<PAGE>
As filed with the Securities and Exchange Commission on June 21, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
Registration Statement Under the Securities Act of 1933
ROOSEVELT FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 6120 43-1498200
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
of incorporation) Industrial Identification No.)
Classification Number)
GARY W. DOUGLASS
ROOSEVELT FINANCIAL GROUP, INC.
900 ROOSEVELT PARKWAY 900 ROOSEVELT PARKWAY
CHESTERFIELD, MISSOURI 63017 CHESTERFIELD, MISSOURI 63017
(314) 532-6200 (314) 532-6200
(Address, including ZIP code, and (Name, address, including ZIP code
telephone number, including area and telephone number, including
code, of registrant's principal area code, of agent for service)
executive offices)
COPIES TO:
CHRISTOPHER R. KELLY, P.C. JEFFREY D. FISHER, P.C.
SILVER, FREEDMAN & TAFF, L.L.P. ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
SUITE 700 EAST SUITE 2600
1100 NEW YORK AVENUE, N.W. ONE METROPOLITAN SQUARE
WASHINGTON, D.C. 20005 ST. LOUIS, MISSOURI 63102-2740
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effec tive date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum Amount
Title of each class of Amount to offering price aggregate offering of
securities to be registered be registered per share price registration fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 870,000 shares(1) N/A $5,661,325(2) $1,953(2)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par
value $.01 per share, of Roosevelt Financial Group, Inc. ("Roosevelt"),
expected to be issued in exchange for up to 870,000 shares of common stock,
par value $.10 per share, of Community Charter Corporation ("Community"),
upon consummation of the merger of Community with and into Roosevelt,
described herein.
(2) Estimated solely for the purpose of calculating the registration fee. The
registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on the book value of Community
common stock on March 31, 1996.
===============================================================================
<PAGE>
ROOSEVELT FINANCIAL GROUP, INC.
Cross Reference Sheet Pursuant to
Item 501(b) of Regulation S-K
(Showing the location in the Proxy Statement/Prospectus of responses
to the Items of Part I of Form S-4)
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<CAPTION>
Location or Heading in Proxy
Item Caption Statement/Prospectus
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<C> <S> <C>
1. Forepart of Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Available Information;
Prospectus Incorporation of Certain Documents by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges Summary; Comparative Stock Prices and
and Other Information Dividend Information; Selected Consolidated
Financial and Other Data of Roosevelt Financial
Group, Inc.; Selected Consolidated Financial and
Other Data of Community Charter Corporation;
Comparative Unaudited Per Share Data;
Roosevelt Financial Group, Inc. and Roosevelt
Bank; Community Charter Corporation and
Missouri State Bank and Trust Company; The
Special Meeting; The Merger
4. Terms of the Transaction Summary; The Merger; Comparison of Rights of
Stockholders of Roosevelt Financial Group, Inc.
and Community Charter Corporation
5. Pro Forma Financial Information Not Applicable
6. Material Contracts with the Company Being Summary; The Merger
Acquired
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
10. Information with Respect to S-3 Registrants Incorporation of Certain Documents by
Reference; Summary; Comparative Stock Prices
and Dividend Information; Roosevelt Financial
Group, Inc. and Roosevelt Bank
11. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other Than Not Applicable
S-3 or S-2 Registrants
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Companies Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Location or Heading in Proxy
Item Caption Statement/Prospectus
- ---- ---------------------------------------------------- -------------------------------------------------
<S> <C> <C>
17. Information with Respect to Companies Other Than Introduction; Summary; Comparative Stock
S-3 or S-2 Companies Prices and Dividend Information; The Merger;
Selected Consolidated and Other Financial Data
of Community Charter Corporation; Business of
Community Charter Corporation; Legal
Proceedings Involving Community Charter
Corporation and Missouri State Bank and Trust
Company; Management's Discussion and
Analysis of Financial Condition and Results of
Operations of Community Charter Corporation;
Supervision and Regulation of Community
Charter Corporation and Missouri State Bank and
Trust Company; Financial Statements of
Community Charter Corporation
18. Information if Proxies, Consents or Authorizations Introduction; Incorporation of Certain Documents
are to be Solicited by Reference; Summary; The Special Meeting;
The Merger
19. Information if Proxies, Consents or Authorizations Not Applicable
are not to be Solicited or in an Exchange Offer
</TABLE>
<PAGE>
[COMMUNITY LOGO]
300 North Tucker Boulevard
St. Louis, Missouri 63101
(314) 621-0000
___________, 1996
Dear Fellow Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Community Charter Corporation ("Community"). The meeting is scheduled to be
held at _________________________________________________, ____________, on
________, ___________, 1996 at :__ .m., local time. Notice of the special
meeting, a Proxy Statement/Prospectus and a form of proxy are enclosed.
The special meeting has been called in connection with the proposed merger
of Community with Roosevelt Financial Group, Inc. ("Roosevelt"). In the merger,
each share of Community common stock outstanding at the time of the merger
(other than shares held by holders who properly exercise dissenters' rights and
other excluded shares) would be converted into 1.6 shares of Roosevelt common
stock (the "exchange ratio"). Upon completion of the merger, Missouri State Bank
and Trust Company, a wholly owned subsidiary of Community, will become a stand-
alone subsidiary of Roosevelt. Consummation of the merger is subject to certain
conditions, including the approval of the stockholders of Community.
The terms of the merger agreement were negotiated by the Board of Directors
in light of various factors, including Community's and Roosevelt's recent
operating results, current financial condition and future prospects. Stifel,
Nicolaus & Company, Inc., Community's financial advisor, has advised your Board
of Directors that in its opinion the exchange ratio is fair from a financial
point of view to Community stockholders as of April 16, 1996.
At the special meeting, Community stockholders will consider and vote upon
approval of the merger. The Board of Directors has approved the merger and
believes that the merger is in the best interests of Community and its
stockholders. Accordingly, the Board of Directors unanimously recommends that
you vote FOR approval of the merger.
If any other matters are properly brought before the special meeting, the
persons named in the accompanying form of proxy will vote the shares represented
by such proxy upon such matters as determined by a majority of the Board of
Directors. You are urged to read the accompanying Proxy Statement/Prospectus,
which provides information regarding the merger and related matters.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE
SPECIAL MEETING. This will not prevent you from voting in person but will
assure that your vote is counted if you do not attend the special meeting.
Sincerely,
James A. Saitz
President, Chief Executive Officer
and Chairman of the Board
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
<PAGE>
COMMUNITY CHARTER CORPORATION
300 North Tucker Boulevard
St. Louis, Missouri 63101
(314) 621-0000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on ___________, 1996
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Community Charter Corporation ("Community") is scheduled to be held
at ____________________________________________, __________, ________, on
________, ___________, 1996 at :__ .m., local time.
A PROXY CARD AND A PROXY STATEMENT/PROSPECTUS FOR THE SPECIAL MEETING ARE
ENCLOSED.
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 as of April 16, 1996, by and among Roosevelt Financial Group,
Inc. ("Roosevelt") and Community Charter Corporation ("Community"), a
copy of which is included in the accompanying Proxy
Statement/Prospectus as Appendix I, and the transactions contemplated
thereby, including the merger of Community into Roosevelt (the
"Merger"), pursuant to which each outstanding share of Community common
stock (other than shares held by holders who perfect dissenters' rights
and other excluded shares) would be converted into 1.6 shares of
Roosevelt common stock (with cash paid in lieu of fractional share
interests).
2. Such other matters as may properly come before the Special Meeting or
any adjournments or postponements 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 of the foregoing proposals at the Special
Meeting on the date specified, or on any dates to which the Special Meeting may
be adjourned or postponed. Stockholders of record at the close of business on
___________, 1996, are the stockholders entitled to vote at the Special Meeting
and any adjournments or postponements thereof.
Each holder of Community common stock may have the right to dissent from
the Merger and to demand payment of the fair value of his shares in the event
the Merger is approved and consummated. Any right of any such shareholder to
receive such payment would be contingent upon strict compliance with the
requirements set forth in Section 351.455 of the General and Business
Corporation Law of Missouri, the full text of which is attached as Appendix III
to the accompanying Proxy Statement/Prospectus. For a summary of these
requirements, see "The Merger--Appraisal Rights" in the Proxy
Statement/Prospectus.
You are requested to fill in, sign and date the enclosed form of proxy
which is solicited on behalf of the Board of Directors, and to mail it promptly
in the enclosed 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
James A. Saitz
President, Chief Executive Officer
and Chairman of the Board
St. Louis, Missouri
___________, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE COMMUNITY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE SPECIAL MEETING.
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
<PAGE>
PROXY STATEMENT
OF
COMMUNITY CHARTER CORPORATION
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________, 1996
-----------------------------------
PROSPECTUS
OF
ROOSEVELT FINANCIAL GROUP, INC.
UP TO 870,000 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
-----------------------------------
This Proxy Statement/Prospectus relates to the proposed merger of Community
Charter Corporation, a Missouri corporation ("Community"), with Roosevelt
Financial Group, Inc., a Delaware corporation ("Roosevelt"), (the "Merger"), as
contemplated by the Agreement and Plan of Merger and Reorganization, dated as of
April 16, 1996 (the "Merger Agreement"), by and among Roosevelt and Community.
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 $.10 per share, of Community ("Community Common
Stock") in connection with the solicitation of proxies by the Board of Directors
of Community (the "Community Board") for use at a Special Meeting of
Stockholders (the "Special Meeting"), scheduled to be held at
___________________________________________________________, on _________, 1996,
at __:__ __.m., local time, and at any and all adjournments and postponements
thereof.
At the Special Meeting, the holders of Community Common Stock will consider
and vote upon a proposal to approve the Merger Agreement and the Merger.
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Community Common Stock issued and outstanding
immediately prior to the Merger (other than shares held by holders who properly
exercise dissenters' rights and other excluded shares) will be converted into
the right to receive 1.6 shares (the "Exchange Ratio") of the common stock, par
value $.01 per share, of Roosevelt ("Roosevelt Common Stock"), with cash paid in
lieu of fractional share interests. Based on the last reported sale price for
Roosevelt Common Stock on the Nasdaq National Market on ____________, 1996
($_____ per share), the value of 1.6 shares of Roosevelt Common Stock as of that
date would have been approximately $_____. At the present time, there is no
established market in which shares of Community Common Stock are regularly
traded, nor are there any uniformly quoted prices for such shares. As of April
16, 1996, the last trading day preceding public announcement of the proposed
Merger, the last reported sale price for Roosevelt Common Stock was $19.00.
Community's financial advisor has rendered an opinion to the effect that as of
April 16, 1996, the Exchange Ratio is fair from a financial point of view to the
stockholders of Community. The Merger is subject to certain conditions,
including the approval of the stockholders of Community. 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 up
to 870,000 shares of Roosevelt Common Stock to be issued upon consummation of
the Merger pursuant to the terms of the Merger Agreement.
This Proxy Statement/Prospectus does not cover any resales of the Roosevelt
Common Stock offered hereby to be received by the stockholders deemed to be
affiliates of Roosevelt or Community upon consummation of the Merger. No person
is authorized to make use of this Proxy Statement/Prospectus in connection with
such resales, although such securities may be traded without the use of this
Proxy Statement/Prospectus by those stockholders of Roosevelt not deemed to be
affiliates of Roosevelt or Community.
<PAGE>
This Proxy Statement/Prospectus, and the accompanying notice and form of
proxy, are first being mailed to stockholders of Community on or about
_________, 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, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM, THE MISSOURI DIVISION OF FINANCE, ANY STATE
SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AGENCY, AND NEITHER THE
SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM, THE MISSOURI DIVISION OF FINANCE, 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 _________, 1996
ii
<PAGE>
AVAILABLE INFORMATION
Roosevelt is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information filed by Roosevelt 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. In addition,
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 Northwestern Atrium Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048.
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 OR COMMUNITY,
UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON TO GARY W. DOUGLASS, EXECUTIVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 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 _________, 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 (the "Roosevelt 1995 10-K").
2. The Quarterly Report on Form 10-Q of Roosevelt for the quarterly period
ended March 31, 1996.
3. 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 after the date of this Proxy
Statement/Prospectus and 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, and all
information with respect to Community and its subsidiaries has been supplied by
Community.
