1996 are not necessarily indicative of the results
which may be expected for the entire fiscal year. The accounting policies and
practices of the Company conform to generally accepted accounting principles.
2. REORGANIZATION
On January 31, 1995, the Company closed its stock offering which was made in
connection with the conversion of the Bankfrom a federally chartered mutual
savings bank to a federally chartered stock savings bank. 333,500 shares of
stock were sold in the offering generating net proceeds of $2.7 million. The
Company utilized one-half of the net proceeds to acquire all of the common stock
of the Bank.
In connection with the conversion, the Bank has established an Employee Stock
Ownership Plan ("ESOP") for eligible employees. The ESOP borrowed $266,800 from
the Company and purchased 26,680 common shares issued in the conversion. The
Bank is expected to make scheduled discretionary cash contributions to the ESOP
sufficient to service the amount borrowed. The $236,700 ($266,800 in stock
issued by the Company on January 31, 1995 less the principal payments made by
the Bank) is reflected in the accompanying consolidated financial statements as
a charge to deferred compensation and a credit to common stock and additional
paid-in capital. The unamortized balance of deferred compensation is shown as a
deduction of stockholders' equity. The unpaid balance of the ESOP loan is
eliminated in consolidation.
3. ADVANCES FROM FEDERAL HOME LOAN BANK OF DES MOINES AND OTHER BORROWINGS
At March 31, 1996, the Company has $900,000 in outstanding borrowings with the
Federal Home Loan Bank of Des Moines ("FHLB") at a rate of 5.67%. The Company
has the ability to borrow funds from the FHLB under a blanket agreement which
assigns all investment in FHLB stock as well as qualifying first mortgage loans
as collateral to secure the amounts borrowed. During the first nine months of
fiscal 1996, the maximum borrowed under this agreement was $1.9 million at an
average interest rate of 5.88% during the period. At March 31, 1996, the Company
had approximately $22.1 million in additional borrowing capacity available to it
under this
M-6
<PAGE>
borrowing agreement. The Company also has a $1.0 million line of credit
agreement with a commercial bank. At March 31, 1996, the Company had no
borrowings outstanding under this line.
4. EARNINGS PER SHARE
Earnings per share of common stock has been determined by dividing net income
for the nine month period ended March 31, 1996 by the weighted average number of
shares of common stock outstanding. Effective July 1, 1994 the Company adopted
Statement of Position (SOP) 93-6, which requires recognition of expense based
upon ESOP shares committed to be released and the exclusion of ESOP shares not
committed to be released, from earnings per share computations. Under SOP 93-6,
the number of shares considered outstanding for earnings per share purposes in
periods prior to July 1, 1994, that are no longer considered outstanding for the
nine months ended March 31, 1996 totaled 22,793 shares.
Because the conversion to stock ownership was effected on January 31, 1995,
earnings per share for the nine months ended March 31, 1995 is not applicable.
5. COMMITMENTS AND CONTINGENCIES
Commitments to originate mortgage loans of $948,600 (of which $438,500 were
adjustable-rate commitments) at March 31, 1996 represent amounts which the Bank
plans to fund within the normal commitment period of sixty to ninety days. As of
March 31, 1996, the Bank had no commitments to purchase mortgage-backed
securities or collateralized mortgage obligations.
The Company also offers consumer lines-of-credit for its customers. At March 31,
1996, there were $34,700 in outstanding line of credit commitments.
6. CLASSIFICATION OF INVESTMENT SECURITIES
Following reclassification of the Bank's entire investment portfolio to
Available for Sale as of December 20, 1995, under Statement of Financial
Accounting Standards No. 115, the book value of the Investment and Mortgage-
Backed Securities portfolios at March 31, 1996 were $6.8 million and $4.8
million while the market values were $6.7 million and $4.7 million,
respectively.
M-7
<PAGE>
APPENDIX I
------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
ROOSEVELT FINANCIAL GROUP, INC.,
ROOSEVELT BANK,
MUTUAL BANCOMPANY, INC.
and
MUTUAL SAVINGS BANK, F.S.B.
---------------------------
----------------
APRIL 9, 1996
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS...................................................................1
ARTICLE I. THE MERGER AND RELATED MATTERS............................ 1
1.1 Merger; Resulting Institution............................ 1
1.2 Effective Time of the Merger.............................. 2
1.3 Company Merger............................................ 2
1.4 Closing................................................... 5
1.5 Reservation of Right to Revise Transaction................ 5
ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
MUTUAL BANCOMPANY AND MUTUAL BANK......................... 6
2.1 Organization and Authority................................ 6
2.2 Subsidiaries.............................................. 6
2.3 Capitalization............................................ 7
2.4 Authorization............................................. 7
2.5 Mutual Bancompany Financial Statements.................... 8
2.6 Mutual Reports............................................ 8
2.7 Properties and Leases..................................... 9
2.8 Taxes..................................................... 9
2.9 Material Adverse Change................................... 10
2.10 Commitments and Contracts................................. 10
2.11 Litigation and Other Proceedings.......................... 11
2.12 Insurance................................................. 11
2.13 Compliance with Laws...................................... 11
2.14 Labor..................................................... 13
2.15 Material Interests of Certain Persons..................... 13
2.16 Allowance for Loan Losses; Nonperforming Assets........... 14
2.17 Employee Benefit Plans.................................... 14
2.18 Conduct to Date........................................... 15
2.19 Prospectus/Proxy Statement, etc........................... 16
2.20 Registration Obligations.................................. 17
2.21 Takeover Provisions Not Applicable........................ 17
2.22 Regulatory, Tax and Accounting Matters.................... 17
2.23 Brokers and Finders....................................... 17
2.24 Accuracy of Information................................... 17
2.25 Community Reinvestment Act Compliance..................... 17
2.26 Fairness Opinion.......................................... 17
2.27 Governmental Approvals and Other Conditions............... 18
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
ROOSEVELT FINANCIAL AND ROOSEVELT BANK.................... 18
3.1 Organization and Authority................................ 18
3.2 Capitalization of Roosevelt Financial..................... 18
3.3 Authorization............................................. 19
3.4 Roosevelt Financial Financial Statements.................. 20
3.5 Roosevelt Reports......................................... 20
3.6 Material Adverse Change................................... 20
3.7 Registration Statement, etc............................... 20
3.8 Brokers and Finders....................................... 21
3.9 Accuracy of Information................................... 21
3.10 Community Reinvestment Act Compliance..................... 21
3.11 Litigation and Other Proceedings.......................... 21
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.12 Compliance with Laws........................................ 22
3.13 Governmental Approvals and Other Conditions................. 23
3.14 Commitments and Contracts................................... 23
ARTICLE IV. CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME........... 23
4.1 Conduct of Businesses Prior to the Effective Time........... 23
4.2 Forbearances................................................ 23
ARTICLE V. ADDITIONAL AGREEMENTS....................................... 25
5.1 Access and Information...................................... 25
5.2 Registration Statement; Regulatory Matters.................. 26
5.3 Stockholder Approval........................................ 26
5.4 Current Information......................................... 27
5.5 Agreements of Affiliates.................................... 27
5.6 Expenses.................................................... 27
5.7 Miscellaneous Agreements and Consents....................... 27
5.8 Benefits.................................................... 28
5.9 Press Releases.............................................. 29
5.10 Takeover Provisions......................................... 30
5.11 D&O Indemnification and Insurance........................... 30
5.12 Third Parties............................................... 30
5.13 Schedule 13D or 13G Filings................................. 30
5.14 Dissenting Shareholders' Appraisal Rights................... 30
5.15 Nasdaq Listing.............................................. 30
5.16 Assistance with Third-Party Agreements...................... 31
5.17 Insurance Policies Assignment............................... 31
ARTICLE VI. CONDITIONS.................................................. 31
6.1 Conditions to Each Party's Obligation to Effect the Merger.. 31
6.2 Conditions to Obligations of Mutual Bancompany and
Mutual Bank to Effect the Merger............................ 32
6.3 Conditions to Obligations of Roosevelt Financial and
Roosevelt Bank to Effect the Merger......................... 33
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER........................... 34
7.1 Termination................................................. 34
7.2 Effect of Termination....................................... 34
7.3 Amendment................................................... 35
7.4 Severability................................................ 36
7.5 Waiver...................................................... 36
ARTICLE VIII. GENERAL PROVISIONS......................................... 36
8.1 Non-Survival of Representations, Warranties and Agreements.. 36
8.2 Notices..................................................... 36
8.3 Miscellaneous............................................... 37
</TABLE>
Exhibit A - Form of Voting Agreement (intentionally omitted)
Exhibit B - Subsidiary Agreement and Plan of Merger (intentionally omitted)
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
-----------------------------------------------
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"),
dated April 9, 1996, is by and among ROOSEVELT FINANCIAL GROUP, INC., a Delaware
corporation ("Roosevelt Financial"), ROOSEVELT BANK, a federally chartered
savings bank and a wholly owned subsidiary of Roosevelt Financial ("Roosevelt
Bank"), MUTUAL BANCOMPANY, INC. a Missouri corporation ("Mutual Bancompany"),
and MUTUAL SAVINGS BANK, F.S.B., a federally chartered savings bank and a wholly
owned subsidiary of Mutual Bancompany ("Mutual Bank").
A. Roosevelt Financial, Roosevelt Bank, Mutual Bancompany and Mutual Bank
wish to provide for the terms and conditions of the following described business
combination in which Mutual Bancompany will be merged with Roosevelt Financial
(the "Company Merger"), followed immediately by the merger of Mutual Bank with
Roosevelt Bank (the "Bank Merger") pursuant to the Subsidiary Agreement and Plan
of Merger attached hereto as Exhibit B (the "Subsidiary Merger Agreement"). The
surviving entity of the Bank Merger is sometimes be referred to herein as the
"Surviving Bank." The Company Merger and the Bank Merger are collectively
referred to herein as the "Merger."
B. For federal income tax purposes, it is intended that the Company
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), the
Bank Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) or (D) of the Code and this Agreement shall constitute a plan of
reorganization pursuant to Section 368 of the Code.
C. For accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests.
D. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
E. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to Roosevelt Financial's willingness to enter into
this Agreement, Roosevelt Financial and each of the directors of Mutual
Bancompany have entered into voting agreements in the form attached hereto as
Exhibit A (the "Voting Agreements").
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger; Resulting Institution. Subject to the terms and conditions of
-----------------------------
this Agreement, and pursuant to the provisions of the Delaware General
Corporation Law (the "DGCL"), the General and Business Corporation Law of
Missouri (the "Missouri Act"), the Federal Deposit Insurance Act (the "FDIA"),
the Home Owners' Loan Act (the "HOLA") and the rules and regulations promulgated
under the HOLA (the "Thrift Regulations"), (a) at the Effective Time (as
hereinafter defined), Mutual Bancompany shall be merged with and into Roosevelt
Financial pursuant to the terms and conditions set forth herein and (b)
thereafter, at the Bank Merger Effective Time (as hereinafter defined), Mutual
Bank shall be merged with Roosevelt Bank pursuant to the terms and conditions
set forth in the Subsidiary
<PAGE>
Merger Agreement. Upon the consummation of the Company Merger, the separate
corporate existence of Mutual Bancompany shall cease and Roosevelt Financial
shall continue as the surviving corporation. The name of Roosevelt Financial, as
the surviving corporation of the Company Merger shall remain "Roosevelt
Financial Group, Inc." From and after the Effective Time, Roosevelt Financial,
as the surviving corporation of the Company Merger, shall possess all of the
properties and rights and be subject to all of the liabilities and obligations
of Roosevelt Financial and Mutual Bancompany, all as more fully described in the
DGCL and the Missouri Act. The Bank Merger will be consummated pursuant to the
terms and conditions set forth in the Subsidiary Merger Agreement.
1.2 Effective Time of the Merger. As soon as practicable after each of
----------------------------
the conditions set forth in Article 6 hereof have been satisfied or waived, the
parties will file, or cause to be filed, with the Secretary of State of
Delaware, the Secretary of State of the State of Missouri and the Office of
Thrift Supervision (the "OTS") such certificates or articles of merger, articles
of combination and other documents as they may deem necessary or appropriate for
the Company Merger and the Bank Merger, which certificates or articles of
merger, articles of combination and other documents shall in each case be in the
form required by and executed in accordance with the applicable provisions of
the DGCL, the Missouri Act and the Thrift Regulations, respectively. The Company
Merger shall become effective at the time the certificate of merger for such
merger is filed with the Secretary of State of Delaware and the articles of
merger are filed with the Secretary of State of the State of Missouri (the
"Effective Time"). The Bank Merger shall become effective at the time the
articles of combination for such merger are endorsed by the Secretary of the OTS
pursuant to the Thrift Regulations (the "Bank Merger Effective Time"). The
parties shall cause the Company Merger to become effective immediately prior to
the Bank Merger.
1.3 Company Merger.
--------------
(a) Conversion of Mutual Bancompany Stock. At the Effective Time:
-------------------------------------
(i) Each share of common stock of Mutual Bancompany, $.01 par
value per share ("Mutual Bancompany Common Stock"), issued and
outstanding immediately prior thereto (except for Dissenting Shares,
if applicable, as defined in Section 1.3(c) hereof) shall, by virtue
of the Company Merger and without any action on the part of the holder
thereof, but subject to Section 1.3(e) hereof, be converted into the
right to receive from Roosevelt Financial a number (the "Exchange
Ratio") of shares of common stock of Roosevelt Financial, par value
$.01 per share ("Roosevelt Financial Common Stock"), equal to the
quotient of (A) $23.00 divided by (B) the Roosevelt Share Price (i.e.,
the weighted average sale price of all Roosevelt Financial Common
Stock traded on the Nasdaq National Market during the ten trading days
ending on the date that is three trading days prior to the Closing
Date). If, subsequent to the date of this Agreement but prior to the
Effective Time, the outstanding shares of Roosevelt Financial Common
Stock shall, through a merger, reclassification, recapitalization,
stock dividend, stock split, reverse stock split, or other similar
change in Roosevelt Financial's capitalization, have been increased,
decreased, changed into or exchanged for a different number or kind of
shares or securities, appropriate adjustment will be made to the
Exchange Ratio.
Notwithstanding any other provision of this Agreement, any shares
of Mutual Bancompany Common Stock issued and outstanding immediately
prior to the Effective Time which are then owned beneficially or of
record by Roosevelt Financial, Roosevelt Bank, Mutual Bancompany,
Mutual Bank or by any direct or indirect Subsidiary (as hereinafter
defined) of any of them or held in the treasury of Mutual Bancompany
(other than any shares of Mutual Bancompany Common Stock held (A)
directly or indirectly in
2
<PAGE>
trust accounts, managed accounts and the like, or otherwise held in a
fiduciary capacity, that are beneficially owned by third parties or
(B) in respect of a debt previously contracted) shall, by virtue of
the Company Merger, be canceled without payment of any consideration
therefor and without any conversion thereof.
(ii) Each share of Roosevelt Financial Common Stock issued and
outstanding or held in treasury immediately prior to the Effective
Time shall remain issued and outstanding or held in treasury and
continue to be an identical issued and outstanding or treasury share
of Roosevelt Financial Common Stock after the Effective Time.
(iii) The holders of certificates representing shares of Mutual
Bancompany Common Stock shall cease to have any rights as stockholders
of Mutual Bancompany, except such rights, if any, as they may have
pursuant to the Missouri Act. Except as provided herein, until
certificates representing shares of Mutual Bancompany Common Stock are
surrendered for exchange, each such certificate shall, after the
Effective Time, represent for all purposes only the right to receive
the number of whole shares of Roosevelt Financial Common Stock into
which their shares of Mutual Bancompany Common Stock shall have been
converted by the Company Merger as provided above and the right to
receive the cash value of any fraction of a share of Roosevelt
Financial Common Stock as provided below (collectively, the "Merger
Consideration").