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
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TABLE OF CONTENTS
<TABLE>
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Page
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AVAILABLE INFORMATION iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE iii
TABLE OF CONTENTS v
SUMMARY 1
The Parties to the Merger 1
Roosevelt Financial Group, Inc. and Roosevelt Bank 1
Community Charter Corporation and Missouri State Bank and Trust Company 1
The Special Meeting 2
Meeting Date; Record Date 2
Matters to Be Considered 2
Vote Required 2
Security Ownership 2
The Merger 3
General 3
Reasons for the Merger; Recommendation of the Board of Directors 3
Merger Consideration 3
Treatment of Community Stock Options 3
Opinion of Financial Advisor 4
Effective Time and Closing Date 4
Appraisal Rights 4
Interests of Certain Persons in the Merger 4
Conditions to the Merger 5
Regulatory Approvals 5
Waiver and Amendment; Termination 5
Conduct of Business Pending the Merger 6
Expenses; Termination Fees 6
Accounting Treatment 6
Certain Federal Income Tax Consequences of the Merger 6
Effects of the Merger on Rights of Stockholders 7
Nasdaq Listing 7
Management After the Merger 7
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION 8
RECENT DEVELOPMENTS 10
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF ROOSEVELT FINANCIAL GROUP, INC. 11
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF COMMUNITY CHARTER CORPORATION 13
COMPARATIVE UNAUDITED PER SHARE DATA 15
ROOSEVELT FINANCIAL GROUP, INC. AND ROOSEVELT BANK 16
Roosevelt Financial Group, Inc. 16
Bank Holding Company Regulation 17
Roosevelt Bank 19
COMMUNITY CHARTER CORPORATION AND MISSOURI STATE BANK AND TRUST COMPANY 19
Community Charter Corporation 19
Missouri State Bank 20
THE SPECIAL MEETING 20
Place, Time and Date 20
Matters to Be Considered 20
Record Date; Vote Required 21
Proxies 21
</TABLE>
v
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<TABLE>
<S> <C>
THE MERGER 22
General 22
Background of the Merger 22
Reasons for the Merger; Recommendation of the Board of Directors 23
Merger Consideration 23
Treatment of Community Stock Options 24
Opinion of Financial Advisor 24
Effective Time and Closing Date 27
Appraisal Rights 27
Fractional Shares 28
Exchange of Certificates 28
Interests of Certain Persons in the Merger 29
Representations and Warranties 29
Conditions to the Merger 29
Regulatory Approvals 30
Waiver and Amendment; Termination 31
Conduct of Business Pending the Merger 32
Expenses; Termination Fees 33
Accounting Treatment 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 COMMUNITY CHARTER CORPORATION 35
General 35
Missouri State Bank 35
Lending and Credit Management 37
Nonperforming Assets 40
Investment Portfolio 41
Deposits 43
Amounts and Maturities of Time Deposits of $100,000 and Over 44
Sensitivity to Changes in Interest Rates 44
Competition 45
Employees 45
Properties 45
LEGAL PROCEEDINGS INVOLVING COMMUNITY CHARTER CORPORATIONAND MISSOURI STATE BANK AND TRUST COMPANY 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS OF COMMUNITY CHARTER CORPORATION 46
General 46
Net Income 46
Net Interest Income 46
Interest Income 47
Interest Expense 47
Average Balances, Interest Rates and Yields 48
Changes in Interest Income and Expense/Volume and Rate Variances 49
Noninterest Income 49
Noninterest Expense 50
Income Taxes 51
Capital Management and Resources 51
Liquidity 52
Accounting Pronouncements 52
Effects of Inflation 53
</TABLE>
vi
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<TABLE>
<S> <C>
SUPERVISION AND REGULATION OF COMMUNITY CHARTER CORPORATION AND MISSOURI STATE BANK 54
General 54
Federal Bank Holding Company Regulation 55
State Bank Holding Company Regulation 55
Federal and State Bank Regulation 55
Deposit Insurance 57
Dividends 57
Capital Adequacy 57
Monetary Policy 59
Proposed Regulations 59
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ROOSEVELT FINANCIAL GROUP, INC.AND COMMUNITY CHARTER CORPORATION 60
General 60
Introduction 60
Capital Stock 60
Payment of Dividends 60
Special Meetings of Stockholders 61
Advance Notice Requirements for Nominations of Directors and Presentation of New Business at Meetings
of Stockholders 61
Action by Stockholders Without a Meeting 61
Cumulative Voting for Election of Directors 61
Rights of Stockholders to Dissent 62
Number and Term of Directors 62
Removal of Directors 62
Vacancies on the Board of Directors 63
Approval of Mergers, Consolidations, Sales of Substantially All Assets and Dissolutions 63
Amendment of Certificate or Articles of Incorporation and Bylaws 64
Transactions with Affiliates 65
Inspection of Books and Records 65
Liability and Indemnification of Directors, Officers and Employees 65
LEGAL MATTERS 66
EXPERTS 66
STOCKHOLDER MATTERS 67
INDEPENDENT ACCOUNTANTS 67
OTHER MATTERS 67
FINANCIAL STATEMENTS OF COMMUNITY CHARTER CORPORATION F-1
APPENDICES
I. Agreement and Plan of Merger and Reorganization (omitting schedules and exhibits)
II. Fairness Opinion of Stifel, Nicolaus & Company, Inc.
III. Text of Section 351.455 of the General and Business Corporation Law of Missouri
</TABLE>
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, Community 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 March 31, 1996, Roosevelt had total consolidated assets of $9.1
billion, deposits of $4.9 billion and stockholders' equity of $509 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 $9.1 billion
in consolidated total assets at March 31, 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 services
for other investors.
Following the acquisition of Community and its subsidiary, Missouri
State Bank and Trust Company ("Missouri State Bank" or the "Bank"), Roosevelt,
which is currently regulated as a saving 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."
COMMUNITY CHARTER CORPORATION AND MISSOURI STATE BANK AND TRUST COMPANY
Community, a Missouri corporation, is the holding company for Missouri
State Bank, a state chartered Missouri trust company with full commercial
banking powers headquartered in St. Louis, Missouri. As of March 31, 1996,
Community had total consolidated assets of $61.9 million, deposits of $53.6
million and stockholders' equity of $5.7 million. Community has no employees,
and no significant business or assets apart from its investment in Missouri
State Bank. The executive offices of both Community and Missouri State Bank are
located at 300 North Tucker Boulevard, St. Louis, Missouri 63101, and their
telephone number at that address is (314) 621-0000.
1
<PAGE>
Missouri State Bank has two offices, both located in the City of St.
Louis, Missouri, from which it conducts a commercial banking business and acts
primarily as a lender to small and middle market companies located within the
St. Louis metropolitan area. These companies tend to be privately held and
owner-operated with annual sales of less than $50 million, and with typical
borrowing requirements of $50,000 to $1 million.
Management believes that Community is able to compete effectively in its
market because (i) Missouri State Bank's lending officers and senior management
maintain close working relationships with their commercial customers and their
businesses, (ii) the Bank is able to respond more quickly to loan requests than
Community's larger competitors, (iii) the Bank's management and board of
directors have significant experience within the St. Louis community, and (iv)
industry consolidation has resulted in fewer banks addressing the Bank's target
market niche.
For additional information concerning Community and Missouri State Bank,
see "Community Charter Corporation and Missouri State Bank and Trust Company"
and "Business of Community Charter Corporation."
THE SPECIAL MEETING
MEETING DATE; RECORD DATE
The Special Meeting is scheduled to be held at the
______________________________________________, on ________, ___________, 1996
at __:__ __.m., local time, and any and all adjournments or postponements
thereof. Only holders of record of Community Common Stock at the close of
business on ___________, 1996 (the "Record Date"), are entitled to notice of and
to vote at the Special Meeting.
MATTERS TO BE CONSIDERED
At the Special Meeting, holders of shares of Community Common Stock will
vote on a proposal to approve the Merger Agreement and the Merger. Community
stockholders also may consider and vote upon such other matters as are properly
brought before the Special Meeting.
VOTE REQUIRED
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Community Common Stock entitled to vote at the Special
Meeting is required for approval of the Merger Agreement and the Merger. As of
the Record Date, there were 471,499 shares of Community Common Stock entitled to
be voted at the Special Meeting.
Approval of the Merger Agreement and the Merger by the stockholders of
Community is a condition to, and required for, consummation of the Merger. See
"The Merger--Conditions to the Merger."
SECURITY OWNERSHIP
As of the Record Date, the directors and executive officers of Community
and their affiliates beneficially owned in the aggregate 205,335 shares, or
43.5% of the then outstanding shares, of Community Common Stock entitled to vote
at the Special Meeting. The directors of Community have entered into voting
agreements with Roosevelt whereby such directors have agreed to vote all shares
of Community Common Stock owned by them for approval of the Merger Agreement and
the Merger. As of the Record Date, directors and executive officers of Roosevelt
and their affiliates beneficially owned in the aggregate no shares of Community
Common Stock.
For additional information, see "The Special Meeting."
2
<PAGE>
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 Community are being asked to consider and vote upon
a proposal to approve the Merger Agreement, pursuant to which Community will be
merged with and into Roosevelt, resulting in Missouri State Bank, a wholly owned
first tier subsidiary of Community, becoming a stand-alone first tier subsidiary
of Roosevelt. As of the Effective Time (as defined below) Community shall cause
Missouri State Bank to change its name to "Roosevelt Bank and Trust Company."
The name of the surviving holding company following consummation of the Merger
will be "Roosevelt Financial Group, Inc." See "The Merger--General."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Community Board has unanimously adopted the Merger Agreement and
approved the transactions contemplated thereby and has determined that the
Merger is in the best interests of Community and its stockholders. THE COMMUNITY
BOARD THEREFORE RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER AT THE SPECIAL MEETING.
For a discussion of the factors considered by the Community Board in
reaching its decision to adopt the Merger Agreement and approve the transactions
contemplated thereby, see "The Merger--Background of the Merger" and "--Reasons
for the Merger; Recommendation of the Board of Directors."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Community 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 1.6 shares of Roosevelt Common Stock (the "Merger Consideration").
See "The Merger--Merger Consideration." Each share of Roosevelt Common Stock
issued and outstanding at the Effective Time will remain outstanding and
unchanged as a result of the Merger.
The number of shares of Roosevelt Common Stock to be received for each
share of Community Common Stock has been fixed at 1.6. Based on the last
reported sale price for Roosevelt Common Stock on the Nasdaq National Market on
___________, 1996 ($_____ per share), the value of 1.6 shares of Roosevelt
Common Stock as of that date would have been approximately $_____. At the
present time, there is no established market in which shares of Community Common
Stock are regularly traded, nor are there any uniformly quoted prices for such
shares. The market value 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 result in an increase or decrease in the value of
the Merger Consideration to be received by Community stockholders in the Merger.
An increase in the market value of Roosevelt Common Stock would increase the
value of the Merger Consideration to be received by Community stockholders in
the Merger. A decrease in the market value of Roosevelt Common Stock would have
the opposite effect. See "The Merger--Merger Consideration."
TREATMENT OF COMMUNITY STOCK OPTIONS
At the Effective Time, Community's Non-Qualified Stock Option Plan for
Executive Officers and Directors (the "Community Stock Option Plan") and each
outstanding option thereunder to purchase Community Common Stock (the "Community
Stock Options") will be assumed by Roosevelt. Upon such assumption, each
Community Stock Option shall become an option to purchase the number of shares
of Roosevelt Common Stock that would have been received by the holder of such
option in the Merger had the option been exercised in full immediately prior to
the Effective Time, upon the same terms and conditions under the relevant option
as were applicable immediately
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<PAGE>
prior to the Effective Time, with an appropriate adjustment to the exercise
price under each substituted option. See "The Merger--Treatment of Community
Stock Options."
OPINION OF FINANCIAL ADVISOR
Community has retained Stifel, Nicolaus & Company, Inc. ("Stifel") as
its financial advisor in connection with the transactions contemplated by the
Merger Agreement to evaluate the financial terms of the Merger. See "The Merger
- --Background of the Merger" and "--Reasons for the Merger; Recommendation of the
Board of Directors."
Stifel has delivered its opinion that as of April 16, 1996, the Exchange
Ratio is fair, from a financial point of view, to the holders of Community
Common Stock. A copy of Stifel's opinion dated April 16, 1996 is attached to
this Proxy Statement/Prospectus as Appendix II and is incorporated by reference
herein. See "The Merger--Opinion of Financial Advisor."
EFFECTIVE TIME AND CLOSING DATE
The Merger shall become effective at the time and on the date of the
filing of a certificate of merger with the Secretary of State of Delaware,
articles of merger with the Secretary of State of Missouri and the issuance of a
certificate of merger by the Secretary of State of Missouri (the "Effective
Time"). Such filings will occur only after the approval of the Merger Agreement
and the Merger by the requisite vote of Community'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
following the satisfaction or waiver of all conditions and obligations precedent
of Roosevelt and Community to consummate the Merger, or at another time agreed
to by Roosevelt and Community (the "Closing Date"). See "The Merger--Effective
Time and Closing Date."
APPRAISAL RIGHTS
Under Missouri law, holders of Community 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 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 the shareholder's
dissenter's rights. However, a vote for the Merger Agreement and the Merger will
constitute such a waiver. A Community 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. See
"The Merger--Appraisal Rights" and Appendix III to this Proxy
Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
For at least three years after the Effective Time (to the extent
permitted by applicable law), Roosevelt will cause Roosevelt Bank and Trust
Company to continue to maintain the corporate indemnification currently in
effect at Missouri State Bank for the benefit of its current officers and
directors relating to their acts or omissions occurring prior to the Effective
Time. The Community Board was aware of this interest and considered it, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
Subsequent to the execution of the Merger Agreement, James A. Saitz, the
current Chairman, President and Chief Executive Officer of Missouri State Bank,
has entered into an agreement pursuant to which he will serve in those
capacities for Roosevelt Bank and Trust Company following consummation of the
Merger. Mr. Saitz's initial base salary will be $175,000 and he will be subject
to Roosevelt's Executive Compensation Policy for all compensation matters.
Consistent with Roosevelt's policy to provide for management's continuity and to
motivate performance, Mr. Saitz will be issued 25,000 restricted shares of
Roosevelt Common Stock upon his becoming President of Roosevelt Bank and Trust
that will vest ratably over a three year period contingent upon achievement of
performance measures that will be a part of Roosevelt Bank and Trust Company's
strategic goals. Such shares,
4
<PAGE>
consistent with Roosevelt's Executive Compensation Policy, will vest completely
upon a change in control of Roosevelt. See "The Merger--Interests of Certain
Persons in the Merger."
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 Community of an opinion with respect to
certain federal income tax consequences of the Merger, the receipt by Roosevelt
of a letter from its independent accountants to the effect that the Merger will
qualify for pooling of interests accounting treatment, that no more than 5% of
the outstanding shares of Community Common Stock be held by holders who dissent
from the Merger and certain other conditions. See "The Merger--Conditions to the
Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "FRB") and the Missouri Division of Finance (the
"MDF"). Roosevelt filed applications for approval of the Merger with the FRB
and the MDF on __________, 1996 and anticipates obtaining the approvals of the
FRB and the MDF in the third quarter of 1996. There can be no assurance as to
the receipt or timing of such approvals.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained, including approval to change the name of
Missouri State Bank to Roosevelt Bank and Trust Company, without the imposition
of any condition that Roosevelt reasonably determines is unduly burdensome to
Roosevelt or any of its subsidiaries or limits or restricts the activities of
Missouri State Bank. There can be no assurance that any such approval will not
contain terms, conditions or requirements which cause such approval to fail to
satisfy such condition to the consummation of the Merger.
Under federal law, a period of 30 days, subject to reduction to 15 days by
the FRB with the concurrence of the United States Department of Justice (the
"Department of Justice"), must expire following approval by the FRB within which
period the Department of Justice may file objections to the Merger under the
federal antitrust laws. The Department of Justice could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger unless acceptable accommodations are
made. While the parties believe that the likelihood of such action by the
Department of Justice is remote in this case, there can be no assurance that the
Department of Justice will not initiate such a proceeding. See "The Merger--
Regulatory Approvals."
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, the Boards of Directors of Roosevelt and
Community may extend the time for performance of any obligations under the
Merger Agreement, waive any inaccuracies in the representations and warranties
contained in the Merger Agreement and waive compliance with any term, condition
or provision of the Merger Agreement.
Subject to applicable law, the Merger Agreement may be amended by action of
the Roosevelt and Community Boards at any time before or after approval of the
Merger Agreement and the Merger by the stockholders of Community; provided that,
among other things, after approval of the Merger Agreement and the Merger by the
stockholders of Community, no amendment may change the amount or form of the
Merger Consideration to be received by Community stockholders in the Merger or
adversely affect the tax treatment to Community Stockholders of the Merger
Consideration without their approval. In addition, Roosevelt may cause an
amendment to the Merger Agreement to change the method of structuring 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
Community's stockholders, either by mutual consent of the parties in writing or
by either party if (i) the Merger is not consummated by March 31, 1997 (provided
that the terminating
5
<PAGE>
party is not then in material breach of the Merger Agreement); (ii) any
regulatory authority denies approval of the Merger; (iii) no Acquisition
Transaction (as defined below, see "The Merger--Expenses; Termination Fees) is
proposed or initiated by a third party prior to the Special Meeting and the
required approval of Community's stockholders is not obtained (provided 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. The Board of Directors of Roosevelt (the "Roosevelt Board") may
terminate the Merger Agreement upon payment of $1.0 million in cash to Community
if Roosevelt enters into a definitive agreement to merge with or be acquired by
another party and such party requires the termination of the Merger Agreement as
a condition of entering into such definitive agreement. See "The Merger--Waiver
and Amendment; Termination." The board of directors of either party may
terminate the Merger Agreement in the event the stockholders of Community do not
approve the Merger after a third party proposes or initiates an Acquisition
Transaction (as hereinafter defined). In the event of such termination,
Community shall pay Roosevelt a fee of $800,000 (plus expenses up to $200,000).
See "The Merger--Waiver and Amendment; Termination" and "Expenses; Termination
Fees. "
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Roosevelt and Community has agreed to conduct its business prior to
the Effective Time only 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. Community 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 FEES
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, (i) Roosevelt may terminate the Merger Agreement upon
payment of $1.0 million in cash to Community if Roosevelt enters into a
definitive agreement to merge with or be acquired by another party and such
party requires the termination of the Merger Agreement as a condition of
entering into such definitive agreement and (ii) Community has agreed to pay
Roosevelt a fee of $800,000 (plus expenses up to $200,000) in the event the
Merger Agreement is terminated because the stockholders of Community do not
approve the Merger after a third party proposes or initiates an Acquisition
Transaction. See "The Merger--Expenses; Termination Fees."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "pooling of
interests" in accordance with generally accepted accounting principles. A
condition to the consummation of the Merger is the receipt by Roosevelt of a
letter from its independent accountants to the effect that the Merger qualifies
for pooling of interests accounting treatment. See "The Merger--Accounting
Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is a condition to the obligations of Roosevelt and Community to
consummate the Merger that they shall have received an opinion of counsel or
independent certified accountants mutually acceptable to them to the effect
that, among other things, the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and for federal income tax purposes no gain or loss will be
recognized as a result of the Merger by Roosevelt or Community, or any Community
stockholder upon receipt solely of Roosevelt Common Stock in the Merger (except
with respect to cash received by a Community stockholder in lieu of a fractional
share of Roosevelt Common Stock). This condition is waivable at the option of
the parties. Community 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. See "The
Merger--Certain Federal Income Tax Consequences of the Merger" and "--Conditions
to the Merger."
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<PAGE>
EFFECTS OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Community 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 Community governing the rights of Roosevelt and Community stockholders, see
"Comparison of Rights of Stockholders of Roosevelt Financial Group, Inc. and
Community Charter Corporation."
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 Community in the
Merger and to be reserved for issuance pursuant to the Community Stock Options
assumed by Roosevelt in the Merger 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.
Prior to the Effective Time, Community will cause Stanley J. Bradshaw,
President and Chief Executive Officer of Roosevelt, to be elected as a director
of Missouri State Bank for the longest term permitted by the bylaws of Missouri
State Bank, with a term commencing as of the Effective Time. See "Management
After the Merger."
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<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION
The Roosevelt Common Stock is quoted on the Nasdaq National Market under the
symbol "RFED." At the present time, there is no established market in which
shares of Community Common Stock are regularly traded, nor are there any
uniformly quoted prices for such shares. The following table sets forth the
comparative market prices for Roosevelt Common Stock and the prices at which
Community Common Stock has been traded to the knowledge of Community 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 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 COMMUNITY COMMON STOCK
------------------------------ -------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------- -------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
1993 CALENDAR YEAR
First Quarter/(1)/............................... $13.333 $ 9.375 $ 0.07 n/a n/a n/a
Second Quarter/(1)/.............................. 15.500 12.333 0.08 n/a n/a n/a
Third Quarter/(1)/............................... 15.500 13.167 0.08 n/a n/a n/a
Fourth Quarter................................... 16.167 13.417 0.08 $10.00/(3)/ 10.00/(3)/ $---
1994 CALENDAR YEAR
First Quarter.................................... 15.833 13.917 0.10 10.00/(3)/ 10.00/(3)/ ---
Second Quarter................................... 18.250 14.328 0.11 10.00/(3)/ 10.00/(3)/ ---
Third Quarter/(2)/............................... 17.375 16.000 0.11 n/a n/a ---
Fourth Quarter/(2)/.............................. 16.875 12.750 0.11 n/a n/a ---
1995 CALENDAR YEAR
First Quarter/(2)/............................... 17.250 14.750 0.14 n/a n/a ---
Second Quarter................................... 18.625 15.750 0.14 10.50/(4)/ 10.50/(4)/ ---
Third Quarter.................................... 18.875 15.250 0.14 11.00/(5)/ 11.00/(5)/ ---
Fourth Quarter................................... 19.375 15.875 0.14 11.27/(6)/ 11.27/(6)/ ---
1996 CALENDAR YEAR
First Quarter/(2)/............................... 19.250 17.000 0.155 n/a n/a ---
Second Quarter .................................
</TABLE>
- -------------------------------------
/(1)/ Prior to the fourth quarter of 1993, there were no shares of Community
Common Stock issued and outstanding.
/(2)/ There were no trades in Community Common Stock during the quarter.
/(3)/ Represents the price of Community Common Stock at the time of Community's
initial stock offering.
/(4)/ Represents the price at which Community repurchased shares of Community
Common Stock from a shareholder.
/(5)/ Represents the price at which Community resold the shares of Community
Common Stock repurchased during the second quarter of 1995.
/(6)/ Represents the price at which Community repurchased shares of Community
Common Stock from a shareholder and then resold during the fourth quarter
of 1995.
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<PAGE>
The following table sets forth the last reported sale prices per share of
Roosevelt Common Stock and the equivalent per share price for Community Common
Stock giving effect to the Merger on (i) April 15, 1996, the last trading day
preceding public announcement of the signing of the Merger Agreement; and (ii)
___________, 1996, the last practicable date prior to the mailing of this Proxy
Statement/Prospectus.
ROOSEVELT COMMUNITY EQUIVALENT PRICE PER
COMMON STOCK COMMON STOCK COMMUNITY SHARE/(1)/
------------ ------------ --------------------
April 15, 1996...... $19.00 n/a /(2)/ $30.40
___________, 1996...
- ------------------
/(1)/The equivalent price per share of Community Common Stock at each
specified date was determined by multiplying (i) the last reported sale
price of Roosevelt Common Stock on such date and (ii) the Exchange Ratio
of 1.6.
/(2)/To the best knowledge of Community, there have been no trades in
Community Common Stock since 1995.
As of _____________, 1996, the ______________ outstanding shares of
Roosevelt Common Stock were held by approximately _____ record owners and the
471,499 outstanding shares of Community Common Stock were held by approximately
66 record owners. In addition, as of _____________, 1996, 71,000 shares of
Community Common Stock were subject to outstanding option rights under the
Community Stock Option Plan.
The number of shares of Roosevelt Common Stock to be received for each
share of Community Common Stock has been fixed at 1.6. Community stockholders
are advised to obtain current market quotations for Roosevelt Common Stock. The
market price of Roosevelt Common Stock may fluctuate between the date of this
Proxy Statement/Prospectus and the Effective Time. Fluctuations in the market
price of Roosevelt Common Stock would result in an increase or decrease in the
value of the Merger Consideration to be received by holders of Community Common
Stock in the Merger. An increase in the market value of Roosevelt Common Stock
would increase the market value of the Merger Consideration to be received in
the Merger. A decrease in the market value of Roosevelt Common Stock would have
the opposite effect. 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."
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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<PAGE>
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. As a result of these
adjustments, BIF insured institutions now generally pay lower premiums than SAIF
insured institutions.
The FDIC also 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 were considered by the United
States Congress in 1995 and 1996. One proposal currently under consideration
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 disparity. The BIF and SAIF would be merged into one fund as soon
as practicable but no later than January 1, 1998. The special assessment rate
is anticipated to range from .80% to .90%. Based on Roosevelt Bank's level of
SAIF deposits at March 31, 1995 (including the effect of the acquisitions of
Washington Savings Bank, FSB ("Washington Savings"), Kirksville Federal Savings
Bank ("Kirksville Bank"), Sentinel Federal Savings and Loan Association of
Kansas City ("Sentinel Federal") and Mutual Savings Bank, f.s.b. ("Mutual
Bank")) and assuming a special assessment of .90%, Roosevelt Bank's assessment
would be approximately $38.8 million on a pre-tax basis. If such special
assessment had been recorded as of March 31, 1996, on a pro forma basis, the
tangible, core and risk-based capital ratios of Roosevelt Bank would have been
5.09%, 5.11% and 13.82%, respectively. If the legislation is enacted, 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 if 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 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 Office of Thrift Supervision (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.