(b) Reservation of Shares. Prior to the Effective Time, the Board
---------------------
of Directors of Roosevelt Financial shall reserve for issuance a sufficient
number of shares of Roosevelt Financial Common Stock for the purpose of
issuing its shares to Mutual Bancompany's stockholders in accordance
herewith.
(c) Dissenting Shares. Any shares of Mutual Bancompany Common Stock
-----------------
held by a holder who dissents from the Company Merger in compliance with
the applicable provisions of the Missouri Act and becomes entitled to
obtain payment for the fair value of such shares pursuant to the Missouri
Act shall be herein called "Dissenting Shares." Notwithstanding any other
provision of this Agreement, any Dissenting Shares shall not, after the
Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights
as are afforded in respect of Dissenting Shares pursuant to the Missouri
Act. All payments in respect of Dissenting Shares shall be from funds of
Roosevelt Financial and not from the acquired assets of Mutual Bancompany.
If any holder of Mutual Bancompany Common Stock purports to exercise
dissenters' rights but fails at any time to comply with all requirements
for the exercise of dissenters' rights under applicable law (or validly
waives such rights), then such holder shall not be entitled to proceed with
such dissent, the shares of such holder shall be subject to conversion
pursuant to Section 1.3(a) hereof, and such holder shall be entitled to
receive only the Merger Consideration as provided herein.
(d) Exchange of Mutual Bancompany Common Stock
------------------------------------------
(i) As soon as reasonably practicable after the Effective
Time, and subject to the rights and procedures applicable to holders of
Dissenting Shares, holders of record of certificates formerly representing
shares of Mutual Bancompany Common Stock (the "Certificates") shall be
instructed to tender such Certificates to an independent exchange agent to
be selected by Roosevelt Financial (the "Exchange Agent") pursuant to a
letter of transmittal that Roosevelt Financial shall deliver or cause to be
delivered to such
3
<PAGE>
holders. Such letter of transmittal shall specify that risk of loss and
title to Certificates shall pass only upon acceptance of such Certificates
by the Exchange Agent.
(ii) After the Effective Time, each holder of a Certificate that
surrenders such Certificate to the Exchange Agent will, upon acceptance
thereof by the Exchange Agent, be entitled to the Merger Consideration
payable in respect of the shares represented thereby.
(iii) The Exchange Agent shall accept Certificates upon compliance
with such reasonable terms and conditions as Roosevelt Financial or the
Exchange Agent may impose to effect an orderly exchange thereof in
accordance with customary exchange practices. Certificates shall be
appropriately endorsed or accompanied by such instruments of transfer as
Roosevelt Financial or the Exchange Agent may reasonably require.
(iv) Each outstanding Certificate, other than those representing
Dissenting Shares, shall until duly surrendered to Roosevelt Financial or
the Exchange Agent be deemed to evidence the right to receive the Merger
Consideration.
(v) After the Effective Time, holders of Certificates shall cease
to have rights with respect to the Mutual Bancompany Common Stock
previously represented by such Certificates, and their sole rights (other
than the holders of Certificates representing Dissenting Shares) shall be
to exchange such Certificates for the Merger Consideration. After the
Effective Time, there shall be no further transfer on the records of Mutual
Bancompany of Certificates, and if such Certificates are presented to
Mutual Bancompany for transfer, they shall be canceled against delivery of
the Merger Consideration. Roosevelt Financial shall not be obligated to
deliver the Merger Consideration to any holder of Mutual Bancompany Common
Stock until such holder surrenders the Certificates as provided herein. No
dividends declared will be remitted to any person entitled to receive
Roosevelt Financial Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive such Roosevelt
Financial Common Stock, at which time such dividends shall be remitted to
such person, without interest and less any taxes that may have been imposed
thereon. Certificates surrendered for exchange by any person constituting
an "affiliate" of Mutual Bancompany for purposes of Rule 145 under the
Securities Act of 1933 and the rules and regulations thereunder (the
"Securities Act") shall not be exchanged for certificates representing
Roosevelt Financial Common Stock until Roosevelt Financial has received a
written agreement from such person as specified in Section 5.5. Neither the
Exchange Agent nor any party to this Agreement nor any affiliate thereof
shall be liable to any holder of Mutual Bancompany Common Stock represented
by any Certificate for any consideration paid to a public official pursuant
to applicable abandoned property, escheat or similar laws. Roosevelt
Financial and the Exchange Agent shall be entitled to rely upon the stock
transfer books of Mutual Bancompany to establish the identity of those
persons entitled to receive the consideration specified in this Agreement,
which books shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any Certificate,
Roosevelt Financial and the Exchange Agent shall be entitled to deposit any
consideration in respect thereof in escrow with an independent third party
and thereafter be relieved with respect to any claims thereto.
4
<PAGE>
(e) No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of
Roosevelt Financial Common Stock shall be issued in the Company Merger.
Each holder who otherwise would have been entitled to a fraction of a share
of Roosevelt Financial Common Stock shall receive in lieu thereof cash
(without interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled by the
Roosevelt Share Price. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share
interest.
(f) Stock Options. No options, restricted stock or other awards are
-------------
outstanding under either the Mutual Bancompany 1995 Stock Option and
Incentive Plan (the "Mutual Bancompany Option Plan") or the Mutual
Bancompany Management Recognition Plan.
(g) Certificate of Incorporation and Bylaws of the Surviving
--------------------------------------------------------
Corporation. The Certificate of Incorporation and bylaws of Roosevelt
-----------
Financial, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation and bylaws of Roosevelt Financial, as the
surviving corporation of the Company Merger, until either is thereafter
amended in accordance with applicable law.
(h) Directors and Officers of the Surviving Corporation. The
---------------------------------------------------
directors and officers of Roosevelt Financial immediately prior to the
Effective Time shall be the directors and officers of Roosevelt Financial,
as the surviving corporation of the Company Merger, until their respective
successors shall be duly elected and qualified or otherwise duly selected.
1.4 Closing. Subject to the provisions of Article 6 hereof, the closing
-------
of the transactions contemplated by this Agreement (the "Closing") shall take
place as soon as practicable after satisfaction or waiver of all of the
conditions to Closing, and shall be at 10:00 a.m. on the last business day of
the first calendar month following the satisfaction of all of the conditions to
Closing, at the executive offices of Roosevelt Financial or at such other date,
time and location as is mutually agreed to by Roosevelt Financial and Mutual
Bancompany. The date on which the Closing actually occurs is herein referred to
as the "Closing Date."
1.5 Reservation of Right to Revise Transaction. Roosevelt Financial shall
------------------------------------------
have the unilateral right to change the method of effecting the Merger
(including without limitation the provisions of this Article I), to the extent
permitted by applicable law and to the extent it deems such change to be
desirable; provided, however, that no such change shall (a) alter or change the
amount or kind of the Merger Consideration, (b) diminish the benefits to be
received by the directors, officers or employees of Mutual Bancompany and Mutual
Bank as set forth in this Agreement or in any other agreements between the
parties made in connection with this Agreement, (c) materially impede or delay
the consummation of the Company Merger or (d) adversely affect the tax treatment
of Mutual Bancompany stockholders as a result of receiving the Merger
Consideration. Roosevelt may exercise this right of revision by giving written
notice thereof in the manner provided in Section 8.2 of this Agreement.
5
<PAGE>
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF MUTUAL BANCOMPANY AND MUTUAL BANK
Mutual Bancompany and Mutual Bank represent and warrant to and covenant
with Roosevelt Financial and Roosevelt Bank as follows:
2.1 Organization and Authority. Mutual Bancompany is a corporation
--------------------------
duly organized, validly existing and in good standing under the laws of the
State of Missouri, is duly qualified to do business and is in good standing in
all jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on the financial condition,
assets, deposit liabilities, results of operations or business (collectively,
the "Condition") of Mutual Bancompany and the Mutual Bancompany Subsidiaries,
taken as a whole, and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted.
The term "Subsidiary" when used with respect to any party means any entity
(including without limitation any corporation, partnership, joint venture or
other organization, whether incorporated or unincorporated) which is
consolidated with such party for financial reporting purposes. Mutual
Bancompany is registered as a savings and loan holding company with the OTS
under the HOLA. True and complete copies of the Articles of Incorporation and
bylaws of Mutual Bancompany and of the Charter and bylaws of Mutual Bank, each
as in effect on the date of this Agreement, are set forth in Schedule 2.1
hereto.
2.2 Subsidiaries. Set forth in Schedule 2.2 is a complete and correct
------------
list of all Subsidiaries of Mutual Bancompany (each a "Mutual Bancompany
Subsidiary" and collectively the "Mutual Bancompany Subsidiaries"). Other than
the Mutual Bancompany Subsidiaries, there are no entities in which Mutual
Bancompany has a five percent or greater direct or indirect equity or ownership
interest. All outstanding Equity Securities (as defined in Section 2.3) of each
Mutual Bancompany Subsidiary are owned directly or indirectly by Mutual
Bancompany. All of the outstanding shares of capital stock of the Mutual
Bancompany Subsidiaries are validly issued, fully paid and nonassessable and are
owned directly or indirectly by Mutual Bancompany free and clear of any lien,
claim, charge, option, encumbrance, agreement, mortgage, pledge, security
interest or restriction (each a "Lien") with respect thereto. Each of the Mutual
Bancompany Subsidiaries is a corporation, savings bank, or other entity duly
incorporated or organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation or organization, and has the corporate
power and authority to own or lease its properties and assets and to carry on
its business as it is now being conducted. Each of the Mutual Bancompany
Subsidiaries is duly qualified to do business in each jurisdiction where its
ownership or leasing of property or the conduct of its business requires it so
to be qualified, except where the failure to be so qualified, individually or in
the aggregate, would not have a material adverse effect on the Condition of
Mutual Bancompany and the Mutual Bancompany Subsidiaries, taken as a whole.
Except as set forth on Schedule 2.2 and except for shares of stock of the
Federal Home Loan Bank of Des Moines (the "FHL Bank"), Mutual Bancompany does
not own beneficially, directly or indirectly, any shares of any class of Equity
Securities or similar interests of any corporation, bank, business trust,
association or similar organization. Mutual Bank is a federally chartered stock
savings bank. The deposits of Mutual Bank are insured up to applicable limits by
the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC"). Mutual Bank is a member in good standing of the FHL
Bank. Mutual Bank is a "domestic building and loan association" as defined in
Section 7701(a)(19) of the Code. Neither Mutual Bancompany nor any Mutual
Bancompany Subsidiary holds any interest in a partnership or joint venture of
any kind.
6
<PAGE>
2.3 Capitalization. The authorized capital stock of Mutual Bancompany
--------------
consists of (i) 2,000,000 shares of Mutual Bancompany Common Stock, of which, as
of the date hereof, 333,500 shares are issued and outstanding (and no shares of
Mutual Bancompany Common Stock are held in the treasury of Mutual Bancompany)
and (ii) 500,000 shares of preferred stock, $.01 par value per share, none of
which are issued or outstanding. As of the date hereof, no shares of Mutual
Bancompany Common Stock have been issued pursuant to, or are covered by options
or other awards granted under, either the Mutual Bancompany Option Plan or the
Mutual Bancompany Management Recognition Plan. Since June 30, 1995, no Equity
Securities of Mutual Bancompany have been issued. Except as set forth above,
there are no Equity Securities of Mutual Bancompany outstanding. "Equity
Securities" of an issuer means capital stock or other equity securities of such
issuer, options, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible
into, shares of any capital stock or other equity securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer is
or may become bound to issue additional shares of its capital stock or other
equity securities of such issuer, or options, warrants, scrip or rights to
purchase, acquire, subscribe to, calls on or commitments for any shares of its
capital stock or other equity securities. All of the issued and outstanding
shares of Mutual Bancompany Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive right of
any stockholder of Mutual Bancompany.
2.4 Authorization.
-------------
(a) Mutual Bancompany and Mutual Bank have the corporate power and
authority to enter into this Agreement and, except as set forth on Schedule
2.4, to carry out their obligations hereunder. The only stockholder vote
required for Mutual Bancompany to approve this Agreement is the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Mutual Bancompany Common Stock entitled to vote at a meeting called for
such purpose. The execution, delivery and performance of this Agreement by
Mutual Bancompany and Mutual Bank and the consummation by Mutual Bancompany
and Mutual Bank of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Mutual Bancompany and Mutual Bank.
Subject to the approval of Mutual Bancompany's stockholders and subject to
the receipt of such approvals of Regulatory Authorities (as defined in
Section 2.6) as may be required by statute, regulation or the Charter of
Mutual Bank, this Agreement is a valid and binding obligation of Mutual
Bancompany and Mutual Bank enforceable against Mutual Bancompany and Mutual
Bank in accordance with its terms, subject as to enforcement to bankruptcy,
insolvency and other similar laws of general applicability affecting
creditors' rights and to general equity principles.
(b) Neither the execution, delivery or performance by Mutual
Bancompany and Mutual Bank of this Agreement, nor the consummation by
Mutual Bancompany and Mutual Bank of the transactions contemplated hereby,
nor compliance by Mutual Bancompany and Mutual Bank with any of the
provisions hereof, will (i) except as set forth on Schedule 2.4, violate or
conflict with any term, condition or provision of its articles of
incorporation, charter or bylaws, (ii) violate, conflict with, or result in
a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the
creation of any Lien upon any of the properties or assets of Mutual
Bancompany or any Mutual Bancompany Subsidiary under any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Mutual Bancompany or any Mutual Bancompany Subsidiary is a party or by
which it may be bound, or to which Mutual Bancompany or any Mutual
Bancompany Subsidiary or any of their properties or assets may be subject,
or (iii) subject
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to compliance with the statutes and regulations referred to in subsection
(c) of this Section 2.4, to the best knowledge of Mutual Bancompany and of
each Mutual Bancompany Subsidiary (collectively, the "Best Knowledge of
Mutual"), violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Mutual Bancompany or any Mutual
Bancompany Subsidiary or any of their respective material properties or
assets.
(c) Other than in connection or in compliance with the provisions of
the DGCL, the Missouri Act, the Securities Act, the Securities Exchange Act
of 1934 and the rules and regulations thereunder (the "Exchange Act"), the
securities or blue sky laws of the various states or filings, consents,
reviews, authorizations, approvals or exemptions required under the Savings
and Loan Holding Company Act (the "Holding Company Act"), the FDIA, the
HOLA, the Thrift Regulations, the Bank Merger Act (the "BMA") and the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), no notice
to, filing with, exemption or review by, or authorization, consent or
approval of, any public body or authority is necessary on the part of
Mutual Bancompany or Mutual Bank for the consummation by them of the
transactions contemplated by this Agreement.
2.5 Mutual Bancompany Financial Statements. The consolidated balance
--------------------------------------
sheets of Mutual Bancompany and the Mutual Bancompany Subsidiaries as of June
30, 1995 and 1994 and the related consolidated statements of income, cash flows
and changes in stockholders' equity for each of the three years in the three-
year period ended June 30, 1995, together with the notes thereto, audited by the
accounting firm of Deloitte & Touche, L.L.P. (with respect to statements as of
June 30, 1994 and 1993 and for the years then ended) and Williams-Keepers (with
respect to statements as of June 30, 1995 and for the year then ended) and
included in Mutual Bancompany's Annual Report on Form 10-KSB for the year ended
June 30, 1995 as filed with the Securities and Exchange Commission (the "SEC"),
and the unaudited consolidated condensed balance sheets of Mutual Bancompany and
the Mutual Bancompany Subsidiaries as of September 30 and December 31, 1995, and
the related unaudited consolidated condensed statements of income, cash flows
and changes in stockholders' equity for the periods then ended, included in
Mutual Bancompany's Quarterly Reports on Form 10-QSB for the periods then ended
(each, a "Mutual Bancompany Form 10-QSB") as filed with the SEC (collectively,
the "Mutual Bancompany Financial Statements"), have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except for the omission of notes to unaudited statements), present fairly
the consolidated financial position of Mutual Bancompany and the Mutual
Bancompany Subsidiary at such dates, and the consolidated results of operations,
cash flows and changes in stockholders' equity of Mutual Bancompany and the
Mutual Bancompany Subsidiaries for the periods stated therein and are derived
from the books and records of Mutual Bancompany and the Mutual Bancompany
Subsidiaries, which are complete and accurate in all material respects and have
been maintained in accordance with good business practices. Neither Mutual
Bancompany nor any of the Mutual Bancompany Subsidiaries has any material
contingent liabilities that are not described in the financial statements
described above.