10
<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 THREE MONTHS AT OR FOR THE
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------------------- ------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ -------------- ------------- --------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY OF FINANCIAL CONDITION:
Total assets..................$9,134,660 $ 9,055,086 $ 9,013,061 $ 8,431,866 $ 7,595,161 $6,038,732 $ 5,756,199
Securities available for sale. 1,459,784 1,954,997 1,606,461 1,765,699 1,665,879 52,399 46,997
Securities held to maturity... 3,577,014 3,602,999 3,550,140 3,276,062 2,642,916 2,219,147 2,487,141
Loans......................... 3,777,160 3,149,641 3,577,892 3,072,151 2,671,810 2,349,771 2,259,867
Deposits...................... 4,921,047 4,854,475 4,907,497 4,899,389 5,081,496 4,300,981 4,184,323
Other borrowings.............. 3,571,970 3,618,695 3,507,475 2,963,449 1,975,661 1,319,154 1,222,457
Stockholders' equity.......... 509,105 438,997 496,906 441,626 378,462 288,545 254,396
SUMMARY OF OPERATIONS:
Total interest income.........$ 166,143 $ 156,553 $ 647,316 $ 533,368 $ 486,940 $ 439,173 $ 503,801
Total interest expense........ 119,769 108,123 466,433 347,574 321,490 314,728 394,315
Provision for losses on
loans........................ 300 300 1,200 12,432 706 2,648 2,695
---------- ------------- ------------ ----------- ------------ ---------- -----------
Net interest income after
provision for losses on
loans....................... 46,074 48,130 179,683 173,362 164,744 121,797 106,791
---------- ------------- ------------ ----------- ------------ ---------- -----------
Retail banking fees.......... 3,132 2,532 10,706 8,682 6,260 4,870 3,150
Insurance and brokerage
sales commissions........... 1,698 2,011 7,506 6,538 5,737 4,347 3,159
Loan servicing fees
(expenses), net............. 2,019 2,042 8,911 7,359 (11,145) 8,392 11,191
Net gain (loss) from
financial instruments....... 341 1,508 5,468 (39,120) 10,646 11,394 374
Unrealized losses on
impairment of
mortgage-backed
securities held to
maturity.................... --- (27,063) (27,063) --- --- --- ---
Recognition of financial
futures losses.............. --- --- (34,827) --- --- --- ---
Other........................ 1,328 998 3,016 5,337 2,759 1,790 5,33
---------- ------------- ------------ ----------- ------------ ---------- ----------
Total noninterest income
(loss)................... 8,518 (17,972) (26,283) (11,204) 14,257 30,793 23,211
---------- ------------- ------------ ----------- ------------ ---------- ----------
Total noninterest expense. 21,718 21,493 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........ 32,874 8,665 65,734 46,582 80,403 52,138 42,008
Income tax expense........... 11,309 2,978 20,616 15,026 27,134 17,887 14,612
Extraordinary item, net...... --- --- --- (7,849) (1,908) (3,796) (1,662)
Cumulative effect of
change in accounting
principle..................... --- --- --- --- (,489)/(1)/ --- (16,321)/(2)/
---------- ------------- ------------ ----------- ------------ ---------- ------------
Net income....................$ 21,565 $ 5,687 $ 45,118 $ 23,707 $ 44,872 $ 30,455 $ 9,413
========== ============= ============ =========== ============ ========== ============
Net income attributable to
common stock..................$ 20,508 $ 4,615 $ 40,875 $ 18,523 $ 41,057 $ 28,866 $ 5,029
========== ============= ============ =========== ============ ========== ============
PER SHARE DATA:
Primary earnings per share:
Income before
extraordinary item and
cumulative effect of
change in accounting
principle................$ 0.48 $ 0.12 $ 1.01 $ 0.70 $ 1.54 $ 1.09 $ 1.09
Extraordinary item......... --- --- --- (0.21) (0.06) (0.13) (0.06)
Cumulative effect of
change in accounting
principle................ --- --- --- --- (0.20) --- (0.65)
---------- ------------- ------------ ----------- ------------ ---------- -----------
Net income...............$ 0.48 $ 0.12 $ 1.01 $ 0.49 $ 1.28 $ 0.96 $ 0.38
========== ============= ============ =========== ============ ========== ==========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS AT OR FOR THE
ENDED MARCH 31, 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 before
extraordinary item
and cumulative effect
of change in accounting
principle..............$ 0.46 $ 0.12 $ 0.99 $ 0.68 $ 1.32 $ 0.99 $ 1.09
Extraordinary item...... --- --- --- (0.20) (0.05) (0.11) (0.06)
Cumulative effect of
change in accounting
principle.............. --- --- --- --- (0.16) --- (0.65)
---------- ------------- ------------ ------------ ------------- ---------- ------------
Net income.............$ 0.46 $ 0.12 $ 0.99 $ 0.48 $ 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 and
administrative expense.... 2.14x 2.25x 2.06x/(4)/ 1.67x/(3)/ 1.82x 1.55x 1.44x
Effective net spread
during the period......... 2.08% 2.22% 2.05% 2.29% 2.40% 2.32% 2.01%
Nonperforming assets to
total assets, end of
period.................... 0.85 0.61 0.90 0.41 0.46 0.78 0.89
Return on assets (ratio of
net income to average
total assets)............. 0.93 0.25/(5)/ 0.49/(4)/ 0.28/(3)/ 0.61 0.54 0.16
Return on equity (ratio of
net income to average
stockholders' equity)..... 17.18 5.08/(5)/ 9.93/(4)/ 5.85/(3)/ 12.86 11.11 3.55
Equity-to-assets ratio
(ratio of average
stockholders' equity to
average total assets)..... 5.40 4.95 4.97 4.80 4.75 4.84 4.64
Cash dividends per share
of common stock...........$ 0.155 $ 0.14 $ 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)..... 32.29% 116.67%/(5)/ 55.45%/(4)/ 58.81%/(3)/ 18.72% 18.63% 90.41%
Book value per share, end
of period.................$ 10.83 $ 9.74 $ 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. Not including such
charges 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, the recognition of financial futures losses
of $34.8 million and merger-related expenses of $1.6 million, the ratio of net
interest income to general and administrative expense would have been 2.10x,
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, return on assets would have been 1.04%,
return on equity would have been 20.95% and the dividend on common stock payout
ratio would have been 25.45%.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF COMMUNITY CHARTER CORPORATION
The following table shows, for the periods indicated, certain summary
historical data for Community. 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 THREE MONTHS AT OR FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
--------------------------------- --------------------------------
1996 1995 1995 1994/(1)/
---------------- -------------- ------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets................................ $61,917 $46,068 $64,296 $ 44,663
Loans receivable............................ 43,907 28,399 41,315 25,808
Investment securities:
Available for sale........................ 10,919 2,478 14,413 2,443
Held to maturity.......................... 4,522 11,551 4,524 10,646
Total deposits.............................. 53,579 40,508 50,071 38,751
Stockholders' equity........................ 5,661 4,953 5,529 4,796
Number of full-service offices.............. 2 2 2 2
SELECTED OPERATIONS DATA:
Total interest and dividend income.......... 1,264 917 4,345 1,805
Total interest expense...................... 592 388 1,951 733
------- ------- ------- ----------
Net interest income.................... 672 529 2,394 1,072
Provision for losses on loans............... 10 --- --- (190)
------- ------- ------- ----------
Net interest income after provision
for loan losses....................... 662 529 2,394 1,262
------- ------- ------- ----------
Service fee income.......................... 56 46 208 91
Loss on sale of securities, net............. --- --- (8) ---
Other noninterest income.................... 5 11 38 26
------- ------- ------- ----------
Total noninterest income............... 61 57 238 117
------- ------- ------- ----------
Noninterest expense......................... 441 401 1,666 1,134
------- ------- ------- ----------
Income before income taxes............. 282 185 966 245
Income taxes................................ 108 66 360 77
------- ------- ------- ----------
Net income............................. $ 174 $ 119 $ 606 $ 168
======= ======= ======= ==========
EARNINGS PER SHARE:
Net income............................. $ 0.37 $ 0.25 $ 1.31 $ 0.56
======= ======= ======= ==========
</TABLE>
_____________________________
/(1)/ Community was formed in August 1993 with the purpose of acquiring
Missouri State Bank and other community-based banks within the St. Louis
area. Missouri State Bank was acquired on May 31, 1994. Accordingly,
Community had no substantive operating activities until the acquisition
of Missouri State Bank.
13
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS AT OR FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------------------
1996 1995 1995 1994/(1)/
---------------- -------------- ------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
OTHER DATA:
Average total assets........................... $60,885 $45,072 $51,937 $ 41,366
Average total liabilities...................... 55,234 40,180 46,875 36,608
Net interest margin............................ 4.62% 5.05% 4.86% 4.67%
Average interest-earning assets to average
interest-bearing liabilities................. 124.74 127.22 127.87 133.25
Nonperforming assets to total assets at
end of period................................ 0.74 0.95 0.53 1.12
Equity to total assets at end of period........ 9.14 10.75 8.60 10.74
Return on assets (ratio of net income to
average total assets)......................... 1.15 1.07 1.17 0.69/(2)/
Return on equity (ratio of net income to
average equity)............................... 12.37 9.85 11.98 6.01/(2)/
Equity-to-assets ratio (ratio of average
equity to average total assets).............. 9.28 10.85 9.75 11.50
General and administrative expenses
as a percent of average total assets......... 2.92 3.61 3.21 4.68/(2)/
Ratio of net interest income to general
and administrative expenses.................. 152.32 131.95 143.70 94.50
Ratio of noninterest expense to the sum
of net interest income and
noninterest income........................... 60.19 68.44 63.29 95.42
Dividend payout ratio.......................... n/a n/a n/a n/a
</TABLE>
_______________________________________
n/a Not applicable.
(2) Yields are annualized based on the seven months of operations remaining
in 1994 subsequent to the purchase of Missouri State Bank by Community.
The majority of the investment in the organization by its stockholders,
and the investment of Community in its subsidiary, was not made until
May 31, 1994.
14
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows unaudited comparative per share data for
Roosevelt and Community Common Stock on an historical basis, and on a pro forma
combined basis and a pro forma equivalent basis for Roosevelt and Community
giving effect to the Merger. The Merger will be a business combination
accounted for under the pooling of interests method of accounting.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- ---------------------------
EQUIVALENT
ROOSEVELT COMMUNITY COMBINED SHARES
--------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Book value per share at:
December 31, 1995.................. $10.60 $11.73 $10.55/(2)/ $ 16.88/(3)/
March 31, 1996..................... 10.83 12.01 10.78/(2)/ 17.25/(3)/
Cash dividends declared per
share:
Year Ended December 31, 1993........ 0.310 --- 0.310 0.496
Year Ended December 31, 1994........ 0.430 --- 0.430 0.688
Year Ended December 31, 1995........ 0.560 --- 0.560 0.896
Three Months Ended March 31, 1996... 0.155 --- 0.155 0.248
Income per share before extraordinary
item and cumulative effect of change
in accounting principle:
Year Ended December 31, 1993........ 1.32 N/A/(1)/ 1.32 2.11/(4)/
Year Ended December 31, 1994........ 0.68 0.56 0.68 1.09/(4)/
Year Ended December 31, 1995........ 0.99 1.31 0.99 1.58/(4)/
Three Months Ended March 31, 1996... 0.46 0.37 0.46 0.74/(4)/
</TABLE>
- ------------------
(1) Although Community was formed in 1993, its operations began during 1994.
(2) Based on the combined stockholders' equity of Roosevelt and Community,
including the effect of pro forma adjustments. The adjusted stockholders'
equity amounts are divided by the number of shares of Community Common
Stock outstanding at December 31, 1995 and March 31, 1996, respectively,
plus the product of the number of shares of Community Common Stock
outstanding at December 31, 1995 and March 31, 1996, respectively, and the
Exchange Ratio. The number of shares of Roosevelt Common Stock outstanding
at December 31, 1995 and March 31, 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.
(3) Based on the pro forma combined book value per share amounts of Roosevelt
and Community, respectively, multiplied by the Exchange Ratio.
(4) 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 Community, respectively, multiplied by the Exchange Ratio.
15
<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 March 31, 1996, Roosevelt had
total consolidated assets of $9.1 billion, deposits of $4.9 billion and
stockholders' equity of $509 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 based
toward checking and transaction accounts; and (iv) growth in income by providing
other services such as insurance, brokerage and mortgage loan services 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 thrift
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 $108 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
16
<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 stockholder's 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
for each share of Kirksville common stock held. As of the date of the
acquisition, Kirksville had totaled 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"), 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 1.4321 shares of Roosevelt Common Stock for each share of Sentinel
common stock held (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.
On April 9, 1996, Roosevelt entered into a definitive agreement
pursuant to which Mutual Bancompany, Inc. ("Mutual"), the holding company for
Mutual Bank, will be merged with Roosevelt. Upon the consummation of the
merger, each Mutual stockholder will become entitled to receive, for each share
of Mutual common stock held, 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. As of March 31, 1996, Mutual had total consolidated assets of $53
million, deposits of $46 million and stockholders' equity of $6 million.
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.
17
<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 Efficiency Act of 1994 (the "Riegle-Neal Act") was enacted
to ease restrictions on interstate banking. Effective September 29, 1995, the
Riegle-Neal 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
Riegle-Neal 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 Riegle-Neal 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 Riegle-Neal 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 Riegle-Neal Act by adopting a law
after the date of enactment of the Riegle-Neal 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. 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 Riegle-Neal 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 Riegle-Neal 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
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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.
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 $9.1 billion
in consolidated assets at March 31, 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." Additional information
concerning Roosevelt and Roosevelt Bank also is included in the Roosevelt
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
COMMUNITY CHARTER CORPORATION AND
MISSOURI STATE BANK AND TRUST COMPANY
COMMUNITY CHARTER CORPORATION
Community is a Missouri corporation incorporated in August, 1993, for
the purpose of acquiring one or more community based banks within the St. Louis
Metropolitan Statistical Area ("MSA"). It acquired Missouri State Bank on May
31, 1994, through a purchase of 100% of Missouri State Bank's stock. The
executive offices of both Community and Missouri State Bank are located at 300
North Tucker Boulevard, St. Louis, Missouri 63101, and their telephone number at
that address is (314) 621-0000. Community has no employees, and has no
significant
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assets apart from its investment in Missouri State Bank. The officers of
Community are all officers of, and are compensated by, Missouri State Bank.
As of March 31, 1996, Community had total consolidated assets of $61.9
million, deposits of $53.6 million, loans of $43.9 million, and stockholders'
equity of $5.7 million.
Community considers its market area for lending purposes as the area
generally consisting of the St. Louis MSA. However, a majority of its deposits
and loans come from within the City and County of St. Louis.
MISSOURI STATE BANK
Missouri State Bank was organized in 1966, and is a state-chartered
Missouri trust company with full commercial banking powers headquartered in St.
Louis, Missouri. Because the Missouri trust company and banking laws were
consolidated subsequent to the Bank's organization, the Bank now has all the
powers and is subject to the same regulations as a Missouri state chartered
bank.
The Bank conducts a commercial banking business from two locations,both of
which are in the City of St. Louis, Missouri. Its main office is a full
service bank at Tucker and Olive, downtown, with deposits of approximately $34.6
million at March 31, 1996. Its other office is located at Hampton and Fyler in
the St. Louis Hills area, and handles depository transactions and provides night
deposit services; it also provides the primary contact for lending activities in
that area, with loan applications subsequently referred to the main office.
The Bank acts primarily as a lender to small and middle market companies
located within the St. Louis metropolitan area. These companies tend
to be privately held and owner-operated with annual sales of less than $50
million, and with typical borrowing requirements of $50,000 to $1,000,000.
Management believes that Community is able to compete effectively in its market
because (i) Missouri State Bank's lending officers and senior management
maintain close working relationships with their commercial customers and their
businesses, (ii) the Bank is able to respond more quickly to loan requests than
Community's larger competitors, (iii) the Bank's management and board of
directors have significant experience within the St. Louis community, and (iv)
industry consolidation has resulted in fewer banks addressing the Bank's target
market niche.
THE SPECIAL MEETING
PLACE, TIME AND DATE
The Special Meeting is scheduled to be held at____________________________
located at ________________________________________________________________,
_________, _______, on ________, ___________, 1996 at __:__ __.m., local time.
This Proxy Statement/Prospectus is being sent to holders of record, and certain
beneficial owners, of Community Common Stock as of the Record Date, and is
accompanied by a form of proxy which the Community Board requests that
stockholders execute and return to Community for use at the Special Meeting and
at any and all adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, holders of Community Common Stock as of the Record
Date will vote upon the proposal to approve the Merger Agreement and the
Merger. Holders of Community Common Stock also may consider and vote upon
such other matters as are properly brought before the Special Meeting. As of
the date hereof, the Community Board knows of no business that will be
presented for consideration at the Special Meeting, other than the matters
described in this Proxy Statement/Prospectus.
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RECORD DATE; VOTE REQUIRED
The Community Board has fixed the close of business on ___________,
1996 as the Record Date for determining holders of Community Common Stock who
are entitled to notice of and to vote at the Special Meeting. Only holders of
record of Community Common Stock on the Record Date will be entitled to notice
of and to vote at the Special Meeting. As of the Record Date, there were 471,499
shares of Community Common Stock outstanding and entitled to vote at the Special
Meeting.
Each holder of record of shares of Community Common Stock on the Record
Date will be entitled to cast one vote per share on each proposal at the
Special Meeting. Such vote may be exercised in person or by properly executed
proxy. The presence, in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of Community Common Stock entitled to vote
at the Special Meeting is necessary to constitute a quorum. Abstentions and
broker non-votes will be treated as shares present at the Special Meeting for
purposes of determining the presence of a quorum.
Approval of the Merger Agreement and the Merger at the Special Meeting will
require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Community 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 and the Merger.
As of the Record Date, the directors and executive officers of Community
and their affiliates beneficially owned in the aggregate 205,335
shares (excluding 70,000 shares underlying stock options held by them, which
shares may not be voted at the Special Meeting), or 43.5% of the then
outstanding shares (50.8%, assuming the exercise of the stock options held by
directors and executive officers) of Community Common Stock entitled to vote at
the Special Meeting. The directors of Community have entered into voting
agreements whereby such directors have agreed to vote all shares of Community
Common Stock owned by them for approval of the Merger Agreement and the Merger.
As of the Record Date, directors and executive officers of Roosevelt and their
affiliates beneficially owned no shares of Community Common Stock.
PROXIES
Shares of Community Common Stock represented by properly executed proxies
received prior to or at the Special Meeting will, unless such proxies
have been revoked, be voted at the Special Meeting and any adjournments or
postponements thereof in accordance with the instructions indicated in the
proxies. If no instructions are indicated on a properly executed proxy, the
shares will be voted FOR the Merger Agreement and the Merger.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted by delivering to
the Secretary of Community at 300 North Tucker Boulevard, P.O. Box 1488, St.
Louis, Missouri 63188-1488 or at the Special Meeting on or before the taking of
the vote at the Special Meeting, a written notice of revocation bearing a later
date than the proxy or a later dated proxy relating to the same shares of
Community Common Stock or by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in itself constitute the revocation
of a proxy.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the proxy or acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. As
of the date hereof, the Community Board knows of no such other matters.
In addition to solicitation by mail, directors, officers, and employees of
Community, who will not be specifically compensated for such services, may
solicit proxies from the stockholders of Community, personally or by telephone,
telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forwar soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy material to beneficial owners.
Community will bear its own expenses in connection with the solicitation of
proxies for the Special Meeting, except that Roosevelt will pay all printing and
mailing expenses associated with the Proxy Statement/Prospectus.
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<PAGE>
HOLDERS OF COMMUNITY COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING FORM OF PROXY AND TO RETURN IT PROMPTLY TO COMMUNITY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
HOLDERS OF COMMUNITY COMMON STOCK SHOULD NOT FORWARD STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
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, Community will be merged with and into
Roosevelt resulting in Missouri State Bank, a wholly owned first tier
subsidiary of Community, becoming a stand-alone first tier subsidiary of
Roosevelt. As of the Effective Time, Community shall cause Missouri State Bank
to change its name to "Roosevelt Bank and Trust Company." 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 Community will file a certificate of merger with
the Secretary of State of Delaware and articles of merger with the Secretary of
State of Missouri. The 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 a certificate
of merger by the Secretary of State of Missouri.
Upon consummation of the Merger, each outstanding share of Community
Common Stock (other than shares held by holders who perfect dissenters' rights
and other excluded shares) shall be converted into 1.6 shares of Roosevelt
Common Stock, each stockholder of Community shall cease to be a stockholder of
Community and shall be entitled to exchange Community Common Stock certificates
for Roosevelt Common Stock certificates and thereupon shall cease to be a
stockholder of Community, and the separate existence and corporate organization
of Community shall cease.
BACKGROUND OF THE MERGER
During the fourth week of March 1996, James A. Saitz, Community's
Chairman and Chief Executive Officer, was approached by Stanley J. Bradshaw,
Roosevelt's President and Chief Executive Officer, about the possibility of
Roosevelt acquiring Community as a means of entering the commercial banking
business. Mr. Bradshaw and Mr. Saitz then met on March 25, 1996.
Mr. Saitz presented the results of his preliminary conversations with
Mr. Bradshaw to the Executive Committee of the Community Board (the "Executive
Committee") at a special meeting held on March 26, 1996. At that meeting, the
Executive Committee authorized Mr. Saitz to proceed to negotiate the terms of a
possible merger with Roosevelt and to retain Stifel as Community's financial
advisor in the negotiations. The terms of the Merger Agreement were
subsequently negotiated between Community and Roosevelt over the course of
several meetings of the parties and their representatives during the latter part
of March and the first part of April.
At a special meeting on April 12, 1996, the Community Board members in
attendance reviewed and (with three directors not present) adopted a resolution
approving the Merger Agreement and authorized Mr. Saitz to execute and deliver
the Merger Agreement on behalf of Community, which was done on April 16, 1996.
Subsequently, at its regular meeting on April 18, 1996, the Community Board
unanimously (with all directors present and voting) adopted a resolution
ratifying and approving the Merger Agreement as executed.
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<PAGE>
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Community Board has determined that the proposed Merger entails a
fair price for the Community Common Stock, and recommends that the holders of
shares of Community Common Stock approve the Merger Agreement. Among the factors
considered by the Community Board in making this recommendation was the
opportunity provided by the Merger for Community's shareholders to convert their
shares of Community Common Stock, for which there has never been an active
market, into Roosevelt Common Stock, which is traded on the Nasdaq National
Market. The Community Board also considered that, although future dividends
cannot be assured, Roosevelt has historically paid quarterly dividends on the
Roosevelt Common Stock. Community has not paid and has no plans to pay dividends
on the Community Common Stock. The Community Board also considered the exchange
ratio of 1.6 shares of Roosevelt Common Stock for each share of Community Common
Stock which, based on trading prices of the Roosevelt Common Stock at the time
of its approval of the Merger Agreement, represented approximately 2.56 times
the March 31, 1996 book value of the Community Common Stock.
The Community Board also relied in part on the written opinion of
Stifel, as Community's financial advisor, dated April 16, 1996, that as of April
16, 1996 the Exchange Ratio was fair from a financial point of view to the
holders of Community Common Stock. See "--Opinion of Financial Advisor."
THE COMMUNITY BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTEREST
OF COMMUNITY STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT COMMUNITY STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Further, each member of the Community Board, in his individual
capacity as a stockholder, has agreed to vote the shares of Community Common
Stock owned by him in favor of the Merger.
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Community 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 1.6 shares
of Roosevelt Common Stock. The Exchange Ratio was determined through arm's-
length negotiations between Roosevelt and Community, who 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
Community 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."
The number of shares of Roosevelt Common Stock to be received for each
share of Community Common Stock has been fixed at 1.6. Based on the last
reported sale price for Roosevelt Common Stock on the Nasdaq National Market on
___________, 1996 ($_____ per share), the value of 1.6 shares of Roosevelt
Common Stock as of that date would have been approximately $_____. At the
present time, there is no established market in which shares of Community Common
Stock are regularly traded, nor are there any uniformly quoted prices for such
shares. The market value 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 result in an increase or decrease in the value of
the Merger Consideration to be received by Community stockholders in the Merger.
An increase in the market value of Roosevelt Common Stock would increase the
value of the Merger Consideration to be received by Community stockholders in
the Merger. A decrease in the market value of Roosevelt Common Stock would have
the opposite effect. The value of the Merger Consideration at the time of the
Merger will depend upon various factors, including the market value of a share
of Roosevelt Common Stock at such time and any effect of the Merger itself. See
"--Waiver and Amendment; Termination."
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TREATMENT OF COMMUNITY STOCK OPTIONS
At the Effective Time, the Community Stock Option Plan and each outstanding
Community Stock Option thereunder to purchase Community Common Stock will be
assumed by Roosevelt. Upon such assumption, each Community Stock Option shall
become an option to purchase the number of shares of Roosevelt Common Stock that
would have been received by the holder of such option in the Merger had the
option been exercised in full immediately prior to the Effective Time, upon the
same terms and conditions under the relevant option as were applicable
immediately prior to the Effective Time, provided that the exercise price under
each new option will be equal to the original exercise price of the
corresponding Community Stock Option divided by the Exchange Ratio. See "--
Merger Consideration."
OPINION OF FINANCIAL ADVISOR
Community has retained Stifel to act as its financial advisor and
render a fairness opinion with respect to the Merger. Stifel is an investment
banking and securities firm with membership on all principal U.S. securities
exchanges. As part of its investment banking activities, Stifel is regularly
engaged in the valuation of businesses and their securities in connection with
merger transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Stifel has rendered its
opinion that, based upon and subject to the various considerations set forth
therein, as of April 16, 1996, the Merger Consideration to be paid for each
share of Community Common Stock resulted in consideration that was fair,
from a financial point of view, to the holders of Community Common Stock. Stifel
is familiar with Community, having acted as its financial advisor in connection
with, and having participated in, the negotiations leading to the Agreement.
The full text of Stifel's opinion as of April 16, 1996, which sets
forth the assumptions made, matters considered and limitations of the review
undertaken, is attached to this Proxy Statement/Prospectus as Appendix II and
is incorporated herein by reference, and should be read in its entirety in
connection with this Proxy Statement/Prospectus. The summary of the opinion of
Stifel set forth in this Proxy Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinion.
Stifel's opinion is directed only to the fairness of the Merger
Consideration from a financial point of view and does not constitute a
recommendation to any holders of Community Common Stock as to how such holders
of Community Common Stock should vote at the Special Meeting or as to any other
matter.
In connection with its opinion dated April 16, 1996, Stifel reviewed
and analyzed material bearing upon the financial and operating condition of
Community and Roosevelt and material prepared in connection with the Merger,
including among other things: (a) the Merger Agreement; (b) certain publicly
available reports filed with the SEC by Roosevelt; (c) certain other publicly
available financial and other information concerning Community and Roosevelt and
the trading markets for the publicly traded securities of Roosevelt; (d) certain
other internal information, including audited financial statements for Community
and projections for Community and Roosevelt, relating to Community and Roosevelt
prepared by the management of Community and Roosevelt and furnished to Stifel
for purposes of its analysis; and (e) publicly available information concerning
certain other banks and bank holding companies, savings banks and savings and
loan associations, savings and loan holding companies, the trading markets for
their securities and the nature and terms of certain other merger and
acquisition transactions believed relevant to its inquiry. Stifel also met with
certain officers and representatives of Community and Roosevelt to discuss the
foregoing as well as other matters relevant to its inquiry, including the past
and current business operations, results of regulatory examinations, financial
condition and future prospects of Community and Roosevelt, both separately and
on a combined basis. In addition, Stifel reviewed the reported price and trading
activity for Roosevelt Common Stock, compared certain financial and stock market
information for Roosevelt with similar information for certain other companies,
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the commercial banking and thrift
industries, and performed such other studies and analyses as it considered
appropriate. Stifel also took into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuations and knowledge of the commercial
banking and thrift industries generally.