2.6 Mutual Reports. Since June 30, 1995, each of Mutual Bancompany and
--------------
the Mutual Bancompany Subsidiaries has filed all material reports, registrations
and statements, together with any required material amendments thereto,
including, but not limited to, Forms 10-KSB (including Mutual Bancompany's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995), Forms 10-
QSB, Forms 8-K and proxy statements, that it was required to file with (i) the
SEC, (ii) the OTS, (iii) the FHL Bank and the Federal Home Loan Bank System,
(iv) the FDIC and (v) any other federal, state, municipal, local or foreign
government, securities, banking, savings and loan, insurance and other
governmental or regulatory authority and the agencies and staffs thereof (the
entities in the foregoing clauses (i) through (v) being referred to herein
collectively as the "Regulatory Authorities" and individually as a "Regulatory
Authority"). All such reports and statements filed with any such Regulatory
Authority are collectively
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referred to herein as the "Mutual Reports." As of its respective date, each
Mutual Report complied in all material respects with all of the rules and
regulations promulgated by the applicable Regulatory Authority and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.7 Properties and Leases. Except (i) as may be reflected in the Mutual
---------------------
Bancompany Financial Statements, (ii) any Lien for current taxes not yet
delinquent and (iii) with respect to assets classified as real estate owned,
Mutual Bancompany and the Mutual Bancompany Subsidiaries have good title free
and clear of any material Lien to all the real and personal property reflected
in Mutual Bancompany's consolidated balance sheet as of December 31, 1995
included in the most recent Mutual Bancompany Form 10-QSB and, in each case, all
real and personal property acquired since such date, except such real and
personal property as has been disposed of in the ordinary course of business.
All leases material to Mutual Bancompany or any Mutual Bancompany Subsidiary,
pursuant to which Mutual Bancompany or the Mutual Bancompany Subsidiary is a
lessee or lessor of real or personal property, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any material existing default by Mutual Bancompany or any Mutual
Bancompany Subsidiary or any event which, with notice or lapse of time or both,
would constitute a material default by Mutual Bancompany or any Mutual
Bancompany Subsidiary. Substantially all of Mutual Bancompany's and the Mutual
Bancompany Subsidiaries' buildings, structures and equipment in regular use have
been well maintained and are in good and serviceable condition, normal wear and
tear excepted. To the Best Knowledge of Mutual, none of the buildings,
structures and equipment of Mutual Bancompany or any Mutual Bancompany
Subsidiary violates or fails to comply with in any material respect any
applicable health, fire, environmental, safety, zoning or building laws or
ordinances or any restrictive covenant pertaining thereto.
2.8 Taxes. During the past five years (and to the Best Knowledge of
-----
Mutual, at all times prior thereto), Mutual Bancompany and each Mutual
Bancompany Subsidiary have timely (including extensions) filed all required tax
returns and reports, and they will timely (including extensions) file all tax
returns and reports required to be filed at or prior to the Closing Date
("Mutual Bancompany's Returns"). Each of Mutual Bancompany and the Mutual
Bancompany Subsidiaries has paid, or set up adequate reserves on the Mutual
Bancompany Financial Statements for the payment of, all taxes required to be
paid in respect of the periods covered by such returns and reports. Neither
Mutual Bancompany nor any Mutual Bancompany Subsidiary will have any liability
material to the Condition of Mutual Bancompany and the Mutual Bancompany
Subsidiaries, taken as a whole, for any such taxes in excess of the amounts so
paid or reserves so established and no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against Mutual Bancompany or any Mutual Bancompany Subsidiary which
would not be covered by existing reserves. Neither Mutual Bancompany nor any
Mutual Bancompany Subsidiary is delinquent in the payment of any tax, assessment
or governmental charge, nor has it requested any extension of time within which
to file any tax returns in respect of any fiscal year which have not since been
filed and no requests for waivers of the time to assess any tax are pending.
The federal income tax returns of Mutual Bancompany and the Mutual Bancompany
Subsidiaries have been audited by the Internal Revenue Service (the "IRS") with
respect to those periods set forth on Schedule 2.8. The state income tax returns
of Mutual Bancompany and the Mutual Bancompany Subsidiaries have not been
audited during the past five years. There is no deficiency or refund litigation
or matter in controversy with respect to Mutual Bancompany's Returns. Neither
Mutual Bancompany nor any Mutual Bancompany Subsidiary (i) has extended or
waived any statute of limitations on the assessment of any tax due; (ii) is a
party to any agreement providing for the allocation or sharing of taxes (other
than the allocation of federal income taxes as provided by regulation 1.1552-
1(a)(1) under the Code); (iii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code, by reason of a voluntary change in
accounting method (nor to the Best Knowledge of Mutual has the IRS
9
<PAGE>
proposed any such adjustment or change of accounting method) or (iv) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
2.9 Material Adverse Change. Except as set forth on Schedule 2.9, since
-----------------------
June 30, 1995, there has been no material adverse change in the Condition of
Mutual Bancompany and the Mutual Bancompany Subsidiaries, taken as a whole,
except as may have resulted or may result from changes to laws and regulations,
generally accepted accounting principles or regulatory accounting principles or
changes in economic conditions applicable to depositary institutions generally.
2.10 Commitments and Contracts.
-------------------------
(a) Neither Mutual Bancompany nor any Mutual Bancompany Subsidiary
is a party or subject to any of the following (whether written or oral,
express or implied):
(i) any agreement, arrangement or commitment (A) not made in
the ordinary course of business, (B) by virtue of which the consent
or approval of any third party (other than Regulatory Authorities) is
required for or in connection with the execution, delivery and
performance of this Agreement or the consummation of the Merger or
(C) pursuant to which Mutual Bancompany or any of the Mutual
Bancompany Subsidiaries is or may become obligated to invest in or
contribute capital to any Mutual Bancompany Subsidiary or any other
entity;
(ii) any agreement, indenture or other instrument not
disclosed in the Mutual Bancompany Statements relating to the
borrowing of money by Mutual Bancompany or any Mutual Bancompany
Subsidiary or the guarantee by Mutual Bancompany or any Mutual
Bancompany Subsidiary of any such obligation (other than trade
payables or instruments related to transactions entered into in the
ordinary course of business by any Mutual Bancompany Subsidiary, such
as deposits, Fed Funds borrowings, FHL Bank advances and repurchase
agreements);
(iii) any contract, agreement or understanding with any labor
union or collective bargaining organization;
(iv) any contract containing covenants which limit the ability
of Mutual Bancompany or any Mutual Bancompany Subsidiary to compete
in any line of business or with any person or containing any
restriction of the geographical area in which, or method by which,
Mutual Bancompany or any Mutual Bancompany Subsidiary may carry on
its business (other than as may be required by law or any applicable
Regulatory Authority);
(v) any off-balance sheet financial instruments, including
without limitation letters of credit, unfunded commitments (other
than unfunded commitments made in the ordinary course of business and
consistent with past practice) and derivative financial instruments;
(vi) any contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-B promulgated
by the SEC that is not listed under Item 13 of Mutual Bancompany's
Annual Report on Form 10-KSB for the year ended June 30, 1995; or
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<PAGE>
(vii) any contract or agreement (A) not terminable by
Mutual Bancompany or any of its Subsidiaries on 30 or fewer days'
notice or (B) involving annual payments by or to them aggregating
$25,000 or more.
(b) Neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary is in violation of its charter or organizational documents or
bylaws or in default under any agreement, commitment, arrangement, lease,
insurance policy, or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has
not occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except where such default would not
have a material adverse effect on the Condition of Mutual Bancompany and
the Mutual Bancompany Subsidiaries, taken as a whole.
2.11 Litigation and Other Proceedings. Other than as set forth on
--------------------------------
Schedule 2.11, there is no claim, action, suit, investigation or proceeding,
pending or, to the Best Knowledge of Mutual, threatened against Mutual
Bancompany or any Mutual Bancompany Subsidiary, nor are they subject to any
order, judgment or decree, except for matters which do not involve a claim for
damages for more than $25,000 or for non-monetary relief, but not excepting any
actions, suits or proceedings which purport or seek to enjoin or restrain the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as set forth on Schedule 2.11 there are no actions, suits,
or proceedings pending or, to the Best Knowledge of Mutual, threatened against
Mutual Bancompany or any Mutual Bancompany Subsidiary or any of their respective
officers or directors by any stockholder of Mutual Bancompany or any Mutual
Bancompany Subsidiary (or by any former stockholder of Mutual Bancompany or any
Mutual Bancompany Subsidiary relating to or arising out of such person's status
as a stockholder or former stockholder) or involving claims under the Securities
Act, the Exchange Act, the Community Reinvestment Act of 1977 (the "CRA") or the
fair lending laws.
2.12 Insurance. Each of Mutual Bancompany and the Mutual Bancompany
---------
Subsidiaries has taken or will timely take all requisite action (including
without limitation the making of claims and the giving of notices) pursuant to
its directors' and officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters (other than matters
arising in connection with this Agreement and the transactions contemplated
hereby) occurring prior to the Effective Time that are known to Mutual
Bancompany. Set forth on Schedule 2.12 is a list of all insurance policies
(excluding policies maintained on one- to four-family residential properties
acquired through foreclosure or on properties in which neither Mutual Bancompany
nor any Mutual Bancompany Subsidiary have any interest other than as collateral
for mortgage loans held by Mutual Bank) maintained by or for the benefit of
Mutual Bancompany or any of the Mutual Bancompany Subsidiaries or their
respective directors, officers, employees or agents. Neither Mutual Bancompany
nor any of the Mutual Bancompany Subsidiaries has, during the past three years,
had an insurance policy canceled or been denied insurance coverage for which any
of such companies has applied.
2.13 Compliance with Laws.
--------------------
(a) Mutual Bancompany and each of the Mutual Bancompany
Subsidiaries have all material permits, licenses, authorizations, orders
and approvals of, and have made all material filings, applications and
registrations with, all Regulatory Authorities that are required in order
to permit them to own or lease their properties and assets and to carry on
their business as presently conducted; all such permits, licenses,
authorizations, orders and approvals are in full force and effect and, to
the Best Knowledge of Mutual, no suspension or cancellation of any of them
is threatened and all such filings, applications and registrations are
current.
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(b) (i) Each of Mutual Bancompany and the Mutual Bancompany
Subsidiaries has complied with all laws, regulations and orders (including
without limitation zoning ordinances, building codes, the Employee
Retirement Income Security Act of 1974 ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and safety laws and
regulations, and including without limitation, in the case of any Mutual
Bancompany Subsidiary that is a savings bank or savings association,
banking organization, banking corporation or trust company, all statutes,
rules, regulations and policy statements pertaining to the conduct of a
banking, savings bank, deposit-taking, lending or related business, or to
the exercise of trust powers) and governing instruments applicable to them
and to the conduct of their business, except such noncompliance as,
individually and in the aggregate, would not have a material adverse effect
on the Condition of Mutual Bancompany and the Mutual Bancompany
Subsidiaries, taken as a whole, and (ii) neither Mutual Bancompany nor any
Mutual Bancompany Subsidiary is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result in a default
under, the terms of any judgment, order, writ, decree, permit, or license
of any Regulatory Authority or court, whether federal, state, municipal, or
local and whether at law or in equity, except such defaults as,
individually and in the aggregate, would not have a material adverse effect
on the Condition of Mutual Bancompany and the Mutual Bancompany
Subsidiaries, taken as a whole. Except as set forth in Schedule 2.13B,
neither Mutual Bancompany nor any Mutual Bancompany Subsidiary is subject
to or reasonably likely to incur a liability as a result of its past or
present ownership, operation, or use of any Property (as defined below) of
Mutual Bancompany or any Mutual Bancompany Subsidiary (whether directly or,
to the Best Knowledge of Mutual, as a consequence of such Property being
collateral for any loan or investment made by Mutual Bancompany or any
Mutual Bancompany Subsidiary) (A) that is contaminated by or contains any
hazardous waste, toxic substance, or related materials, including without
limitation asbestos, PCBs, pesticides, herbicides, and any other substance
or waste that is hazardous to human health or the environment
(collectively, a "Toxic Substance"), or (B) on which any Toxic Substance
has been stored, disposed of, placed, or used in the construction thereof;
and which, in any such case or in the aggregate, reasonably could be
expected to have a material adverse effect on the Condition of Mutual
Bancompany and the Mutual Bancompany Subsidiaries, taken as a whole.
"Property" of a person shall include all property (real or personal) owned,
leased or controlled by such person, including without limitation property
under foreclosure, property held by such person or any Subsidiary of such
person in its capacity as a trustee and property in which any venture
capital or similar unit of such person or any Subsidiary of such person has
an interest. No claim, action, suit, or proceeding is pending against
Mutual Bancompany or any Mutual Bancompany Subsidiary relating to Property
of Mutual Bancompany or any Mutual Bancompany Subsidiary before any court
or other Regulatory Authority or arbitration tribunal relating to hazardous
substances, pollution, or the environment, and there is no outstanding
judgment, order, writ, injunction, decree, or award against or materially
adversely affecting Mutual Bancompany or any Mutual Bancompany Subsidiary
with respect to the same. Except for statutory or regulatory restrictions
of general application, no Regulatory Authority has placed any restriction
on the business of Mutual Bancompany or any Mutual Bancompany Subsidiary
which reasonably could be expected to have a material adverse effect on the
Condition of Mutual Bancompany and the Mutual Bancompany Subsidiaries,
taken as a whole.
(c) Except as set forth in Schedule 2.13C, since June 30, 1992,
neither Mutual Bancompany nor any Mutual Bancompany Subsidiary has received
any notification or communication as to any matter which has not been
resolved from any Regulatory Authority (i) asserting that Mutual Bancompany
or any Mutual Bancompany Subsidiary is not in substantial compliance with
any of the statutes, regulations or ordinances that such Regulatory
Authority enforces, (ii) threatening to revoke any license, franchise,
permit or governmental authorization
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<PAGE>
that is material to the Condition of Mutual Bancompany and the Mutual
Bancompany Subsidiaries, taken as a whole, including without limitation
Mutual Bank's status as an insured depositary institution under the FDIA,
(iii) requiring or threatening to require Mutual Bancompany or any of the
Mutual Bancompany Subsidiaries, or indicating that Mutual Bancompany or any
of the Mutual Bancompany Subsidiaries may be required, to enter into a
cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to direct, restrict
or limit in any manner the operations of Mutual Bancompany or any of the
Mutual Bancompany Subsidiaries, including without limitation any
restriction on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
(d) Except as a result of the conversion of Mutual Bank from
mutual to stock form or the acquisition of control of Mutual Bank by Mutual
Bancompany, neither Mutual Bancompany nor any Mutual Bancompany Subsidiary
is required by Section 32 of the FDIA to give prior notice to any federal
banking agency of the proposed addition of an individual to its board of
directors or the employment of an individual as a senior executive officer.
2.14 Labor. No work stoppage involving Mutual Bancompany or any Mutual
-----
Bancompany Subsidiary is pending or, to the Best Knowledge of Mutual,
threatened. Neither Mutual Bancompany nor any Mutual Bancompany Subsidiary is
involved in, or, to the Best Knowledge of Mutual, threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding which
reasonably could be expected to have a material adverse effect on the Condition
of Mutual Bancompany and the Mutual Bancompany Subsidiaries, taken as a whole.
No employees of Mutual Bancompany or any Mutual Bancompany Subsidiary are
represented by any labor union or any collective bargaining organization.
2.15 Material Interests of Certain Persons.
-------------------------------------
(a) Except as set forth in Mutual Bancompany's Proxy Statement
for its 1995 Annual Meeting of Stockholders, to the Best Knowledge of
Mutual, no officer or director of Mutual Bancompany or any Subsidiary of
Mutual Bancompany, or any "associate" (as such term is defined in Rule 14a-
1 under the Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal, tangible
or intangible), used in or pertaining to the business of Mutual Bancompany
or any Mutual Bancompany Subsidiary, which in the case of Mutual Bancompany
is required to be disclosed by Item 404 of Regulation S-B promulgated by
the SEC or in the case of any Mutual Bancompany Subsidiary would be
required to be so disclosed if such Mutual Bancompany Subsidiary had a
class of securities registered under Section 12 of the Exchange Act.
(b) Except as set forth in Mutual Bancompany's Proxy Statement
for its 1995 Annual Meeting of Stockholders or on Schedule 2.15, there are
no loans in excess of $25,000 from Mutual Bancompany or any Mutual
Bancompany Subsidiary to any present officer, director, employee or any
associate or related interest of any such person which was or would be
required under any rule or regulation to be approved by or reported to
Mutual Bancompany's or any Mutual Bancompany Subsidiary's Board of
Directors ("Insider Loans"). All outstanding Insider Loans from Mutual
Bancompany or any Mutual Bancompany Subsidiary were approved by or reported
to the appropriate board of directors in accordance with applicable law and
regulations.
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2.16 Allowance for Loan Losses; Nonperforming Assets.
-----------------------------------------------
(a) The allowances for loan losses contained in the Mutual
Bancompany Financial Statements were established in accordance with the
past practices and experiences of Mutual Bancompany and the Mutual
Bancompany Subsidiaries, and the allowance for loan losses shown on the
consolidated condensed balance sheet of Mutual Bancompany and the Mutual
Bancompany Subsidiaries contained in the most recent Mutual Bancompany Form
10-QSB is in all material respects in compliance with the requirements of
GAAP and the rules, regulations and policies of the OTS and is, in the
opinion of management of Mutual Bancompany, adequate to provide for
possible losses on loans (including without limitation accrued interest
receivable) and credit commitments (including without limitation stand-by
letters of credit) outstanding as of the date of such balance sheet.
(b) The sum of the aggregate amount of all Nonperforming Assets
(as defined below) and all troubled debt restructurings (as defined under
GAAP) on the books of Mutual Bancompany and the Mutual Bancompany
Subsidiaries does not exceed $100,000 at the date hereof. "Nonperforming
Assets" shall mean (i) loans and leases classified as non-performing (as
such term is used in Item 1 of Mutual Bancompany's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1995), (ii) assets classified as
real estate owned and other assets acquired through foreclosure, including
in-substance foreclosed real estate, and (iii) loans and leases that are on
non-accrual status, in each case under the definitions applied by the SEC,
the OTS and under GAAP, as appropriate.
2.17 Employee Benefit Plans.
----------------------
(a) Schedule 2.17A lists all pension, retirement, supplemental
retirement, stock option, restricted stock, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, employment,
deferred compensation, consulting, bonus, medical, disability, workers'
compensation, vacation, group insurance, severance and other material
employee benefit, incentive and welfare policies, contracts, plans and
arrangements, and all trust or loan agreements or arrangements related
thereto, maintained, sponsored or contributed to by Mutual Bancompany or
any Mutual Bancompany Subsidiary in respect of any of the present or former
directors, officers, or other employees of and/or consultants to Mutual
Bancompany or any Mutual Bancompany Subsidiary (collectively, "Mutual
Employee Plans"). The following documents with respect to each Mutual
Employee Plan are included in Schedule 2.17A: (i) a true and complete copy
of all written documents comprising such Mutual Employee Plan (including
amendments, corporate resolutions and individual agreements relating
thereto) or, if there is no such written document, an accurate and complete
description of the Mutual Employee Plan; (ii) the most recent Form 5500 or
Form 5500-C (including all schedules thereto), if applicable; (iii) the
most recent financial statements and actuarial reports, if any; (iv) the
summary plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter, if any.
(b) All Mutual Employee Plans have been maintained and operated
materially in accordance with their terms and with the material
requirements of all applicable statutes, orders, rules and final
regulations, including without limitation ERISA and the Code. All
contributions required to be made to Mutual Employee Plans have been made.
(c) With respect to each of the Mutual Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the "Pension Plans"):
(i) each Pension Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and, to the
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extent a determination letter has been received from the IRS with respect
to any such Pension Plan, such determination letter may still be relied
upon, and each related trust is exempt from taxation under Section 501(a)
of the Code; (ii) the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV of ERISA,
valued using the assumptions in the most recent actuarial report, did not,
in each case, as of the last applicable annual valuation date (as indicated
on Schedule 2.17A), exceed the value of the assets of the Pension Plan
allocable to benefits on a plan termination basis; (iii) there has been no
"prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, which could subject any Pension Plan or
associated trust, or, to the Best Knowledge of Mutual, Mutual Bancompany or
any Mutual Bancompany Subsidiary, to any material tax or penalty; (iv) no
Pension Plan or any trust created thereunder has been terminated, nor have
there been any "reportable events" with respect to any Pension Plan, as
that term is defined in Section 4043 of ERISA since January 1, 1986; and
(v) no Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA (whether or not waived). No Pension Plan is a "multiemployer plan"
as that term is defined in Section 3(37) of ERISA. With respect to each
Pension Plan that is described in Section 4063(a) of ERISA (a "Multiple
Employer Pension Plan"): (i) neither Mutual Bancompany nor any Mutual
Bancompany Subsidiary would have any liability or obligation to post a bond
under Section 4063 of ERISA if Mutual Bancompany and all Mutual Bancompany
Subsidiaries were to withdraw from such Multiple Employer Pension Plan; and
(ii) neither Mutual Bancompany nor any Mutual Bancompany Subsidiary would
have any liability under Section 4064 of ERISA if such Multiple Employer
Pension Plan were to terminate.
(d) Neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary has any liability for any post-retirement health, medical or
similar benefit of any kind whatsoever, except as required by statute or
regulation or as set forth in Schedule 2.17D.
(e) Neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary has any material liability under ERISA or the Code as a result
of its being a member of a group described in Sections 414(b), (c), (m) or
(o) of the Code.
(f) Neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary has any material liability under the continuation of health care
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 or
any comparable state law.
(g) Except as set forth on Schedule 2.17G, neither the execution
nor delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any material payment
(including without limitation severance, unemployment compensation or
golden parachute payment) becoming due to any director or employee of
Mutual Bancompany or any Mutual Bancompany Subsidiary from any of such
entities, (ii) materially increase any benefit otherwise payable under any
of the Mutual Employee Plans or (iii) result in the acceleration of the
time of payment of any such benefit. Mutual Bancompany shall use its best
efforts to ensure that no amounts paid or payable by Mutual Bancompany,
Mutual Bancompany Subsidiaries or Roosevelt Financial to or with respect to
any employee or former employee of Mutual Bancompany or any Mutual
Bancompany Subsidiary will fail to be deductible for federal income tax
purposes by reason of Section 280G of the Code or otherwise.
2.18 Conduct to Date. From and after June 30, 1995 through the date of
---------------
this Agreement, except as set forth on Schedule 2.18 or in Mutual Bancompany
Financial Statements: (i) Mutual Bancompany and the Mutual Bancompany
Subsidiaries have conducted their respective businesses in the
15
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ordinary and usual course consistent with past practices; (ii) neither Mutual
Bancompany nor any Mutual Bancompany Subsidiary has issued, sold, granted,
conferred or awarded any of its Equity Securities, or any corporate debt
securities which would be classified under GAAP as long-term debt on the balance
sheets of Mutual Bancompany; (iii) Mutual Bancompany has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization; (iv) Mutual Bancompany has not declared, set aside or paid any
dividend or other distribution in respect of its capital stock, or purchased,
redeemed, retired, repurchased, or exchanged, or otherwise acquired or disposed
of, directly or indirectly, any of its Equity Securities, whether pursuant to
the terms of such Equity Securities or otherwise; (v) neither Mutual Bancompany
nor any Mutual Bancompany Subsidiary has incurred any material obligation or
liability (absolute or contingent), except normal trade or business obligations
or liabilities incurred in the ordinary course of business, or subjected to Lien
any of its assets or properties other than in the ordinary course of business,
(vi) neither Mutual Bancompany nor any Mutual Bancompany Subsidiary has
discharged or satisfied any material Lien or paid any material obligation or
liability (absolute or contingent), other than in the ordinary course of
business; (vii) neither Mutual Bancompany nor any Mutual Bancompany Subsidiary
has sold, assigned, transferred, leased, exchanged, or otherwise disposed of any
of its properties or assets other than for fair consideration (in the reasonable
opinion of management) and in the ordinary course of business; (viii) except as
required by contract or law, neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary has (A) increased the rate of compensation of, or paid any bonus to,
any of its directors, officers, or other employees, except merit or promotion
increases applicable to individual employees and annual increases applicable to
employees generally, all in accordance with past practice, or (B) entered into
any new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Mutual Employee
Plans or (D) agreed to do any of the foregoing; (ix) neither Mutual Bancompany
nor any Mutual Bancompany Subsidiary has suffered any material damage,
destruction, or loss, whether as the result of fire, explosion, earthquake,
accident, casualty, labor trouble, requisition, or taking of property by any
Regulatory Authority, flood, windstorm, embargo, riot, act of God or the enemy,
or other casualty or event, and whether or not covered by insurance; (x) other
than in the ordinary course of business consistent with past practice, neither
Mutual Bancompany nor any Mutual Bancompany Subsidiary has canceled or
compromised any debt; (xi) neither Mutual Bancompany nor any Mutual Bancompany
Subsidiary has entered into any material transaction, contract or commitment
outside the ordinary course of its business and (xii) neither Mutual Bancompany
nor any Mutual Bancompany Subsidiary has made or guaranteed any loan to any of
the Mutual Employee Plans.
2.19 Prospectus/Proxy Statement, etc. None of the information regarding
--------------------------------
Mutual Bancompany or any Mutual Bancompany Subsidiary supplied or to be supplied
by Mutual Bancompany for inclusion or included in (i) the registration statement
on Form S-4 to be filed with the SEC by Roosevelt Financial for the purpose of
registering the shares of Roosevelt Financial Common Stock to be exchanged for
shares of Mutual Bancompany Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the prospectus/proxy statement to
be mailed to stockholders in accordance with Section 5.3 (the "Prospectus/Proxy
Statement") or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Regulatory Authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Prospectus/Proxy Statement, when mailed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading or, in the case of the
Prospectus/Proxy Statement or any amendment thereof or supplement thereto, at
the time of the meeting of Mutual Bancompany's stockholders referred to in
Section 5.3, be false or misleading with respect to any material fact, or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Mutual Bancompany or any Mutual Bancompany
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Subsidiary is responsible for filing with any Regulatory Authority in connection
with the Merger will comply as to form in all material respects with the
provisions of applicable law.
2.20 Registration Obligations. Except as set forth on Schedule 2.20,
------------------------
neither Mutual Bancompany nor any Mutual Bancompany Subsidiary is under any
obligation, contingent or otherwise, which will survive the Effective Time by
reason of any agreement to register any of its securities under the Securities
Act or other federal or state securities laws or regulations.
2.21 Takeover Provisions Not Applicable. The transactions contemplated by
----------------------------------
this Agreement and the Voting Agreements are not subject to any legal
requirements or prohibitions under Sections 351.407 or 351.459 of the Missouri
Act, and Mutual Bancompany has taken or will take all steps necessary so that
any takeover provisions in the charter documents or bylaws of Mutual Bancompany
or Mutual Bank, including without limitation Articles Three and Ten of the
Mutual Bancompany Articles of Incorporation and any other provisions thereof
restricting the ownership or acquisition of Mutual Bancompany securities or
imposing any "fair price" or supermajority director or stockholder vote
requirements (and, subject to OTS approval, any corresponding or similar
provisions of Mutual Bank's Charter, including without limitation Section 8.A
thereof), will not apply to the Voting Agreements, this Agreement or any of the
transactions contemplated hereby or thereby.
2.22 Regulatory, Tax and Accounting Matters. Mutual Bancompany has not
--------------------------------------
taken or agreed to take any action, nor does it have knowledge of any fact or
circumstance, that would (i) materially impede or delay the consummation of the
transactions contemplated by this Agreement or the ability of the parties to
obtain any approval of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform their covenants and agreements
under this Agreement or (ii) prevent the Merger from qualifying as a pooling of
interests for accounting purposes, the Company Merger from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code or the
Bank Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) or (D) of the Code.
2.23 Brokers and Finders. Except as set forth in the agreement with
-------------------
Robert W. Baird & Co. Incorporated ("Baird") dated January 17, 1996, which has
not been amended since such date, neither Mutual Bancompany nor any Mutual
Bancompany Subsidiary nor any of their respective officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Mutual Bancompany or any
Mutual Bancompany Subsidiary, in connection with this Agreement or the
transactions contemplated hereby.
2.24 Accuracy of Information. The statements of Mutual Bancompany and
-----------------------
Mutual Bank contained in this Agreement, the Schedules hereto and any other
written document executed and delivered by or on behalf of Mutual Bancompany or
Mutual Bank pursuant to the terms of this Agreement are true and correct in all
material respects.
2.25 Community Reinvestment Act Compliance. Mutual Bank is in material
-------------------------------------
compliance with the applicable provisions of the CRA and the regulations
promulgated thereunder, and, as of the date hereof, Mutual Bank has a CRA rating
of satisfactory or better from the OTS. To the Best Knowledge of Mutual, there
is no fact or circumstance or set of facts or circumstances which would cause
Mutual Bancompany or any Mutual Bancompany Subsidiary to fail to comply with
such provisions or cause the CRA rating of Mutual Bank to fall below
satisfactory.
2.26. Fairness Opinion. Mutual Bancompany has received from Baird a
----------------
fairness opinion, dated as of the date of this Agreement, to the effect that the
consideration to be received by the holders of
17
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Mutual Bancompany Common Stock pursuant to this Agreement is fair to such
holders from a financial point of view.
2.27 Governmental Approvals and Other Conditions. To the Best Knowledge
-------------------------------------------
of Mutual, there is no reason relating specifically to Mutual Bancompany or any
of its Subsidiaries why (a) the approvals that are required to be obtained from
Regulatory Authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (b) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such Regulatory Authorities in orders approving
acquisitions of the type contemplated hereby or (c) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ROOSEVELT FINANCIAL AND ROOSEVELT BANK
Roosevelt Financial and Roosevelt Bank represent and warrant to and
covenant with Mutual Bancompany and Mutual Bank as follows:
3.1 Organization and Authority. Roosevelt Financial and each of its
--------------------------
Subsidiaries (each a "Roosevelt Financial Subsidiary" and collectively the
"Roosevelt Financial Subsidiaries") is a corporation, savings bank or other
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, is duly qualified to do business and is in
good standing in all jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified, except where the
failure to be so qualified would not have a material adverse effect on the
Condition of Roosevelt Financial and the Roosevelt Financial Subsidiaries, taken
as a whole, and has the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted. Roosevelt
Financial is registered as a savings and loan holding company with the OTS under
the HOLA. True and complete copies of the Certificate of Incorporation and
bylaws of Roosevelt Financial and of the Charter and bylaws of Roosevelt Bank,
each as in effect on the date of this Agreement, are set forth in Schedule 3.1.