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In conducting its review and arriving at its opinion, Stifel relied
upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt to
independently verify the same. Stifel has relied upon the management of
Community and Roosevelt as to the reasonableness and achievability of the
projections (and the assumptions and basis therefore) provided to Stifel, and
assumed that such projections, including, without limitation, projected cost
savings and operating synergies resulting from the Merger, reflected the best
currently available estimates and judgments of Community management and
Roosevelt representatives and that such projections would be realized in the
amounts and time periods estimated. Stifel also assumed, without independent
verification, that the aggregate allowances for loan losses for Community and
Roosevelt were adequate to cover such losses. Stifel did not conduct physical
inspections of any of the properties or assets of Community or Roosevelt, and
Stifel did not make or obtain, and was not furnished with, any evaluations or
appraisals of any properties, assets or liabilities of Community and Roosevelt.
Stifel was retained by the Community Board as its financial advisor in
connection with the Merger to express an opinion as to the fairness, from a
financial point of view, to the holders of Community Common Stock of the Merger
Consideration.
In connection with rendering its opinion to the Community Board,
Stifel performed a variety of financial analyses that are summarized below. The
summary of the presentations by Stifel to the Community Board as set forth
herein does not purport to be a complete description of such presentations.
Stifel believes that its analyses and the summary set forth herein must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and processes underlying its opinions.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. In its analyses, Stifel made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters, many
of which are beyond the control of Community or Roosevelt. Any estimates
contained in Stifel's analyses are not necessarily indicative of actual future
values or results, which may be significantly more or less favorable than
suggested by such estimates. Estimates of values of companies do not purport to
be appraisals or necessarily reflect the actual prices at which companies or
their securities actually may be sold. No company or transaction utilized in
Stifel's analyses was identical to Community or Roosevelt or the Merger.
Accordingly, such analyses are not based solely on arithmetic calculations;
rather, they involve complex considerations and judgments concerning differences
in financial and operating characteristics of the relevant companies, the timing
of the relevant transactions, and prospective buyer interest, as well as other
factors that could affect the public trading values of the company or companies
to which they are being compared. None of the analyses performed by Stifel was
assigned a greater significance by Stifel than any other.
The following is a summary of the financial analyses performed by Stifel in
connection with providing its opinion to the Community Board on April
16, 1996, which was dated as of April 16, 1996.
Contribution Analysis. Stifel reviewed certain historical operating
---------------------
and financial information of both Community and Roosevelt for the twelve month
period ended December 31, 1995, including net revenues before and after loan
loss provisions, net income before preferred dividends and extraordinary items,
total assets, total loans, total deposits, and total equity and compared the
percentage contribution of Community to the pro forma combined figures for
Community and Roosevelt and to the percentage of total outstanding Roosevelt
Common Stock that would be owned by the Community stockholders as a result of
the Merger. The contribution analysis showed, among other things, that Community
would contribute 0.8% of combined net revenues before and after loan loss
provisions, 0.7% of net income before preferred dividends and extraordinary
items, 0.7% of combined total assets, 1.1% of combined total loans, 1.0% of
combined total deposits, and 1.1% of combined total equity, while receiving 1.9%
of the outstanding shares of the combined institution. Ownership figures are
fully diluted and assume a 1.6 exchange ratio. Operating data for Roosevelt
excludes non-recurring securities charges of $60,355 on a pre-tax basis.
Accretion/Dilution Summary. Stifel reviewed certain estimated future
--------------------------
operating and financial information developed by both Community and Roosevelt
for the pro forma combined entity resulting from the Merger for the projected
twelve month period ended December 31, 1997. Based on this analysis, Stifel
compared Community's estimated future stand-alone per share earnings with such
projected figures for the pro forma combined entity for this twelve month
period. The Merger is projected to be accretive to shareholders on a projected
pro forma basis with respect to earnings per share. Stifel also reviewed certain
historical operating and financial information
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developed by both Community and Roosevelt for the pro forma combined entity
resulting from the Merger for the twelve month period ended December 31, 1995.
Based on this analysis, Stifel compared Community's stand-alone book value per
share and stand-alone tangible book value per share with such calculated figures
for the pro forma combined entity at December 31, 1995. The Merger is calculated
to be accretive to shareholders on a pro forma basis with respect to book value
per share and tangible book value per share.
Present Value Analysis. Applying discounted cash flow analysis to the
----------------------
theoretical future earnings and dividends of Community and Roosevelt, Stifel
compared the calculated value of a Community share to the calculated value of a
share of the combined entity. The analysis was based upon a range of assumed
returns on assets (consistent with management's budgets), an assumed annual
asset growth rate, current dividend rates, a range of assumed price/earnings
ratios, and a 10% discount rate. Stifel selected the range of terminal
price/earnings ratios on the basis of past and current trading multiples for the
banking industry with respect to Community and Stifel selected the range of
terminal price/earnings ratios on the basis of past and current trading
multiples for Roosevelt and other thrift institutions with respect to the
combined institution. Based on this analysis, Stifel concluded that the Merger
increases the calculated value of a share of Community Common Stock.
Discounted Cash Flow Analysis. Based upon estimates provided by
-----------------------------
management of the future earnings and the range of profit improvements for the
pro forma combined entity, Stifel estimated the present value of future
dividends available to be paid to Roosevelt under various scenarios assuming
Community maintains a capital level of approximately 6.5% of assets. Based upon
management's estimated profitability ranges and a range of discount rates, under
Roosevelt ownership, Community could theoretically produce future cash flows to
Roosevelt with a present value ranging from $14 million to $29 million.
Summary Analysis of Bank Merger Transactions. Stifel analyzed certain
--------------------------------------------
information relating to transactions in the banking industry, including median
information for 306 acquisitions announced in the United States between March
31, 1995 and March 31, 1996 ("All U.S. Transactions"). Stifel also analyzed 75
bank acquisitions announced in the Midwest Region of the United States during
that same time period ("All Midwestern Transactions"). Stifel also analyzed 27
bank acquisitions announced in the Midwest Region of the United States between
January 1, 1995 and March 29, 1996 involving sellers with total assets between
$25 million and $100 million (the "Selected Midwestern Transactions"). Stifel
also analyzed 34 bank acquisitions announced in the state of Missouri and the
St. Louis, Missouri MSA between January 1, 1993 and March 29, 1996 (the
"Selected Missouri Transactions"). Stifel calculated the following ratios with
respect to the Merger (assuming full conversion of 71,000 common stock
equivalents) and the four comparable transaction groups:
<TABLE>
<CAPTION>
Medians of Comparable Transactions
--------------------------------------------
Community/
Roosevelt All All Selected Selected
Ratios Merger U.S. Midwestern Midwestern Missouri
- ------ ----------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Deal Price per share/Book Value 259.13% 175.00% 171.00% 182.17% 163.68%
Deal Price per share/Tangible Book Value 268.23% 180.00% 180.00% 185.57% 166.35%
Adjusted Deal Price/6.50% Equity 337.50% 198.00% 200.00% 214.70% 168.46%
Deal Price per share/Last 12 months 24.03x 15.00x 15.17x 14.68x 14.04x
Earnings per share
Deal Price/Assets 25.14% 15.63% 16.02% 17.50% 13.37%
Premium over Tangible Book 20.25% 7.42% 7.92% 8.33% 5.26%
Value/Deposits
Deal Price/Deposits 32.29% 18.24% 19.14% 20.08% 15.04%
</TABLE>
No company or transaction used in the above analyses as a comparison
is identical to Roosevelt, Community, or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other facts that could affect the public
trading value of the companies to which they are being compared.
As described above, Stifel's opinion and presentation to the Community
Board were among the many factors taken into consideration by the Community
Board in making its determination to approve the Merger.
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For Stifel's services in connection with the Merger, Community will
pay Stifel a total fee of 1.50% of the Merger Consideration upon the closing of
the Merger pursuant to the terms of an engagement letter and has agreed to
reimburse Stifel for certain out-of-pocket expenses. Pursuant to the engagement
letter, Community has agreed to indemnify Stifel, its affiliates and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under the
federal securities laws.
In the ordinary course of its business, Stifel makes a market in the
equity securities of Roosevelt and actively trades the equity securities of
Roosevelt for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
EFFECTIVE TIME AND CLOSING DATE
The Merger shall 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 with the Secretary of State of Missouri. Such
filings will occur only after the receipt of all requisite regulatory approvals,
the approval of the Merger Agreement and the Merger by the requisite vote of
Community'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 following the satisfaction or waiver of all conditions
and obligations precedent of Roosevelt and Community to consummate the Merger,
or at another time agreed to by Roosevelt and Community.
APPRAISAL RIGHTS
Each holder of Community Common Stock has the right to dissent from
the Merger and receive the fair value of such shares of Community in cash if the
shareholder follows the procedures set forth in Section 351.455 of the General
and Business Corporation Law of Missouri (the "Missouri Act") set forth as
Appendix III, the material provisions of which Section are summarized below.
Under the Missouri Act, a holder of Community Common Stock may dissent and
Roosevelt, as the surviving corporation, will pay to such shareholder the fair
value of such shareholder's shares of Community Common Stock as of the day prior
to the Special Meeting if such shareholder (i) files with Community 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 of the
---
Merger 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 and the Merger will
not constitute a waiver of the shareholder's dissenter's rights. A Community
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. Roosevelt will include notice of the Effective
Time of the Merger in its letter to all shareholders of Community notifying them
of the procedures to exchange their shares for those of Roosevelt. Such letter
shall be sent promptly following the Effective Time of the Merger. 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 Date of the Merger, the value of
such shares is agreed upon between the dissenting shareholder and Roosevelt,
payment therefor shall be made within 90 days after the Effective Date of the
Merger, upon the surrender by such shareholder of the certificate or
certificates representing said shares. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such shares or in
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 any 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 Community Special Meeting with interest thereon to the date
of such judgment. The "fair value"
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determined by the court may be more or less than the amount offered to Community
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, which is 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 Community Common Stock, no dividend or distribution of Roosevelt
will relate to any fractional shares, 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 Community who 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 (i) 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 by (ii) the fractional
share interest to which the holder would otherwise be entitled pursuant to the
terms of the Merger Agreement.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Time, an exchange agent
designated by Roosevelt (the "Exchange Agent") will deliver to each Community
holder of record of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding shares of Community 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 Community
Common Stock were converted pursuant to the Merger Agreement, and (ii) a check
representing the amount of cash in lieu of a fractional share, 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 a fractional
share or on the unpaid dividends and distributions, if any, payable to a
holder of Community Common Stock.
COMMUNITY STOCKHOLDERS SHOULD NOT FORWARD THEIR COMMUNITY 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 or any other distributions 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 or other distributions 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,
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Roosevelt or the Exchange Agent will issue for such lost, stolen or destroyed
Certificate, the shares of Roosevelt Common Stock and deliver cash due, if any,
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 Community 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
Set forth below are descriptions of interests of directors and executive
officers of Community in the Merger in addition to their interests generally
as stockholders of Community.
Indemnification. For at least three years after the Effective Time
(to the extent permitted by applicable law), Roosevelt will cause Roosevelt Bank
and Trust Company to continue to maintain the corporate indemnification
currently in effect at Missouri State Bank for the benefit of its current
officers and directors relating to their acts or omissions occurring prior to
the Effective Time. The Community Board was aware of this interest and
considered it in approving the Merger Agreement and the transactions
contemplated thereby.
Employment Arrangement. Subsequent to the execution of the Merger Agreement,
James A. Saitz, the current Chairman, President and Chief Executive Officer of
Missouri State Bank, entered into an agreement pursuant to which he will serve
in those capacities for Roosevelt Bank and Trust Company following consummation
of the Merger. Mr. Saitz's initial base salary will be $175,000, and he will be
subject to Roosevelt's Executive Compensation Policy for all compensation
matters. Consistent with Roosevelt's policy to provide for management continuity
and to motivate performance, Mr. Saitz will be issued 25,000 restricted shares
of Roosevelt Common Stock upon his becoming President of Roosevelt Bank and
Trust Company that will vest ratably over a three year period contingent upon
achievement of performance measures that will be a part of Roosevelt Bank and
Trust Company's strategic goals. Such shares, consistent with Roosevelt's
Executive Compensation Policy, will vest completely upon a change in control.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Community and Roosevelt 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, authority relative to the Merger Agreement,
the timely filing of all regulatory reports, reliability of financial
statements, taxes, employee arrangements and benefits, Community Reinvestment
Act compliance, 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 and Community 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 and the Merger
shall have been approved by the stockholders of Community; (ii) all requisite
approvals of the Merger Agreement shall have been received from all applicable
regulatory authorities having approval authority with respect to the Merger, if
any; (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 nor Community 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 Community 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
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within the meaning of Section 368 of the Code and that no gain or loss will be
recognized by Roosevelt or Community, or by the stockholders of Community
(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 and to be reserved for issuance upon the exercise of
Community Stock Options after 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 obligation of Community to consummate the Merger is
subject to the satisfaction by Roosevelt or waiver by Community 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, and (B) for the effect of the transactions contemplated by the
Merger Agreement and Community shall have received a certificate of the
President and Chief Executive Officer of Roosevelt to that effect; (ii)
Roosevelt 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 Community shall have received a certificate of the President and Chief
Executive Officer of Roosevelt to that effect; and (iii) Community shall have
received an opinion from counsel to Roosevelt dated the Closing Date regarding
certain legal matters. For additional information, see Section 6.2 of the
Merger Agreement attached hereto as Appendix I.