3.2 Capitalization of Roosevelt Financial. The authorized capital stock
-------------------------------------
of Roosevelt Financial consists of (i) 90,000,000 shares of Roosevelt Financial
Common Stock, of which, as of December 31, 1995, 41,991,701 shares were issued
and outstanding and (ii) 3,000,000 shares of preferred stock, issuable in
series, of which 1,301,000 shares of 6 1/2% Non-Cumulative Convertible Preferred
Stock (the "Convertible Preferred") were issued or outstanding on such date, and
as of such date Roosevelt Financial had reserved 4,946,250 shares of Roosevelt
Financial Common Stock for issuance upon conversion of the Convertible
Preferred. As of December 31, 1995, Roosevelt Financial had reserved 4,650,000
shares of Roosevelt Financial Common Stock for issuance upon the exercise of
options ("Roosevelt Stock Options") under the Roosevelt Financial stock option
and incentive plans. Roosevelt Financial and its Subsidiaries continually
evaluate possible business combinations and may prior to the Effective Time
enter into one or more agreements providing for, and may consummate, business
combinations with other savings and loan holding companies or other companies
(or acquisitions of the assets thereof) for consideration that may include
Equity Securities. In addition, prior to the Effective Time, Roosevelt
Financial and its Subsidiaries may, depending on market conditions and other
factors, otherwise determine to issue equity, equity-linked or other securities
for financing purposes. Notwithstanding the foregoing, Roosevelt
18
<PAGE>
Financial will not take any action and does not have knowledge of any fact or
circumstance, that would (i) materially impede or delay the consummation of the
transactions contemplated by this Agreement or the ability of Roosevelt
Financial or Mutual Bancompany to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or to
perform its covenants and agreements under this Agreement or (ii) prevent the
Merger from qualifying as a pooling of interests for accounting purposes, the
Company Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) of the Code or the Bank Merger from qualifying as a reorganization
within the meaning of Section 368(a)(1)(A) or (D) of the Code. Except as set
forth above, there are no other Equity Securities of Roosevelt Financial
outstanding on the date hereof. All of the issued and outstanding shares of
Roosevelt Financial Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive right of
any stockholder of Roosevelt Financial. The Roosevelt Financial Common Stock to
be issued in the Company Merger will, upon issuance in accordance with Article I
hereof, be duly authorized, validly issued, fully paid and non-assessable, and
will not be issued in violation of any preemptive right of any stockholder of
Roosevelt Financial.
3.3 Authorization.
-------------
(a) Roosevelt Financial and Roosevelt Bank have the corporate
power and authority to enter into this Agreement and to carry out their
obligations hereunder. The execution, delivery and performance of this
Agreement by Roosevelt Financial and Roosevelt Bank and the consummation by
Roosevelt Financial and Roosevelt Bank of the transactions contemplated
hereby have been duly authorized by all requisite corporate action of
Roosevelt Financial and Roosevelt Bank. Subject to the receipt of such
approvals of the Regulatory Authorities as may be required by statute or
regulation, this Agreement is a valid and binding obligation of Roosevelt
Financial and Roosevelt Bank enforceable against Roosevelt Financial and
Roosevelt Bank in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency and other similar laws of general applicability
affecting creditors' rights and to general equity principles.
(b) Neither the execution, delivery or performance by Roosevelt
Financial and Roosevelt Bank of this Agreement, nor the consummation by
Roosevelt Financial and Roosevelt Bank of the transactions contemplated
hereby, nor compliance by Roosevelt Financial and Roosevelt Bank with any
of the provisions hereof, will (i) violate or conflict with any term,
condition or provision of its certificate of incorporation, charter or
bylaws, (ii) violate, conflict with or result in a breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of any
Lien upon any of the material properties or assets of Roosevelt Financial
or any Roosevelt Financial Subsidiary under any of the terms, conditions or
provisions of, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other material instrument or obligation to
which Roosevelt Financial or any Roosevelt Financial Subsidiary is a party
or by which it may be bound, or to which Roosevelt Financial or any
Roosevelt Financial Subsidiary or any of their material property or assets
may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in subsection (c) of this Section 3.3, to the best
knowledge of Roosevelt Financial and of each Roosevelt Financial Subsidiary
(collectively, the "Best Knowledge of Roosevelt"), violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Roosevelt Financial or any of the Roosevelt Financial
Subsidiaries or any of their respective material properties or assets.
(c) Other than in connection with or in compliance with the
provisions of the DGCL, the Securities Act, the Exchange Act, the
securities or blue sky laws of the various states or
19
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filings, consents, reviews, authorizations, approvals or exemptions
required under the Holding Company Act, the FDIA, the HOLA, the Thrift
Regulations, the BMA and the HSR Act, or any required approvals of any
other Regulatory Authority, no notice to, filing with, exemption or review
by, or authorization, consent or approval of, any public body or authority
is necessary on the part of Roosevelt Financial or Roosevelt Bank for the
consummation by them of the transactions contemplated by this Agreement.
3.4 Roosevelt Financial Financial Statements. The consolidated balance
----------------------------------------
sheets of Roosevelt Financial and the Roosevelt Financial Subsidiaries as of
December 31, 1995 and 1994 and related consolidated statements of income, cash
flows and changes in stockholders' equity for each of the three years in the
three-year period ended December 31, 1995, together with the notes thereto,
audited by KPMG Peat Marwick LLP and included in Roosevelt Financial's Annual
Report on Form 10-K for the year ended December 31, 1995 as filed with the SEC
(collectively, the "Roosevelt Financial Financial Statements"), have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except for the omission of notes to unaudited
statements, if applicable), present fairly the consolidated financial position
of Roosevelt Financial and the Roosevelt Financial Subsidiaries at such dates,
and the consolidated results of operations, cash flows and changes in
stockholders' equity of Roosevelt Financial and the Roosevelt Financial
Subsidiaries for the periods stated therein and are derived from the books and
records of Roosevelt Financial and the Roosevelt Financial Subsidiaries, which
are complete and accurate in all material respects and have been maintained in
accordance with good business practices. Neither Roosevelt Financial nor any of
the Roosevelt Financial Subsidiaries has any material contingent liabilities
that are not described in the financial statements described above.
3.5 Roosevelt Reports. Since December 31, 1995, each of Roosevelt
-----------------
Financial and the Roosevelt Financial Subsidiaries has filed all material
reports, registrations and statements, together with any required material
amendments thereto, that it was required to file with any Regulatory Authority.
All such reports and statements filed with any such Regulatory Authority are
collectively referred to herein as the "Roosevelt Reports." As of its
respective date, each Roosevelt Report complied in all material respects with
all of the applicable rules and regulations promulgated by the applicable
Regulatory Authority and, in the case of Roosevelt Reports filed pursuant to the
Securities Act or the Exchange Act, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.6 Material Adverse Change. Since December 31, 1995, there has been no
-----------------------
material adverse change in the Condition of Roosevelt Financial and the
Roosevelt Financial Subsidiaries, taken as a whole, except as may have resulted
or may result from changes to laws and regulations, generally accepted
accounting principles or regulatory accounting principles or changes in economic
conditions applicable to depositary institutions generally.
3.7 Registration Statement, etc. None of the information regarding
---------------------------
Roosevelt Financial or any of the Roosevelt Financial Subsidiaries supplied or
to be supplied by Roosevelt Financial for inclusion or included in (i) the
Registration Statement, (ii) the Prospectus/Proxy Statement or (iii) any other
documents to be filed with any Regulatory Authority in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and, with respect to the Prospectus/Proxy
Statement, when mailed, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Prospectus/Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
meeting
20
<PAGE>
of stockholders referred to in Section 5.3, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for such meeting. All documents which Roosevelt Financial or any of
the Roosevelt Financial Subsidiaries are responsible for filing with any
Regulatory Authority in connection with the Merger will comply as to form in all
material respects with the provisions of applicable law.
3.8 Brokers and Finders. Neither Roosevelt Financial nor any of the
-------------------
Roosevelt Financial Subsidiaries nor any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Roosevelt Financial or any
of the Roosevelt Financial Subsidiaries, in connection with this Agreement or
the transactions contemplated hereby.
3.9 Accuracy of Information. The statements of Roosevelt Financial and
-----------------------
Roosevelt Bank contained in this Agreement, the Schedules hereto and in any
other written document executed and delivered by or on behalf of Roosevelt
Financial pursuant to the terms of this Agreement are true and correct in all
material respects.
3.10 Community Reinvestment Act Compliance. Roosevelt Bank is in material
-------------------------------------
compliance with the applicable provisions of the CRA and the regulations
promulgated thereunder, and Roosevelt Bank currently has a CRA rating of
satisfactory or better from the OTS. To the Best Knowledge of Roosevelt, there
is no fact or circumstance or set of facts or circumstances which would cause
Roosevelt Financial or any Roosevelt Financial Subsidiary to fail to comply with
such provisions or cause the CRA rating of Roosevelt Bank to fall below
satisfactory.
3.11 Litigation and Other Proceedings. Except as to matters set forth in
--------------------------------
the Roosevelt Reports, there is no claim, action, suit, investigation or
proceeding, pending or, to the Best Knowledge of Roosevelt, threatened against
Roosevelt Financial or any Roosevelt Financial Subsidiary, nor are they subject
to any order, judgment or decree, except for matters which, in the aggregate,
will not have, or reasonably could not be expected to have, a material adverse
effect on the condition of Roosevelt Financial and the Roosevelt Financial
Subsidiaries, taken as whole, but not excepting any actions, suits or
proceedings which purport or seek to enjoin or restrain the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, except as to matters set forth in the Roosevelt Reports, there are no
actions, suits, or proceedings pending or, to the Best Knowledge of Roosevelt
Financial, threatened against Roosevelt Financial or any Roosevelt Financial
Subsidiary or any of their respective officers or directors by any stockholder
of Roosevelt Financial or any Roosevelt Financial Subsidiary (or by any former
stockholder of Roosevelt Financial or any Roosevelt Financial Subsidiary
relating to or arising out of such person's status as a stockholder or former
stockholder) or involving claims under the Securities Act, the Exchange Act, the
CRA or the fair lending laws. Except as previously disclosed to Mutual
Bancompany or with respect to matters which reasonably could not be expected to
have a material adverse effect on the Condition of Roosevelt Financial and the
Roosevelt Financial Subsidiaries, taken as a whole: since December 31, 1995
neither Roosevelt Financial nor any Roosevelt Financial Subsidiary has received
any notification or communication which has not been resolved from any
Regulatory Authority (i) asserting that Roosevelt Financial or any Roosevelt
Financial Subsidiary is not in substantial compliance with any of the statutes,
regulations or ordinances that such Regulatory Authority enforces, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization, including without limitation Roosevelt Bank's status as an
insured depositary institution under the FDIA or (iii) requiring or threatening
to require Roosevelt Financial or any of the Roosevelt Financial Subsidiaries,
or indicating that Roosevelt Financial or any of the Roosevelt Financial
Subsidiaries may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the operations of
Roosevelt Financial
21
<PAGE>
or any of the Roosevelt Financial Subsidiaries, including without limitation any
restriction on the payment of dividends, and no such cease and desist order,
agreement or memorandum or understanding or other agreement is currently in
effect.
3.12 Compliance with Laws.
--------------------
(a) Roosevelt Financial and each of the Roosevelt Financial
Subsidiaries have all material permits, licenses, authorizations, orders
and approvals of, and have made all material filings, applications and
registrations with, all Regulatory Authorities that are required in order
to permit them to own or lease their properties and assets and to carry on
their business as presently conducted, except where the failure to have all
such permits, licenses, authorizations, orders and approvals or to have
made all such filings would not have a material adverse effect on the
Condition of Roosevelt Financial and the Roosevelt Financial Subsidiaries,
taken as a whole; all such permits, licenses, authorizations, orders and
approvals are in full force and effect and, to the Best Knowledge of
Roosevelt, no suspension or cancellation of any of them is threatened and
all such filings, applications and registrations are current.
(b) Each of Roosevelt Financial and the Roosevelt Financial
Subsidiaries has complied with all laws, regulations and orders (including
without limitation zoning ordinances, building codes, ERISA, and
securities, tax, environmental, civil rights, and occupational health and
safety laws and regulations, and including without limitation, in the case
of any Roosevelt Financial Subsidiary that is a savings bank, banking
organization, banking corporation or trust company, all statutes, rules,
regulations and policy statements pertaining to the conduct of a banking,
savings bank, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to them and
to the conduct of their business, except as to matters set forth in the
Roosevelt Reports or where such failure to comply would not have a material
adverse effect on the Condition of Roosevelt Financial and the Roosevelt
Financial Subsidiaries, taken as a whole. Neither Roosevelt Financial nor
any Roosevelt Financial Subsidiary is in default under, and no event has
occurred which, with the lapse of time or notice or both, could result in a
default under, the terms of any judgment, order, writ, decree, permit, or
license of any Regulatory Authority or court, whether federal, state,
municipal, or local and whether at law or in equity, except such defaults
as, individually and in the aggregate, would not have a material adverse
effect on the Condition of Roosevelt Financial and the Roosevelt Financial
Subsidiaries, taken as a whole. To the Best Knowledge of Roosevelt, except
as to matters set forth in the Roosevelt Reports: neither Roosevelt
Financial nor any Roosevelt Financial Subsidiary is subject to or
reasonably likely to incur a liability as a result of its past or present
ownership, operation, or use of any Property of Roosevelt Financial or any
Roosevelt Financial Subsidiary (whether directly or, to the Best Knowledge
of Roosevelt Financial, as a consequence of such Property being part of the
investment portfolio of Roosevelt Financial or any Roosevelt Financial
Subsidiary) (A) that is contaminated by or contains any Toxic Substance, or
(B) on which any Toxic Substance has been stored, disposed of, placed, or
used in the construction thereof; and which, in any such case or in the
aggregate, reasonably could be expected to have a material adverse effect
on the Condition of Roosevelt Financial and the Roosevelt Financial
Subsidiaries, taken as a whole, and no claim, action, suit, or proceeding
is pending against Roosevelt Financial or any Roosevelt Financial
Subsidiary relating to Property of Roosevelt Financial or any Roosevelt
Financial Subsidiary before any court or other Regulatory Authority or
arbitration tribunal relating to hazardous substances, pollution, or the
environment, and there is no outstanding judgment, order, writ, injunction,
decree, or award against or materially adversely affecting Roosevelt
Financial or any Roosevelt Financial Subsidiary with respect to the same.
Except for statutory or regulatory restrictions of general application, no
Regulatory Authority has placed any restriction on the
22
<PAGE>
business of Roosevelt Financial or any Roosevelt Financial Subsidiary which
reasonably could be expected to have a material adverse effect on the
Condition of Roosevelt Financial and the Roosevelt Financial Subsidiaries,
taken as a whole.
3.13 Governmental Approvals and Other Conditions. To the Best Knowledge
-------------------------------------------
of Roosevelt, there is no reason relating specifically to Roosevelt Financial or
any of its Subsidiaries why (a) the approvals that are required to be obtained
from Regulatory Authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (b) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such Regulatory Authorities in orders approving
acquisitions of the type contemplated hereby or (c) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
3.14 Commitments and Contracts. Neither Roosevelt Financial nor any of
-------------------------
the Roosevelt Financial Subsidiaries is in violation of its charter documents or
bylaws or in default under any material agreement, commitment, arrangement,
lease, insurance policy, or other instrument, whether entered into in the
ordinary course of business or otherwise and whether written or oral, and there
has not occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except, in all cases, where such default
would not have a material adverse effect on the Condition of Roosevelt Financial
and the Roosevelt Financial Subsidiaries, taken as a whole.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Businesses Prior to the Effective Time. During the period
-------------------------------------------------
from the date of this Agreement to the Effective Time, each of Roosevelt
Financial and Mutual Bancompany shall, and shall cause each of their respective
Subsidiaries to, conduct its business only in the ordinary and usual course
consistent with past practices (including in the case of Roosevelt Financial and
its Subsidiaries the matters set forth in the third and fourth sentences of
Section 3.2 hereof) and shall, and shall cause each such Subsidiary to, use its
best efforts to maintain and preserve its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees.