In addition, the obligations of Roosevelt to consummate the Merger are
subject to the satisfaction by Community or waiver by Roosevelt of the following
conditions: (i) the representations and warranties of Community 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, and (B) for the effect of the transactions contemplated by the Merger
Agreement and Roosevelt shall have received a certificate from the President and
Chief Executive Officer of Community to that effect; (ii) Community 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 shall
have received a certificate of the President and Chief Executive Officer of
Community to that effect; (iii) Roosevelt shall have received an opinion from
counsel to Community dated the Closing Date regarding certain legal matters;
(iv) each of the directors of Community shall have executed and delivered to
Roosevelt a voting agreement in the form attached as Exhibit A to the Merger
Agreement attached hereto as Appendix I; (v) no regulatory approval obtained in
connection with the transactions contemplated herein shall (A) contain a
condition which Roosevelt reasonably determines is unduly burdensome to
Roosevelt or any Roosevelt subsidiary (including Roosevelt Bank and Trust
Company) or (B) limit or restrict the powers of Missouri State Bank; (vi)
Roosevelt shall have received a letter from its independent accountants to the
effect that the Merger will qualify for pooling of interests accounting
treatment; (vii) Roosevelt shall have received from the "affiliates" of
Community certain letters with respect to the resale of shares of Roosevelt
Common Stock received by them in the Merger; (viii) no more than 5% of the
outstanding shares of Community Common Stock shall be held by holders who
dissent from the Merger; (ix) no applicable regulatory authority denies
Missouri State Bank's request or application to change its name as of the
Effective Time to Roosevelt Bank and Trust Company; and (x) the consummation
of the Merger will not result in any significant restriction on activities of,
or significant limitation upon the conduct of business by, any existing
subsidiary of Roosevelt, other than a significant restriction or limitation that
can be cured by having another subsidiary of Roosevelt perform such activity or
conduct such business in the manner theretofore performed or conducted. 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 of satisfaction 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 FRB and the MDF. Roosevelt
filed applications for approval of the Merger with the FRB and the MDF on
__________, 1996 and anticipates obtaining the approvals of the FRB and the MDF
in the third quarter of 1996. There can be no assurance as to the receipt or
timing of such approvals.
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It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained, including approval to change the name of
Missouri State Bank to Roosevelt Bank and Trust Company, without the imposition
of any condition that Roosevelt reasonably determines is unduly burdensome to
Roosevelt or any of its subsidiaries or limits or restricts activities of
Missouri State Bank. There can be no assurance that any such approval will not
contain terms, conditions or requirements which cause such approval to fail to
satisfy such condition to the consummation of the Merger.
Under federal law, a period of 30 days, subject to reduction to 15
days by the FRB with the concurrence of the Department of Justice, must expire
following approval by the FRB within which period the Department of Justice may
file objections to the Merger under the federal antitrust laws. The Department
of Justice could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the Merger
unless acceptable accommodations are made. While the parties believe that the
likelihood of such action by the Department of Justice is remote in this case,
there can be no assurance that the Department of Justice will not initiate such
a proceeding.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, the Boards of Directors of Roosevelt and
Community may extend the time for performance of any obligations under the
Merger Agreement, waive any inaccuracies in the representations and warranties
contained in the Merger Agreement and waive compliance with any term, condition
or provision of the Merger Agreement.
Subject to applicable law, the Merger Agreement may be amended by action of
the Roosevelt and Community Boards at any time before or after approval of the
Merger Agreement by the stockholders of Community; provided, however, that after
approval by the stockholders of Community, no amendment may (i) alter or change
the amount or kind of consideration to be received by holders of Community
Common Stock as provided in the Merger Agreement or (ii) adversely affect the
tax treatment to Community stockholders of the stock portion of the Merger
Consideration. In addition, Roosevelt may cause the Merger Agreement to be
amended to change the structure of 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) materially impede or delay the
consummation of the Merger, or (iii) adversely affect the tax treatment of
Community stockholders as a result of receiving the Merger Consideration.
The Merger Agreement may be terminated at any time whether prior to or
after approval of the matters presented herein by Community's stockholders: (i)
by mutual consent of the boards of directors of Roosevelt and Community; (ii) by
the Roosevelt Board or the Community Board at any time after March 31, 1997, if
the 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); (iii) by the board of
directors of Roosevelt or the Community Board if (A) any regulatory authority
denies approval of the Merger or (B) no Acquisition Transaction (as defined
below, see "--Expenses; Termination Fee") is proposed or initiated by a third
party prior to the Special Meeting and the stockholders of Community do not
approve the Merger Agreement and the Merger at such meeting (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein); (iv) by the Roosevelt
Board in the event of a material breach by Community of any representation,
warranty, covenant or other agreement contained in the Merger Agreement, which
breach is not cured within 30 days after written notice thereof to Community by
Roosevelt; (v) by the Community Board in the event of a material breach by
Roosevelt of any representation, warranty, covenant or other agreement contained
in the Merger Agreement, which breach is not cured within 30 days after written
notice thereof is given to Roosevelt by Community, unless Roosevelt elects to
terminate the Merger Agreement; (vi) by the Roosevelt Board, upon the payment of
$1.0 million in cash to Community in immediately-available funds, if Roosevelt
enters into a definitive agreement to merge with or be acquired by another party
and such party requires the termination of the Merger Agreement as a condition
of entering into such definitive agreement; or (vii) by the Roosevelt Board or
the Community Board if the stockholders of Community do not approve the Merger
Agreement or the Merger at the Special Meeting after a third party proposes or
initiates an Acquisition Transaction.
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Subject to certain exceptions, 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 fraud, deception or
intentional misrepresentation.
CONDUCT OF BUSINESS PENDING THE MERGER
Community 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, Community 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 plans or security acquisition loans relating thereto (or prepay
in whole or in part any such loans) or grant any salary or wage increase
(including incentive or bonus payments), other than increases consistent with
past practice, required by applicable law; (iii) 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;
(iv) except as may be required to facilitate the consummation of the
transactions contemplated herein, propose or adopt any amendments to its
articles of incorporation, articles of agreement, or other charter document or
bylaws; (v) issue, sell, grant, confer or award any of its Common Stock except
pursuant to the exercise of Community Stock Options outstanding on the date
hereof or effect any stock split or adjust, combine, reclassify or otherwise
change its capitalization as its exists on the date of the Merger Agreement;
(vi) purchase, redeem, retire, repurchase, or exchange, or otherwise acquire or
dispose of, directly or indirectly, any of its Common Stock, whether pursuant to
the terms of such Common Stock or otherwise; (vii) (A) change its underwriting
policies relating to lending activities, (B) change its deposit-taking policies,
(C) create any new lending or deposit products, or (D) engage in a new line of
business; (viii) directly or indirectly (including, without limitation, through
its officers, directors, employees or other representatives) (A) 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 Community or any subsidiary thereof or the acquisition of 10% or more
of any class of Common Stock of Community or any subsidiary thereof or the
merger of Community or any subsidiary thereof with any person (other than
Roosevelt) or any Acquisition Transaction or (B) except as to the extent that
fulfillment of the fiduciary duties of Community's directors requires such
action, as determined in consultation with Community'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 or engage in discussions with any such person with respect to an
Acquisition Transaction, and Community shall immediately notify Roosevelt 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 in writing;
(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 Community to obtain any approval of any regulatory authority
required for the transactions contemplated by the Merger Agreement or to perform
its covenants and agreements under the Merger Agreement or (B) prevent the
Merger from qualifying as a pooling of interests for accounting purposes or the
Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) 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 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 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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EXPENSES; TERMINATION FEES
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. In addition, (i) Roosevelt
may terminate the Merger Agreement upon payment of $1.0 million in cash to
Community if Roosevelt enters into a definitive agreement to merge with or be
acquired by another party and such party requires the termination of the Merger
Agreement as a condition of entering into such definitive agreement and (ii)
Community has agreed to pay Roosevelt a fee of $800,000 (plus expenses up to
$200,000) in the event the Merger is terminated by the board of directors of
either party because the stockholders of Community do not approve the Merger
after a third party proposes or initiates an Acquisition Transaction. See "The
Merger--Expenses; Termination Fees."
Under the Merger Agreement, each of the following will be deemed an
Acquisition Transaction: (i) the disposition of any significant portion of the
business or assets of Community or any Community subsidiary; (ii) the
acquisition of 10% or more of any class of Common Stock of Community or any
Community subsidiary; (iii) the merger of Community or any Community subsidiary
with any person (other than Roosevelt); or (iv) any similar transaction.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by Roosevelt of
an opinion from its independent accountants to the effect that the Merger
qualifies for pooling of interests accounting treatment if consummated in
accordance with the terms of the Merger Agreement. Under the pooling of
interests method of accounting, the historical cost basis of the assets and
liabilities of Roosevelt and Community will be combined and carried forward at
their previously recorded amounts, and the stockholders' equity accounts of
Roosevelt and Community will be combined on Roosevelt's consolidated balance
sheet. Income and other financial statements of Roosevelt issued after
consummation of the Merger will be restated retroactively to reflect the
consolidated operations of Roosevelt and Community as if the Merger had taken
place prior to the periods covered by such financial statements. See "--
Conditions to the Merger."
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 Community for purposes of Rule 145 under the
Securities Act as of the date of the Special Meeting. Affiliates of Roosevelt
or Community 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 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
Community generally include individuals or entities that control, are controlled
by or under common control with Roosevelt or Community, and may include certain
officers and directors of Roosevelt and Community as well as certain principal
stockholders of Roosevelt and Community.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales by affiliates of Roosevelt or Community 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
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treatment) of Community 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Set forth below is a discussion of federal income tax consequences of
the Merger to Roosevelt and Community stockholders who are citizens or residents
of the United States. THE FOLLOWING DISCUSSION 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 COMMUNITY 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 COMMUNITY 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 Community, and assuming that the Merger is
consummated in the manner set forth in the Merger Agreement, it is anticipated
that the following federal income tax consequences would result:
(i) the Merger will qualify as a reorganization under Section 368(a) of the
Code;
(ii) no gain or loss will be recognized by Roosevelt or Community by reason
of the Merger;
(iii) no gain or loss will be recognized by any Community stockholder upon
the exchange of Community 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, as discussed below);
(iv) the aggregate tax basis of the Roosevelt Common Stock received by each
stockholder of Community who exchanges Community Common Stock for Roosevelt
Common Stock in the Merger will be the same as the aggregate tax basis of the
Community 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
Community stockholder in the Merger will include the holding period of the
Community Common Stock surrendered in exchange therefor (provided that such
shares of Community Common Stock were held as a capital asset by such
stockholder at the Effective Time); and
(vi) cash received in the Merger by a Community stockholder in lieu of a
fractional share interest of Roosevelt Common Stock will 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 will qualify as capital gain or loss (assuming the
Community Common Stock surrendered in exchange therefor was held as a capital
asset by such stockholder at the Effective Time).
34
<PAGE>
Based upon representations to be made by Roosevelt and Community as of the
Effective Time, Roosevelt and Community will receive an opinion of Silver,
Freedman & Taff, L.L.P., counsel to Roosevelt, that the Merger will qualify as a
reorganization under the Code with the consequences set forth above. The
opinion would be subject to various assumptions and qualifications, including
that the Merger is consummated in the manner and in accordance with the terms of
the Merger Agreement. The opinion would be based entirely upon the Code,
regulations then in effect or proposed thereunder, then-current administrative
rulings and practice and judicial authority, all of which would be subject to
change, possibly with retroactive effect. Consummation of the Merger is
conditioned upon the receipt by Roosevelt and Community of such 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 or Community 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 Community in the Merger and to be reserved for
issuance under the Community Stock Options assumed by Roosevelt 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
Financial 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.
Prior to the Effective Time, Community will cause Stanley J. Bradshaw,
President and Chief Executive Officer of Roosevelt, to be elected as a director
of Missouri State Bank for the longest term permitted by the bylaws of Missouri
State Bank, with a term commencing as of the Effective Time.
BUSINESS OF COMMUNITY CHARTER CORPORATION
GENERAL
Community was incorporated in August 1993 for the purpose of acquiring one or
more community-based banks within the St. Louis MSA. Community has no
employees, and has no significant assets apart from its investment in Missouri
State Bank. The officers of Community are all officers of, and are compensated
by, Missouri State Bank.
At March 31, 1996, Community had total consolidated assets of $61.9 million,
deposits of $53.6 million, loans of $43.9 million and stockholders' equity of
$5.7 million.
Community considers its market area for lending purposes as the area generally
consisting of the St. Louis MSA. However, a majority of its deposits and loans
come from within the City and County of St. Louis.
MISSOURI STATE BANK
Missouri State Bank is a Missouri state-chartered trust company organized in
1966. Subsequent to its organization, the Missouri trust company and banking
laws were consolidated, and Missouri State Bank now has all the powers and is
subject to the same regulations as a Missouri state-chartered bank. It operates
at two locations, both of which are in the City of St. Louis, Missouri. The
Bank's main office is a full service bank at Tucker and Olive, downtown, with
deposits of approximately $34.6 million at March 31, 1996. Its other office is
located at Hampton and Fyler in the St. Louis Hills area, and handles depository
transactions and provides night deposit
35
<PAGE>
services; it also provides the primary contact for lending activities in that
area, with loan applications subsequently referred to the main office.