4.2 Forbearances. Except as expressly provided herein, during the period
------------
from the date of this Agreement to the Effective Time, Mutual Bancompany shall
not and shall not permit any of the Mutual Bancompany Subsidiaries to, without
the prior written consent of Roosevelt Financial:
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock
(other than ordinary, normal dividends from a wholly owned Subsidiary of
Mutual Bancompany to Mutual Bancompany or another wholly owned Subsidiary
of Mutual);
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director or officer or employee, or
materially modify any of the Mutual Employee Plans or security acquisition
loans relating thereto (or prepay in whole or in part any such loans) or
grant any salary or wage increase or materially increase any employee
benefit (including incentive or bonus payments), except (i) normal
individual bonuses and increases in
23
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compensation to employees, in each case and in the aggregate consistent
with past practice or to the extent required by law or contract, (ii) as
set forth in Section 5.8 of this Agreement and (iii) such increases of
which Mutual Bancompany notifies Roosevelt Financial in writing and which
Roosevelt Financial does not disapprove within ten days of the receipt of
such notice;
(c) except to the extent that the fulfillment of the fiduciary
duties of Mutual Bancompany's directors requires such action, as determined
in consultation with Mutual Bancompany's outside counsel, authorize,
recommend, propose or announce an intention to authorize, so recommend or
propose, or enter into an agreement in principle with respect to, any
merger, consolidation or business combination (other than the Merger), any
acquisition of a material amount of assets or securities, any disposition
of a material amount of assets or securities or any release or
relinquishment of any material contract rights;
(d) except as may be required by law or regulation or as set
forth on Schedule 4.2D, propose or adopt any amendments to its articles of
incorporation or other charter document or bylaws;
(e) issue, sell, grant, confer or award any of its Equity
Securities or effect any stock split or adjust, combine, reclassify or
otherwise change its capitalization as it exists on the date of this
Agreement;
(f) purchase, redeem, retire, repurchase, or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise;
(g) (i) without first consulting with Roosevelt Financial, enter
into or increase any loan or credit commitment (including stand-by letters
of credit) to, or invest or agree to invest in, any person or entity or
modify any of the material provisions or renew or otherwise extend the
maturity date of any existing loan or credit commitment (collectively,
"Lend to") in an amount in excess of $150,000; (ii) enter into, or increase
in an amount in excess of $100,000 any commercial or multi-family (five or
more units) real estate loan or credit commitment (including stand-by
letters of credit) to, or invest or agree to invest in, any commercial or
multi-family real estate project or entity, or Lend to any person other
than in accordance with lending policies as in effect on the date hereof,
provided that Mutual Bancompany or any Mutual Bancompany Subsidiary may
make any such loan in the event (A) Mutual Bancompany or any Mutual
Bancompany Subsidiary has delivered to Roosevelt Financial or its
designated representative a notice of its intention to make such loan and
such information as Roosevelt Financial or its designated representative
may reasonably require in respect thereof and (B) Roosevelt Financial or
its designated representative shall not have objected to such loan by
giving written or facsimile notice of such objection within two business
days following the delivery to Roosevelt Financial of the notice of
intention and information as aforesaid; (iii) Lend to any person or entity,
any of the loans or other extensions of credit to which or investments in
which are on a "watch list" or similar internal report of Mutual Bancompany
or any Mutual Bancompany Subsidiary (except those denoted "pass" or similar
notation thereon), in an amount in excess of $50,000; or (iv) enter into
any agreement or engage in any transaction which reasonably could be
construed as materially affecting the asset/liability management or
interest rate risk management position of Mutual Bancompany or Mutual Bank
(in this regard, Mutual Bancompany shall promptly telecopy to Roosevelt
Financial copies of all Mutual Bancompany or Mutual Bank loan and deposit
pricing reports as well as summaries of any proposed asset sales and
secondary market transactions as soon as they are identified); provided,
however, that nothing in this paragraph shall prohibit
24
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Mutual Bancompany or any Mutual Bancompany Subsidiary from honoring any
contractual obligation in existence on the date of this Agreement or, with
respect to loans described in clause (i) above, making such loans after
consulting with Roosevelt Financial;
(h) directly or indirectly (including, without limitation, through its
officers, directors, employees or other representatives) (i) initiate,
solicit or encourage any discussions, inquiries or proposals with any third
party relating to the disposition of any significant portion of the
business or assets of Mutual Bancompany or any Mutual Bancompany Subsidiary
or the acquisition of 10% or more of any class of Equity Securities of
Mutual Bancompany or any Mutual Bancompany Subsidiary or the merger of
Mutual Bancompany or any Mutual Bancompany Subsidiary with any person
(other than Roosevelt Financial) or any similar transaction (each such
transaction being referred to in this Section 4.2(h) as an "Acquisition
Transaction") or (ii) except to the extent that the fulfillment of the
fiduciary duties of Mutual Bancompany's directors requires such action, as
determined in consultation with Mutual Bancompany's outside counsel,
directly or indirectly, (including through its officers, directors,
employees or other representatives), provide any such person with
information or assistance or negotiate with any such person with respect to
an Acquisition Transaction, and Mutual Bancompany shall immediately notify
Roosevelt Financial orally and in reasonable detail of all the relevant
facts relating to all inquiries, indications of interest and proposals
which it may receive with respect to any Acquisition Transaction and
promptly confirm the same to Roosevelt Financial in writing;
(i) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Roosevelt Financial or Mutual Bancompany to obtain any approval
of any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
Agreement or (B) prevent the Merger from qualifying as a pooling of
interests for accounting purposes, the Company Merger from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code or
the Bank Merger from qualifying as a reorganization within the meaning of
Section 368(a)(1)(A) or (D) of the Code;
(j) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible or liable for
the obligations of any other individual, corporation or other entity; or
(k) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or take or omit to
take any other act which would make any of the representations and
warranties in Article II of this Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access and Information. Roosevelt Financial and the Roosevelt
----------------------
Financial Subsidiaries, on the one hand, and Mutual Bancompany and the Mutual
Bancompany Subsidiaries, on the other hand, shall each afford to each other, and
to the other's accountants, counsel and other representatives,
25
<PAGE>
reasonable access during normal business hours, during the period prior to the
Effective Time, to all their respective properties, books, contracts,
commitments and records and, during such period, each shall furnish promptly to
the other (i) a copy of each report, schedule and other document filed or
received by it during such period pursuant to the requirements of federal and
state securities laws and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably request. Except as
may be required by law, each party hereto shall, and shall cause its advisors
and representatives to, (A) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the other
party which is not otherwise public knowledge, (B) return all documents
(including copies thereof) obtained hereunder from the other party to such other
party and (C) use its best efforts to cause all information obtained pursuant to
this Agreement or in connection with the negotiation of this Agreement to be
treated as confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the public.
5.2 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Roosevelt Financial, in cooperation with Mutual Bancompany, shall
prepare and, subject to the review and consent of Mutual Bancompany with
respect to matters relating to Mutual Bancompany (which consent shall not
be unreasonably withheld), file with the SEC as soon as is reasonably
practicable the Registration Statement (or the equivalent in the form of
preliminary proxy material) with respect to the shares of Roosevelt
Financial Common Stock to be issued in the Merger. Roosevelt Financial
shall use its best efforts to cause the Registration Statement to become
effective. Roosevelt Financial shall also take any reasonable action
required to be taken under any applicable state blue sky or securities laws
in connection with the issuance of such shares, and Mutual Bancompany and
the Mutual Bancompany Subsidiaries shall furnish Roosevelt Financial all
information concerning Mutual Bancompany and the Mutual Bancompany
Subsidiaries and the stockholders thereof as Roosevelt Financial may
reasonably request in connection with any such action. Mutual Bancompany
authorizes Roosevelt Financial to utilize in the Registration Statement the
information concerning Mutual Bancompany and the Mutual Bancompany
Subsidiaries provided to Roosevelt Financial for inclusion in the
Prospectus/Proxy Statement. Roosevelt Financial shall advise Mutual
Bancompany promptly when the Registration Statement has become effective
and of any supplements or amendments thereto, and shall furnish Mutual
Bancompany with copies of all such documents.
(b) Mutual Bancompany and Roosevelt Financial shall cooperate and use
their respective best efforts to promptly prepare all documentation, to
effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities necessary to
consummate the transactions contemplated by this Agreement and, as and if
directed by Roosevelt Financial, to consummate such other mergers,
consolidations or asset transfers or other transactions by and among the
Roosevelt Financial Subsidiaries and the Mutual Bancompany Subsidiaries
concurrently with or following the Effective Time, provided that such
actions do not materially impede or delay the consummation of the
transactions contemplated by this Agreement.
5.3 Stockholder Approval. Mutual Bancompany shall call a meeting of its
--------------------
stockholders to be held as soon as practicable on a mutually agreeable date for
the purpose of voting upon this Agreement and the Merger. In connection with
such meeting, Roosevelt Financial and Mutual Bancompany shall cooperate in the
preparation of the Prospectus/Proxy Statement and, with the approval of each of
Roosevelt Financial and Mutual Bancompany, which approvals will not be
unreasonably withheld, the Prospectus/Proxy Statement shall be mailed to the
stockholders of Mutual Bancompany. The Board of Directors of Mutual Bancompany
shall submit for approval of Mutual Bancompany's stockholders the matters to be
voted upon at such meeting. The Board of Directors of Mutual Bancompany hereby
does
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<PAGE>
and (except to the extent that the fulfillment of the fiduciary duties of Mutual
Bancompany's directors so requires, as determined in consultation with Mutual
Bancompany's outside counsel) will recommend this Agreement and the transactions
contemplated hereby to the stockholders of Mutual Bancompany and will use its
best efforts to obtain any vote of Mutual Bancompany's stockholders necessary
for the approval and adoption of this Agreement and the Merger.
5.4 Current Information. During the period from the date of this
-------------------
Agreement to the Effective Time, each party shall promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated representatives
to confer on a regular and frequent basis with representatives of the other
party. Each party shall promptly notify the other party of any material change
in its business or operations, of any fact, omission or condition which makes
untrue or misleading or shows to have been untrue or misleading the information
supplied by it for inclusion in the Registration Statement or the
Prospectus/Proxy Statement, and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party, and
shall keep the other party fully informed of such events.
5.5 Agreements of Affiliates. As soon as practicable after the date of
------------------------
this Agreement, Mutual Bancompany shall deliver to Roosevelt Financial a letter,
reviewed by its counsel, identifying all persons whom Mutual Bancompany believes
to be "affiliates" of Mutual Bancompany for purposes of Rule 145 under the
Securities Act or for purposes of qualifying for pooling of interests accounting
treatment for the Merger. Mutual Bancompany shall use its best efforts to cause
each person who is so identified as an "affiliate" to deliver to Roosevelt
Financial, as soon as practicable thereafter, a written agreement, in form and
substance reasonably satisfactory to Roosevelt Financial, providing that from
the date of such agreement each such person will agree not to sell, pledge,
transfer or otherwise dispose of any shares of stock of Mutual Bancompany held
by such person or any shares of Roosevelt Financial Common Stock to be received
by such person in the Merger (i) during the period commencing 30 days prior to
the Merger and ending at the time of publication of financial results covering
at least 30 days of combined operations after the Merger and (ii) at any time,
except in compliance with the applicable provisions of the Securities Act and
other applicable laws and regulations. Prior to the Effective Time, Mutual
Bancompany shall amend and supplement such letter and use its best efforts to
cause each additional person who is identified as an "affiliate" to execute a
written agreement as set forth in this Section 5.5.
5.6 Expenses. Each party hereto shall bear its own expenses incident to
--------
preparing, entering into and carrying out this Agreement and to consummating the
Merger, provided, however, that Roosevelt Financial shall pay all printing and
mailing expenses and filing fees associated with the Registration Statement and
the Prospectus/Proxy Statement and all filings with Regulatory Authorities for
approval of this Agreement.
5.7 Miscellaneous Agreements and Consents. Subject to the terms and
-------------------------------------
conditions herein provided, each of the parties hereto agrees to use its
respective best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including without
limitation using its respective best efforts to lift or rescind any injunction
or restraining order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby. Each party shall, and shall
cause each of its respective Subsidiaries to, use its best efforts to obtain
consents of all third parties and Regulatory Authorities necessary or, in the
reasonable opinion of Roosevelt Financial, desirable for the consummation of the
transactions contemplated by this Agreement.
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<PAGE>
5.8 Benefits.
--------
(a) For at least one year after the Effective Time, and for so long
thereafter as the participating directors and Roosevelt Bank deem the
relationship to be mutually beneficial, the persons who are currently
directors or directors emeriti of Mutual Bancompany who wish to do so may
serve as regional Advisory Directors of Roosevelt Bank with a retainer fee
for each such Advisory Director of $1,000 per month.
(b) Except to the extent provided in Section 5.8(d) hereof: (i) the
provisions of each plan, program or arrangement providing for the issuance
or grant of any interest in respect of the capital stock of Mutual
Bancompany or any Mutual Bancompany Subsidiary shall be terminated as of
the Effective Time and (ii) Mutual Bancompany shall ensure that following
the Effective Time no participant in any Mutual Employee Plan shall have
any right thereunder to acquire any securities of Mutual Bancompany, any
Mutual Bancompany Subsidiary, Roosevelt Financial, any Roosevelt Financial
Subsidiary, or any successor in interest to any of such entities.
(c) Roosevelt Bank anticipates retaining the employees of Mutual Bank
as employees of Roosevelt Bank after the Effective Time, subject to the
needs of Roosevelt Bank and the qualifications of such employees. Any
employee who is not retained for at least six months after the Effective
Time, with at least his or her current salary and with a principal location
of employment within five miles of his or her present principal location of
employment, will be offered a severance arrangement of (i) four weeks' pay
plus (ii) an additional week's pay for each year of service to Mutual
Bancompany or any Mutual Bancompany Subsidiary, except that the employees
listed in Schedule 5.8C shall be eligible for a severance benefit as
described therein. Employees of Mutual Bancompany or any Mutual Bancompany
Subsidiary who continue in employment with Roosevelt Financial or any
Roosevelt Financial Subsidiary following the Effective Time shall be
credited for prior years of service with Mutual Bancompany or any Mutual
Bancompany Subsidiary for purposes of eligibility, vesting and the accrual
of benefits (but not for the accrual of benefits under tax-qualified
defined benefit pension plans maintained by Roosevelt Financial or any of
its Subsidiaries) under Roosevelt Financial and Roosevelt Financial
Subsidiary benefit plans and policies (including, without limitation,
vacation and sick leave policies), there shall be no exclusion from
employee medical coverage as the result of employees' pre-existing
conditions that were covered under the medical plan of Mutual Bancompany or
the applicable Mutual Bancompany Subsidiary, and such employees shall be
entitled to participate on an equitable basis in the same benefit plans and
policies as are generally available to Roosevelt Financial and Roosevelt
Bank employees of similar rank and status.
In the event that the combined benefits allocable under the
Mutual Bancompany Qualified Plans (as hereinafter defined) and any
qualified retirement plans of Roosevelt Financial or the Roosevelt
Financial Subsidiaries, as applicable (the "Roosevelt Qualified Plans"), by
virtue of the allocation under Section 5.8(d)(ii) hereof or otherwise,
exceed the applicable limitations of Section 415 of the Code, any required
reductions in allocations necessary to meet such limitations will be made
first to the benefits allocable under the Roosevelt Qualified Plans.
(d) Prior to the Effective Time, and except to the extent necessary
to effectuate the intent of subparagraphs (i) and (ii) below, Mutual
Bancompany shall make no amendments to the Mutual Bancompany Employee Stock
Ownership Plan (the "ESOP") or any other tax-qualified retirement plan
maintained by Mutual Bancompany or any of its Subsidiaries (together with
the ESOP, the "Mutual Qualified Plans") without the prior written approval
of Roosevelt Financial and shall make no additional contributions to the
ESOP except for contributions that are (x) made
28
<PAGE>
on or before the Effective Time, at levels and with a frequency that is not
in excess of prior practice, and (y) applied to the repayment of ESOP
indebtedness ("Debt").
(i) As soon as practicable after the Effective Time (but not
prior to the publication of financial results covering at least 30
days of combined operations after the Merger) and without adversely
affecting the qualified status of the ESOP, the trustees of the ESOP
shall convert to cash a portion of the Roosevelt Financial Common
Stock received by the ESOP in the Company Merger with respect to
unallocated Mutual Bancompany Common Stock in order to repay the
entire outstanding balance of the ESOP loan.
(ii) As soon as practicable after the retirement of the ESOP
loan as provided in subparagraph (i) above (but not later than 120
days after the publication of financial results covering at least 30
days of combined operations after the Merger) and without adversely
affecting the qualified status of the ESOP, the trustees of the ESOP
shall allocate the remaining Roosevelt Financial Common Stock received
by the ESOP in the Company Merger with respect to unallocated shares
of Mutual Bancompany Common Stock to the accounts of all ESOP
participants (whether or not such participants are then actively
employed) and beneficiaries in proportion to the account balances of
such participants and beneficiaries as they existed as of the
Effective Time (and, if required, to the accounts of former
participants or their beneficiaries) as investment earnings of the
ESOP (except to the extent that any such allocations would be subject
to the limitations of Section 415 of the Code for such year).
(iii) As of the Effective Time, the administrative and other
authority previously exercised with respect to the ESOP by the Board
of Directors of Mutual Bancompany shall be exercised solely by a
Committee appointed and selected by the Board of Directors of Mutual
Bancompany and in place under the terms of the ESOP ("Committee"),
which authority shall include the authority to appoint and remove
trustees of the ESOP.
(iv) Subject to Roosevelt Financial waiting 120 days after the
publication of financial results covering at least 30 days of combined
operations after the Merger with respect to the ESOP only to permit
allocations to be made pursuant to subparagraph (ii), Roosevelt
Financial may terminate the Mutual Qualified Plans, continue the
Mutual Qualified Plans, or merge the Mutual Qualified Plans with other
tax-qualified retirement plans maintained by Roosevelt Financial or
its Subsidiaries, all in its sole discretion, but in a manner
consistent with the requirements of ERISA and the Code. The vested
accrued benefits of participants in the Mutual Qualified Plans shall
not be reduced by virtue of any such termination, continuation or
merger of the Mutual Qualified Plans.
(v) Neither Roosevelt Financial nor any of its Subsidiaries
shall have any obligation to make any contributions to the Mutual
Qualified Plans.
5.9 Press Releases. The initial press release announcing this Agreement
--------------
shall be as previously agreed upon by Roosevelt Financial and Mutual Bancompany.
Except as deemed by Mutual Bancompany, after consultation with its outside
counsel, to be necessary to comply with applicable law, Mutual Bancompany and
its Subsidiaries shall not issue any press release or written statement for
general public circulation relating to this Agreement or any of the transactions
contemplated hereby without the prior consent of Roosevelt Financial, which
consent shall not be unreasonably withheld.
29
<PAGE>
5.10 Takeover Provisions. Mutual Bancompany has taken or will take all
-------------------
steps necessary to render the transactions contemplated by this Agreement
permissible under any applicable Missouri takeover or similar law and under any
takeover or similar provision in the charter documents or bylaws of Mutual
Bancompany or, subject to OTS approval, Mutual Bank, including without
limitation any applicable provisions thereof restricting the ownership,
acquisition or voting of securities or imposing any "fair price" or
supermajority director or stockholder vote requirements.
5.11 D&O Indemnification and Insurance. Roosevelt Financial (and any
---------------------------------
successor) shall indemnify, defend and hold harmless the present and former
directors, officers and employees of Mutual Bancompany and the Mutual Bancompany
Subsidiaries against all liabilities, claims, losses damages or judgments, or
amounts paid in settlement with the approval of Roosevelt Financial (which
approval shall not be unreasonably withheld) of any claim, action or suit,
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement)
regardless of whether such matter is asserted or claimed prior to, at or after
the Effective Time, to the fullest extent such persons may be indemnified under
the Missouri Act and Mutual Bancompany's Articles of Incorporation and bylaws or
under federal law, in each case as applicable and in effect on the date hereof,
including provisions relating to the advancement of expenses incurred in the
defense of any litigation. Roosevelt Financial shall use its reasonable best
efforts to cause the persons serving as officers and directors of Mutual Bank
immediately prior to the Effective Time to be covered for a period of three
years from the Effective Time by single (one-time) premium tail coverage under
the directors' and officers' liability insurance policy maintained by Mutual
Bank (provided that Roosevelt Financial may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not materially less advantageous than such policy) with respect to acts or
omissions occurring prior to the Effective Time which were committed by such
officers and directors in their capacity as such; provided, however, that in no
event shall Roosevelt Financial be required to expend more than 150% of the
annual amount currently expended by Mutual Bank (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto and further provided that
if Roosevelt Financial is unable to maintain or obtain the insurance called for
by this Section 5.11, Roosevelt Financial shall use its reasonable best efforts
to obtain as much comparable insurance as is available for the Insurance Amount.
5.12 Third Parties. Mutual Bancompany and each Mutual Bancompany
-------------
Subsidiary, as applicable, shall immediately terminate all negotiations or
discussions concerning any Acquisition Transaction with parties other than
Roosevelt Financial and enforce the terms of all confidentiality agreements with
such other parties.
5.13 Schedule 13D or 13G Filings. Mutual Bancompany shall immediately
---------------------------
advise Roosevelt Financial of the receipt (and, to the Best Knowledge of Mutual,
the filing) after the date hereof of all Schedules 13D or 13G (and all Schedule
13D or 13G amendments) under the Exchange Act with respect to Mutual Bancompany
Common Stock, and shall provide Roosevelt Financial with a copy of each such
Schedule 13D or 13G or Schedule 13D or 13G amendment promptly after receipt
thereof.
5.14 Dissenting Shareholders' Appraisal Rights. Roosevelt Financial and
-----------------------------------------
Mutual Bancompany, as applicable, will comply with all applicable notification
and other provisions of regulations or statutes relating to Dissenting Shares.
5.15 Nasdaq Listing. Roosevelt Financial shall use all reasonable
--------------
efforts to cause the securities to be issued in the Merger to be approved for
listing on the Nasdaq Stock Market (or such other national securities exchange
or stock market on which such securities shall then be traded), subject to
official notice of issuance, prior to or as of the Closing.
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5.16 Assistance with Third-Party Agreements. Mutual Bancompany and
--------------------------------------
Mutual Bank shall cooperate with, and use all reasonable efforts to assist,
Roosevelt Financial and Roosevelt Bank in (i) gaining access to all of Mutual
Bancompany's and Mutual Bank's third-party vendors, and the landlords of each
property leased by Mutual Bancompany and Mutual Bank, promptly after the date of
this Agreement, and (b) obtaining the cooperation of such third-parties in a
smooth transition in accordance with Roosevelt Financial's and Roosevelt Bank's
timetable at or after the Effective Time. Mutual Bancompany and Mutual Bank
shall also, at Roosevelt Financial's or Roosevelt Bank's reasonable request,
give notice of termination of third-party contracts to be effective at or after
the Effective Time, and take such reasonable additional action as may be
necessary or reasonably appropriate to ensure that such contracts are terminated
at the date requested.
5.17 Insurance Policies Assignment. Mutual Bancompany and Mutual Bank
-----------------------------
agree to make commercially reasonable efforts to obtain consent to assignment of
any insurance policies of Mutual Bancompany or Mutual Bank if requested to do so
by Roosevelt Financial or Roosevelt Bank. Mutual Bancompany and Mutual Bank
shall also inform Roosevelt Financial and Roosevelt Bank no later than the
Effective Time of any material unfiled insurance claims of which they have
knowledge and for which they believe coverage exists.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the Merger shall have received the requisite
approval of the stockholders of Mutual Bancompany at the meeting of
stockholders called pursuant to Section 5.3 of this Agreement;
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the OTS and all other
Regulatory Authorities, if any, having approval authority with respect to
the Merger, without the imposition of any condition which differs from
conditions customarily imposed by such Regulatory Authorities in orders
approving acquisitions of the type contemplated hereby, and all applicable
waiting periods shall have expired.
(c) The Registration Statement shall have been declared effective
and shall not be subject to a stop order or any threatened stop order.
(d) Neither Roosevelt Financial, Roosevelt Bank, Mutual Bancompany
nor Mutual Bank shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(e) A tax opinion addressed to both Roosevelt Financial and Mutual
Bancompany by counsel or independent certified accountants mutually
acceptable to Roosevelt Financial and Mutual Bancompany shall have been
obtained with respect to the Merger, based on customary reliance and
subject to customary qualifications, to the effect that for federal income
tax purposes:
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(i) The Company Merger and the Bank Merger will each qualify
as a "reorganization" under Section 368(a) of the Code.
(ii) No gain or loss will be recognized by Roosevelt Financial,
Roosevelt Bank, Mutual Bancompany or Mutual Bank by reason of the
Company Merger or the Bank Merger.
(iii) No gain or loss will be recognized by any Mutual
Bancompany shareholder (except in connection with the receipt of cash
in lieu of a fractional share of Roosevelt Financial Common Stock)
upon the exchange of Mutual Bancompany Common Stock solely for
Roosevelt Financial Common Stock in the Merger.
(iv) The basis of the Roosevelt Financial Common Stock received
by a Mutual Bancompany shareholder who exchanges Mutual Bancompany
Common Stock for Roosevelt Financial Common Stock will be the same as
the basis of the Mutual Bancompany Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result
of receipt of cash in lieu of a fractional share of Roosevelt
Financial Common Stock).
(v) The holding period of the Roosevelt Financial Common Stock
received by a Mutual Bancompany shareholder receiving Roosevelt
Financial Common Stock will include the period during which the Mutual
Bancompany Common Stock surrendered in exchange therefore was held
(provided that such Common Stock of such Mutual Bancompany shareholder
was held as a capital asset at the Effective Time).
(vi) Cash received by a Mutual Bancompany shareholder in lieu
of a fractional share interest of Roosevelt Financial Common Stock
will be treated as having been received as a distribution in full
payment in exchange for the fractional share interest of Roosevelt
Financial Common Stock which he would otherwise be entitled to receive
and will qualify as capital gain or loss (assuming the Mutual
Bancompany stock was a capital asset in his hands at the Effective
Time).
(f) Listing of Shares. The securities to be issued in the Merger
-----------------
shall be approved for listing as contemplated by Section 5.16 hereof,
subject to official notice of issuance.
6.2 Conditions to Obligations of Mutual Bancompany and Mutual Bank to
-----------------------------------------------------------------
Effect the Merger. The obligations of Mutual Bancompany and Mutual Bank to
- -----------------
effect the Merger shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Roosevelt Financial and Roosevelt Bank set forth in Article
III of this Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Effective Time (as though made
on and as of the Effective Time except (i) to the extent such
representations and warranties are by their express provisions made as of a
specified date, (ii) for the effect of transactions contemplated by this
Agreement and (iii) where the failure to be true and correct would not have
a material adverse effect on the Condition of Roosevelt Financial and its
Subsidiaries taken as a whole) and Mutual Bancompany and Mutual Bank shall
have received a certificate of the president and chief executive officer of
Roosevelt Financial and Roosevelt Bank to that effect.
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(b) Performance of Obligations. Roosevelt Financial and Roosevelt
--------------------------
Bank shall have performed in all material respects all obligations required
to be performed by them under this Agreement prior to the Effective Time,
and Mutual Bancompany and Mutual Bank shall have received a certificate of
the president and chief executive officer of Roosevelt Financial and
Roosevelt Bank to that effect.
(c) Opinion of Counsel. Mutual Bancompany and Mutual Bank shall have
------------------
received an opinion from Silver, Freedman & Taff, L.L.P., counsel to
Roosevelt Financial and Roosevelt Bank, dated the Closing Date, in form and
substance substantially as heretofore provided to Mutual Bancompany and
Mutual Bank.
(d) Delivery of Merger Consideration. Roosevelt Financial shall have
--------------------------------
provided to the Exchange Agent (i) certificates representing at least the
aggregate number of shares of Roosevelt Financial Common Stock to be issued
to the shareholders of Mutual Bancompany pursuant to the provisions of
Section 1.3(a) hereof and (ii) sufficient cash to pay to Mutual Bancompany
shareholders their fractional share interest as provided in Section 1.3(e)
hereof.
6.3 Conditions to Obligations of Roosevelt Financial and Roosevelt Bank to
----------------------------------------------------------------------
Effect the Merger. The obligations of Roosevelt Financial and Roosevelt Bank to
- -----------------
effect the Merger shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Mutual Bancompany and Mutual Bank set forth in Article II of
this Agreement shall be true and correct as of the date of this Agreement
and as of the Effective Time (as though made on and as of the Effective
Time except (i) to the extent such representations and warranties are by
their express provisions made as of a specific date, (ii) for the effect of
transactions contemplated by this Agreement and (iii) where the failure to
be true and correct would not have a material adverse effect on the
Condition of Mutual Bancompany and its Subsidiaries taken as a whole) and
Roosevelt Financial and Roosevelt Bank shall have received a certificate of
the president and chief executive officer of Mutual Bancompany and Mutual
Bank to that effect.
(b) Performance of Obligations. Mutual Bancompany and Mutual Bank
--------------------------
shall have performed in all material respects all obligations required to
be performed by them under this Agreement prior to the Effective Time, and
Roosevelt Financial and Roosevelt Bank shall have received a certificate of
the president and chief executive officer of Mutual Bancompany and Mutual
Bank to that effect.
(c) Opinion of Counsel. Roosevelt Financial and Roosevelt Bank shall
------------------
have received opinions from Housley Kantarian & Bronstein, P.C., and Cook,
Vetter, Doerhoff & Landwehr, P.C., counsel to Mutual Bancompany and Mutual
Bank, dated the Closing Date, in form and substance substantially as
heretofore provided to Roosevelt Financial and Roosevelt Bank.
(d) Voting Agreements. Simultaneous with the execution and delivery
-----------------
of this Agreement, each of the directors of Mutual Bancompany shall have
executed and delivered to Roosevelt Financial a Voting Agreement in the
form attached hereto as Exhibit A.
(e) Third Party Consents. All consents or approvals of all persons
--------------------
(other than Regulatory Authorities) required for or in connection with the
execution, delivery and performance of this Agreement or the consummation
of the Merger shall have been obtained and shall be in full force and
effect, except only such consents and approvals the failure to obtain which
would
33
<PAGE>
not, individually and in the aggregate, have a material adverse effect on
the Condition of Roosevelt Financial as the surviving corporation.
(f) Pooling of Interests. Roosevelt Financial shall have received
--------------------
from KPMG Peat Marwick LLP a letter, in the form then customarily issued by
such accountants in transactions of this type, to the effect that the
Merger will qualify for pooling of interests accounting treatment.
(g) Agreements of Affiliates. Roosevelt Financial shall have received
------------------------
the written affiliates' agreements described in Section 5.5 hereof.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after any requisite stockholder approval:
(a) by mutual consent of the Board of Directors of Roosevelt
Financial and the Board of Directors of Mutual Bancompany;
(b) by the Board of Directors of Roosevelt Financial or the Board of
Directors of Mutual Bancompany at any time after February 28, 1997, if the
Company Merger shall not theretofore have been consummated (provided that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein);
(c) by the Board of Directors of Roosevelt Financial or the Board of
Directors of Mutual Bancompany if (i) any Regulatory Authority denies
approval of the Merger or (ii) the stockholders of Mutual Bancompany do not
approve this Agreement and the Merger at the meeting referred to in Section
5.3 (provided that at the time of any termination pursuant to this Section
7.1(c) the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);
(d) by the Board of Directors of Roosevelt Financial in the event of
a material breach by Mutual Bancompany or Mutual Bank of any
representation, warranty, covenant or other agreement contained in this
Agreement, which breach is not cured within 30 days after written notice
thereof to Mutual Bancompany by Roosevelt Financial; or
(e) by the Board of Directors of Mutual Bancompany in the event of a
material breach by Roosevelt Financial or Roosevelt Bank of any
representation, warranty, covenant or other agreement contained in this
Agreement, which breach is not cured within 30 days after written notice
thereof is given to Roosevelt Financial by Mutual Bancompany.
7.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Sections 7.1(a) through 7.1(c) hereof, this Agreement shall
forthwith become void and there shall be no liability under this Agreement on
the part of Roosevelt Financial or Mutual Bancompany or their respective
officers or directors except as set forth in the second sentence of Section 5.1,
in Section 5.6, or in this Section 7.2. In recognition of the expenses of, and
other opportunities forgone by, Roosevelt Financial in connection with this
Agreement and the Merger, the parties agree that Mutual Bancompany shall pay to
Roosevelt Financial a fee of $500,000 in cash (the "Third-Party Fee") on demand
if, within
34
<PAGE>
18 months after the date hereof, the Merger has not been completed and there
occurs any of the events set forth in subparagraphs (a), (b) or (c) below.
(a) Any person other than Roosevelt Financial or an affiliate of
Roosevelt Financial acquires beneficial ownership of 25% or more of
the then-outstanding Mutual Bancompany Common Stock;
(b) Mutual Bancompany or any of its affiliates, without having
received Roosevelt Financial's prior written consent, enters into an
agreement to engage in an Acquisition Transaction (as defined below)
with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act and the rules and regulations thereunder) other
than Roosevelt Financial or any of its Subsidiaries, or Mutual
Bancompany's Board of Directors recommends that the shareholders of
Mutual Bancompany approve or accept any Acquisition Transaction with
any person other than Roosevelt Financial or any of its Subsidiaries.
For purposes of this Section 7.2, "Acquisition Transaction" shall mean
(i) a merger or consolidation, or any similar transaction, involving
Mutual Bancompany or Mutual Bank, (ii) a purchase, lease or other
acquisition of all or substantially all of the assets of Mutual
Bancompany or Mutual Bank, or (iii) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Mutual Bancompany or Mutual Bank; provided, that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only Mutual Bancompany and/or its
Subsidiaries; or
(c) A bona fide proposal is made by a third party to Mutual
Bancompany or any of its Subsidiaries or shareholders to engage in an
Acquisition Transaction and after such proposal is made any of the
following events occurs: Mutual Bancompany willfully breaches this
Agreement and such breach entitles Roosevelt Financial to terminate
this Agreement; the holders of Mutual Bancompany Common Stock do not
approve this Agreement at the meeting referred to in Section 5.3; such
meeting is not held or is canceled prior to termination of this
Agreement for reasons other than the fault of Roosevelt Financial; or
Mutual Bancompany's Board of Directors withdraws or modifies in a
manner adverse to Roosevelt Financial the recommendation of Mutual
Bancompany's Board of Directors with respect to this Agreement.
Notwithstanding the foregoing, Mutual Bancompany shall not be
obligated to pay to Roosevelt Financial the Third-Party Fee if, prior to
the occurrence any of the events set forth in subparagraphs (a), (b) or (c)
above, (i) this Agreement is validly terminated pursuant to Section 7.1(a)
or (ii) Mutual Bancompany validly terminates this Agreement pursuant to
Sections 7.1(c)(i) or (e).
7.3 Amendment. This Agreement and the Schedules hereto may be amended by
---------
the parties hereto, by action taken by or on behalf of their respective Boards
of Directors, at any time before or after approval of this Agreement by the
stockholders of Mutual Bancompany; provided, however, that (a) after any such
approval by the stockholders of Mutual Bancompany no such modification shall (i)
alter or change the amount or kind of consideration to be received by holders of
Mutual Bancompany Common Stock as provided in this Agreement or (ii) adversely
affect the tax treatment to Mutual Bancompany stockholders of the stock portion
of the Merger Consideration and (b) Roosevelt Financial may make, and Mutual
Bancompany's Board of Directors shall approve and its duly authorized
representative shall execute, such amendments as are permitted by Section 1.6
hereof. This Agreement may not be amended
35
<PAGE>
except by an instrument in writing signed on behalf of each of Roosevelt
Financial and Mutual Bancompany.
7.4 Severability. Any term, provision, covenant or restriction contained
------------
in this Agreement held by a court or a Regulatory Authority of competent
jurisdiction to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdictions
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
7.5 Waiver. Any term, condition or provision of this Agreement may be
------
waived in writing at any time by the Board of Directors of the party which is,
or whose stockholders are, entitled to the benefits thereof.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements. No
----------------------------------------------------------
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein and
each such representation and warranty shall survive such investigation. Except
as set forth below in this Section 8.1, all representations, warranties and
agreements in this Agreement of the parties or in any instrument delivered by a
party pursuant to or in connection with this Agreement shall not survive at the
Effective Time or the termination of this Agreement in accordance with its
terms. In the event of consummation of the Merger, the agreements contained in
or referred to in Sections 1.3, 5.2, 5.8, 5.11 and 5.15 shall survive the
Effective Time. In the event of termination of this Agreement in accordance
with its terms, the agreements contained in or referred to in the second
sentence of Section 5.1, in Sections 5.6 and 7.2, and in the last sentence of
this Section 8.1 shall survive such termination. Nothing herein shall relieve a
breaching party from liability to a non-breaching party in the event of a proper
termination of this Agreement pursuant to Section 7.1(d) or 7.1(e).
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to be duly received (i) on the date given if
delivered personally or (ii) upon confirmation of receipt if by facsimile
transmission or (iii) on the date received if mailed by registered or certified
mail (return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Roosevelt Financial or Roosevelt Bank, or both:
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Attention: Stanley J. Bradshaw
President and Chief
Executive Officer
Telecopy: (314) 532-6292
36
<PAGE>
Copies to:
Gary W. Douglass
Executive Vice President and
Chief Financial Officer
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Telecopy: (314) 532-6292
and
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Christopher R. Kelly, P.C.
Telecopy: (202) 682-0354
(ii) if to Mutual Bancompany or Mutual Bank, or both:
Mutual Bancompany, Inc.
101 West McCarty Street
Jefferson City, Missouri 65101
Attention: Donald L. Connor
President and Chief
Executive Officer
Telecopy: (314) 634-7076
Copy to:
Housley Kantarian & Bronstein, P.C.
1220 19th Street, NW
Suite 700
Washington, D.C. 20036
Attention: K. Scott Fife
Telecopy: (202) 822-0140
8.3 Miscellaneous. This Agreement (including the Schedules referred
-------------
to herein) (i) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof, including any
confidentiality agreement between the parties hereto, (ii) except as expressly
provided herein, is not intended to confer upon any person not a party hereto
any rights or remedies hereunder, (iii) shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns
and (iv) shall be governed in all respects by the laws of the State of Delaware,
except as otherwise specifically provided herein or required by federal law or
regulation. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed in counterparts
which together shall constitute a single agreement.
37
<PAGE>
Roosevelt Financial, Roosevelt Bank, Mutual Bancompany and Mutual Bank have
caused this Agreement to be duly executed by their authorized representatives on
the date first above written.
MUTUAL BANCOMPANY, INC. ROOSEVELT FINANCIAL GROUP, INC.
By: /s/ Donald L. Connor By: /s/ Gary W. Douglass
---------------------------------- ----------------------------------
Name: /s/ Donald L. Connor Name: Gary W. Douglass
-------------------------------- --------------------------------
Title: President & CEO Title: Executive Vice President and
------------------------------- Chief Financial Officer
-------------------------------
Attested by: /s/ Marcrissie T. Henley Attested by: /s/ Anat Bird
------------------------- --------------------------
Name: Marcrissie T. Henley Name: Anat Bird
-------------------------------- ---------------------------------
Title: Secretary Title: Senior Executive Vice President
------------------------------- and Chief Operating Officer
--------------------------------
MUTUAL SAVINGS BANK, F.S.B. ROOSEVELT BANK
By: /s/ Donald L. Connor By: /s/ Gary W. Douglass
---------------------------------- -----------------------------------
Name: Donald L. Connor Name: Gary W. Douglass
-------------------------------- ---------------------------------
Title: President & CEO Title: Executive Vice President and
------------------------------- Chief Financial Officer
-------------------------------
Attested by: /s/ Marcrissie T. Henley Attested by: /s/ Anat Bird
------------------------- --------------------------
Name: Marcrissie T. Henley Name: Anat Bird
-------------------------------- ---------------------------------
Title: Secretary Title: Senior Executive
------------------------------- Vice President and Chief
Financial Officer
--------------------------------
38
<PAGE>
[LETTERHEAD OF ROBERT W. BAIRD & CO. INCORPORATED]
APPENDIX II
April 9, 1996
Board of Directors
Mutual Bancompany, Inc.
101 West McCarty Street
Jefferson City, Missouri
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock, par value $0.01
per share (the "Stock") of Mutual Bancompany, Inc. ("Mutual") of the
consideration (the "Consideration") to be paid for the Common Stock pursuant to
the Merger Agreement and Plan of Reorganization dated as of April 9, 1996 ( the
"Agreement") among Roosevelt Financial Group, Inc., Roosevelt Bank (collectively
"Roosevelt") and Mutual Bancompany and Mutual Savings Bank, F.S.B.
(collectively, "Mutual" or the "Company").
Pursuant to the agreement, Mutual will be merged with and into Roosevelt and
each Mutual share issued and outstanding immediately prior to the merger be
converted into and represent the right to receive such number of shares of
Roosevelt's common stock, par value $0.01 per share ("Roosevelt Common Stock"),
as shall be equal to $23.00 divided by the Roosevelt share price, which is the
weighted average sale price of all Roosevelt Common Stock traded on the Nasdaq
national market during the 10 trading days ending on the date that is three days
prior to the closing date (the "Exchange Ratio").
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment banking
business, is engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwriting, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes. Baird is
familiar with the Company and with Roosevelt, having provided financial advisory
services in connection with the negotiations leading to the Agreement.
In connection with the opinion, we have reviewed or considered among other
things: (a) the Agreement; (b) Mutual's proxy statement dated September 21,
1995; (c) audited consolidated financial statements and management's discussion
and analysis of the financial condition and results of operations for each of
Mutual and Roosevelt for the three fiscal years ended June 30, 1995 and December
31, 1995, respectively; (d) the unaudited financial statements and management's
discussion and analysis of the financial condition and results of operations of
each of Mutual and Roosevelt for the interim periods ending September 30, 1995;
(e) financial analyses and forecast for Mutual and Roosevelt prepared by the
respective managements of Mutual and Roosevelt; (f) the views of senior
management of Mutual and Roosevelt of their respective past and current business
operations, results thereof, financial condition and future prospects; (g)
certain reported price and trading activity for Mutual's and Roosevelt's common
stock, including a comparison of certain financial and stock market information
for Mutual and Roosevelt with similar information for certain other companies
the securities of which
<PAGE>
Board of Directors
Mutual Bancompany, Inc.
April 9, 1996
Page 2
are publicly traded; (h) the financial terms of recent business combinations in
the savings institutions and banking industries; (i) the pro forma impact of the
transaction on Roosevelt; (j) the current market environment generally and the
banking environment in particular; and (k) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as we considered relevant.
In performing our review, we have relied without independent verification upon
the accuracy and completeness of all of the financial and other information,
written or otherwise provided to us, for purposes of this opinion. We did not
make an independent evaluation or appraisal of the specific assets, the
collateral securing assets and liabilities of the Company or the collectibility
of any such assets. With respect to the financial budgets reviewed with
management, we have assumed they reflect the best currently available estimates
and judgments of the Company's Management. We also have assumed that there has
been no material change in the Company's financial condition, results of
operation, business or prospects since the date of the last financial statements
made available to us. We have assumed that Roosevelt will receive regulatory
approvals without undue delay.
Our opinion is necessarily based on economic, market and other conditions in
effect on and material made available to us as of the date hereof. Subsequent
events could materially effect the assumptions used in this opinion. We have
not undertaken to reaffirm or revise this opinion or otherwise comment on any
events occurring after the date hereof.
We have acted as Mutual's financial advisor and will receive a fee for that
service. A significant portion of that fee is contingent on consummation of an
acquisition.
It is understood that this opinion is not to be quoted or referred to, in whole
or part, in a registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without Baird's prior written
consent. Baird hereby consents to the inclusion of this opinion, and a summary
thereof, in any registration statement or proxy statement used in connection
with the Acquisition so long as the opinion is quoted in full in such
registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of the Common Stock
pursuant to the Agreement is fair, from a financial point of view, to such
holders.
Very truly yours,
ROBERT W. BAIRD & CO. INCORPORATED
/s/ Steven P. Kent
STEVEN P. KENT
MANAGING DIRECTOR
<PAGE>
APPENDIX III
GENERAL AND BUSINESS CORPORATION LAW OF MISSOURI
351.455 SHAREHOLDER WHO OBJECTS TO MERGER
MAY DEMAND VALUE OF SHARES, WHEN.--
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall not
vote in favor thereof, and such shareholder, within twenty days after the merger
or consolidation is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the merger or consolidation, the
surviving or new corporation shall pay to such shareholder, upon surrender of
his certificate or certificates representing said shares, the fair value
thereof. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty day period shall be conclusively presumed to have consented to the merger
or consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in any
court of competent jurisdiction within the county in which the registered office
of the surviving or new corporation is situated, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporations of the certificate or
certificates representing said shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the surviving or new corporation. Such shares may be held and disposed of by
the surviving or new corporation as it may see fit. Unless the dissenting
shareholder shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be conclusively presumed to
have approved and ratified the merger or consolidation, and shall be bound by
the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
<PAGE>
EXHIBIT 99
FORM OF PROXY CARD OF MUTUAL BANCOMPANY, INC.
<PAGE>
REVOCABLE PROXY
Mutual Bancompany, Inc.
Jefferson City, Missouri
SPECIAL MEETING OF STOCKHOLDERS
October 23, 1996
The undersigned hereby appoints Donald L. Connor and Robert B. Schwartz,
with full powers of substitution, to act as proxies for the undersigned, to vote
all shares of common stock of Mutual Bancompany, Inc. ("Mutual Bancompany")
which the undersigned is entitled to vote at the Special Meeting of Stock-
holders, scheduled to be held at the office of Mutual Savings Bank, F.S.B.,
101 West McCarty Street, Jefferson City, Missouri, on Wednesday, October 23,
1996 at 11:00 a.m. and at any and all adjournments thereof, as follows:
VOTE
---------------------
FOR AGAINST ABSTAIN
---- ------- -------
The approval of the Agreement and
Plan of Merger and Reorganization
dated April 9, 1996 between Roosevelt
Financial Group, Inc., Roosevelt Bank,
Mutual Bancompany and Mutual Savings Bank,
f.s.b. (including the exhibits and
schedules thereto), and the transactions
contemplated thereby.
[ _ ] [ _ ] [ _ ]
The Board of Directors recommends a vote "FOR" the proposition set forth
above.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY AS DETERMINED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE SPECIAL MEETING. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE
HOLDERS THEREOF TO VOTE WITH RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF THE
SPECIAL MEETING. HOWEVER, PROXIES INSTRUCTED TO VOTE AGAINST THE PROPOSAL TO
APPROVE THE MERGER AGREEMENT AND THE MERGER WILL NOT BE VOTED FOR A PROPOSAL
TO APPROVE ADJOURNMENT OF THE SPECIAL MEETING IN THE EVENT THAT THERE ARE NOT
SUFFICIENT SHARES PRESENT IN PERSON OR BY PROXY AT THE SPECIAL MEETING TO
APPROVE THE MERGER.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and after notification to the Secretary of Mutual
Bancompany at the Special Meeting of the stockholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from Mutual Bancompany prior to the
execution of this proxy of the Notice of the Special Meeting and the Proxy
Statement-Prospectus dated September 18, 1996.
Dated: _________________________, 1996
-----------------------------------
SIGNATURE OF STOCKHOLDER
-----------------------------------
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears herein.
When signing as attorney, executor, administrator,
trustee or guardian, please give your full title.
If shares are held jointly, each holder should
sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ACCOMPANYING POSTAGE-PREPAID ENVELOPE