Community acquired 100% of Missouri State Bank's capital stock by purchase
on May 31, 1994. Community's officers had been employed by the Bank prior to the
acquisition and had already begun to implement the management strategies
currently being followed by Community. Community's strategy has been to act
primarily as a lender to owner-operated, closely held businesses and their
owners, employees and customers. These companies have tended to be located in
the neighborhoods Missouri State Bank currently services, and to have annual
sales of less than $50 million with typical borrowing requirements of $50,000 to
$1 million.
Missouri State Bank offers a broad range of commercial and personal banking
services to its customers. Deposit services include certificates of deposit,
individual retirement accounts and other time deposits, checking, and other
demand deposit accounts, interest bearing checking accounts, savings accounts
and money market accounts. Loans include commercial, financial and industrial
development, real estate construction and development, residential real estate
and home equity loans, installment and consumer loans and direct and indirect
lease financing. Although the Bank has trust powers, its trust-related
activities have previously been very limited.
Deposits are Missouri State Bank's principal source of funds, consisting
primarily of core deposits from the local market areas surrounding each of the
Bank's offices. Missouri State Bank has a historically stable core deposit
base, has not used brokered deposits as a source of funds, and has no
significant reliance on volatile deposit liabilities such as large certificates
of deposit or public funds.
Interest earned on Missouri State Bank's loan portfolio is its primary
source of income. As of March 31, 1996, Missouri State Bank's total loans were
$43.9 million, representing approximately 71% of its total assets. Missouri
State Bank's loan portfolio as of that date consisted of the following:
commercial and financial loans, $14.9 million, or 34%; real estate loans, $27.5
million, or 63%; and installment and consumer loans, $1.5 million, or 3%.
Missouri State Bank's legal lending limit to any one borrower was $907,000 as of
March 31, 1996. Except for loans secured by real estate, as of March 31, 1996,
there were no industry concentrations exceeding 5% of total loans.
As of March 31, 1996, loan loss reserves stood at $676,000, or 185% of non-
performing loans and 1.54% of total loans.
36
<PAGE>
LENDING AND CREDIT MANAGEMENT
Interest earned on its loan portfolio is the primary source of income for
Community. The loan portfolio represented 71% and 64% of Community's total
assets at March 31, 1996 and December 31, 1995, respectively. For the three
months ended March 31, 1996, gross loans increased by $2,591,301, and for the
year ended December 31, 1995, gross loans increased by $15,507,551. Loan growth
from December 31, 1994 has occurred in all categories.
The following table sets forth the composition of the loan portfolio as of the
dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT DECEMBER 31, 1995 AT DECEMBER 31, 1994
------------------ -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
----------- ------ ---------- ------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Commercial and financial $14,944,517 34.0% $15,216,215 36.8% $11,035,061 42.7%
Real estate construction 5,858,055 13.3% 3,925,254 9.5% 1,207,099 4.7%
Real estate mortgage:
One to four family
residential loans 8,346,411 19.0% 7,915,157 19.2% 4,582,211 17.8%
Other real estate loans 13,287,305 30.4% 12,569,859 30.4% 7,724,795 29.9%
Installment and consumer 1,470,442 3.3% 1,688,944 4.1% 1,258,712 4.9%
----------- ----- ----------- ----- ----------- -----
Total loans $43,906,730 100.0% $41,315,429 100.0% $25,807,878 100.0%
=========== ====== =========== ====== =========== =====
</TABLE>
The following table sets forth the remaining maturities for loans as of
December 31, 1995.
<TABLE>
<CAPTION>
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
---------------------- -------------------
ONE YEAR FIXED FLOATING FIXED FLOATING
OR LESS RATE RATE RATE RATE TOTAL
----------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Commercial and financial $ 9,726,291 $3,709,171 $1,220,553 $ --- $ 560,200 $15,216,215
Real estate construction 3,695,268 --- 229,986 --- --- 3,925,254
Real estate mortgage 7,590,064 4,451,132 7,747,236 19,877 676,707 20,485,016
Installment and consumer 1,251,536 323,713 --- 113,695 --- 1,688,944
----------- ---------- ---------- -------- ---------- -----------
Total loans $22,263,159 $8,484,016 $9,197,775 $133,572 $1,236,907 $41,315,429
=========== ========== ========== ======== ========== ===========
</TABLE>
Community grants commercial, financial, real estate, installment and other
consumer loans to customers located within the St. Louis metropolitan area. As
such, Community is susceptible to changes in the economic environment in St.
Louis, Missouri and the surrounding communities. Community does not have a
concentration of credit in any one economic sector, and Community has no
agricultural loans, foreign loans nor any loans regarded by the FRB as highly
leveraged transactions. However, a substantial portion of the portfolio is
concentrated in and secured by real estate within Community's market areas. The
ability of Community's borrowers to honor their contractual obligations is
dependent upon the local economies and their effect on the real estate market.
Community has traditionally emphasized commercial lending, and at March 31,
1996, 78% of its loan portfolio was in commercial, financial, real estate
construction and commercial real estate loans as compared to 77% at both
December 31, 1995 and December 31, 1994.
An economic downturn and management's ability to deal with changing economic
conditions would affect the quality of Community's loan portfolio. Community
strives to mitigate these risks by following written loan policies and
procedures. The loan policies and procedures are designed to ensure prudent
loan underwriting standards. The loan policy provides that each lending officer
has a defined lending authority. New loans in excess of $50,000 are reviewed by
the Senior Loan Committee.
The existing loan portfolio is monitored through Community's loan rating
system. Generally, all existing loans other than residential mortgages are
reviewed on an annual basis. Community assigns a reserve amount consistent with
each loan rating category. The loan rating system is used to determine the
adequacy of the
37
<PAGE>
allowance for loan losses. Each month the allowance for loan losses is reviewed
relative to the loan rating system, and results are reported to the Board of
Directors. Management believes that the level of allowance for loan losses is
appropriate given Community's loan portfolio.
The loan review process is designed to identify problem and potential problem
credits. Potential problem loans are monitored by the lending staff and by
senior management. It is Community's policy to discontinue the accrual of
interest on any loan where the payment of principal or interest on a timely
basis in the normal course of business is in doubt. The discontinuance of
interest accrual on a loan occurs at any time that a significant problem is
detected in the normal payment process. It is also Community's policy to place
a loan on nonaccrual status when it becomes 90 days past due, unless management
assesses the delinquent loan to be both well-secured and the delinquency to be
of a temporary nature.
As of December 31, 1995, Community had $116,092 in loans which were not
included in nonaccrual, past due 90 days or more or restructured categories, but
where the borrowers were currently experiencing potential credit problems that
raised doubts as to the ability of the borrowers to comply with the present loan
repayment terms. These loans were placed in the nonaccrual category in the first
quarter of 1996, increasing total nonperforming loans to $365,779 at March 31,
1996 from $249,687, comprised of one loan, at December 31, 1995 and $250,487,
also comprised of one loan, at December 31, 1994. The $249,687 loan identified
as nonperforming at December 31, 1995 and March 31, 1996, was paid in full in
April 1996, including all outstanding interest. There were no additional
increases to the category in this period.
Gross interest income on nonaccrual and restructured loans, which would have
been recorded under the original terms of the loans, was $10,207 in the first
quarter of 1996, $26,089 in 1995 and $13,504 in 1994. Of this amount, no
interest income was actually recorded on such loans in the first quarter of 1996
or fiscal 1995 and 1994.
38
<PAGE>
As a part of their examination processes, various regulatory authorities
review Community's allowance for loan losses. These agencies have the authority
to require Community to recognize additions to the allowance based upon their
judgment. Management believes that the allowance for possible loan losses at
December 31, 1994, December 31, 1995 and March 31, 1996 was adequate.
The following table sets forth for the periods indicated activity in
Community's allowance for loan losses, including loans charged off, loan
recoveries and additions to the allowance charged to operating expenses.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------- --------------------------
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
(BEGINNING OF PERIOD) $ 664,714 $ 597,417 $ ---
----------- ----------- -----------
Acquisition of subsidiary bank --- --- 897,137
LOANS CHARGED OFF:
Commercial and financial --- 7,290 88,758
Real estate mortgage --- --- 21,573
Installment and consumer --- 3,447 13,954
------------ ----------- -----------
Total loans charged off --- 10,737 124,285
------------ ----------- -----------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF:
Commercial and financial --- 56,941 5,718
Real estate mortgage --- 17,888 3,995
Installment and consumer 1,157 3,205 4,852
---------- ---------- ----------
Total recoveries 1,157 78,034 14,565
---------- ---------- ----------
Net loans charged off (1,157) (67,297) 109,720
---------- ---------- ----------
Provision (benefit) for loan losses 10,500 --- (190,000)
---------- ---------- ----------
ALLOWANCE FOR LOAN LOSSES (END OF PERIOD) $ 676,371 $ 664,714 $ 597,417
=========== =========== ===========
GROSS LOANS OUTSTANDING:
Average $42,261,420 $33,469,064 $23,073,276
End of period 43,906,730 41,315,429 25,807,878
Ratio of allowance for loan losses to loans
outstanding 1.54% 1.61% 2.31%
Ratio of net charge-offs to average loans
outstanding (annualized) [0.01] [0.20] 0.81
PERCENT OF CATEGORIES TO TOTAL LOANS:
Commercial and financial 34.0 36.8 42.7
Real estate mortgage 62.7 59.1 52.4
Installment and consumer 3.3 4.1 4.9
----------- ----------- -----------
Total 100.0% 100.0% 100.0%
=========== =========== ===========
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES AT END
OF PERIOD:
Commercial and financial $ 212,338 $ 207,446 $ 227,708
Real estate mortgage 242,521 233,288 259,390
Installment and consumer 23,057 27,470 16,167
Unallocated 198,455 196,510 94,152
----------- ----------- -----------
Total $ 676,371 $ 664,714 $ 597,417
=========== =========== ===========
</TABLE>
39
<PAGE>
The provision for loan losses was $10,500 for the three months ended March
31, 1996, as compared to no provision in 1995 and a benefit of $190,000 in 1994.
Certain loans representing significant credit risk were identified by management
prior to the acquisition of Missouri State Bank and specific reserves were
established to provide for the potential loan losses. Prior to year-end 1994,
the balances of these loans were significantly decreased and additional
collateral was provided by the borrowers. These actions significantly reduced
the credit risk associated with these credits and the benefit for loan losses
was made in 1994 to reduce the allowance for loan losses to a level management
believed to be adequate.
NONPERFORMING ASSETS
The following table sets forth nonperforming assets by category at the dates
indicated.
<TABLE>
<CAPTION>
AT
MARCH 31, AT DECEMBER 31,
------------ --------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Commercial and financial loans:
Nonaccrual --- --- ---
Past due 90 days or more --- --- ---
Restructured terms --- --- ---
Commercial loans secured by real estate:
Nonaccrual $ 365,779 $ 249,687 $ 250,487
Past due 90 days or more --- --- ---
Restructured terms --- --- ---
Real estate construction loans:
Nonaccrual --- --- ---
Past due 90 days or more --- --- ---
Restructured terms --- --- ---
Real estate mortgage:
Nonaccrual --- --- ---
Past due 90 days or more --- --- ---
Restructured terms --- --- ---
------------ ------------ ------------
Installment and consumer loans:
Nonaccrual --- --- ---
Past due 90 days or more --- --- ---
Restructured terms --- --- ---
------------ ------------ ------------
Total nonperforming loans 365,779 249,687 250,487
Other real estate owned 90,000 90,000 249,479
------------ ------------ ------------
Total nonperforming assets $ 455,779 $ 339,687 $ 499,966
============ ============ ============
Loans, net of unearned discount $43,906,730 $41,315,429 $25,807,878
Allowance for losses to loans 1.54% 1.61% 2.31%
Nonperforming loans to loans 0.83 0.60 0.97
Allowance for loan losses to nonperforming 184.91 266.22 238.50
loans
Nonperforming assets to loans and foreclosed 1.04 0.82 1.92
assets
</TABLE>
40
<PAGE>
At both March 31, 1996 and December 31, 1995, Community had $365,779 of
impaired loans which had an associated specific allowance for loan losses of
$54,867. The average recorded investment in impaired loans during the year
ended December 31, 1995 was $249,829. For the year ended December 31, 1995,
gross interest income on impaired loans, which would have been recorded under
the original terms of the loans, was $36,619. Community actually recorded no
interest income on impaired loans in the first quarter of 1996 as compared to
recorded interest income of $10,530 in 1995. The effect of impaired loans was
immaterial to the financial statements at March 31, 1996 and December 31, 1995.
INVESTMENT PORTFOLIO
Management believes Community's investment securities portfolio meets a number
of objectives, including providing a stable source of income with little credit
risk, providing a source of liquidity as investment securities mature, providing
collateral for pledging, and helping balance Community's asset-liability
position. Investment securities in the available for sale category meet the
above needs and additionally provide a source of liquidity through their ability
to be sold to fund loan growth. Securities are generally purchased for the
available for sale account when the level of interest rates or the shape of the
yield curve favors investing in longer term securities, even though Community
does not expect to hold such securities to maturity. In addition, investment
securities may need to be purchased and, at a later date, sold in order to help
balance the asset-liability position. Finally, Community attempts to fully
utilize its equity at all times. When the level of equity is adequate to
support greater asset levels than can be achieved by efforts to attract quality
loans, Community will invest in securities provided such investment is
consistent with its asset sensitivity objective and enhances earnings. This is
consistent with Community's objective of maximizing return on equity to a larger
extent than return on assets.
As of December 31, 1995 and 1994, available for sale securities were
$14,412,951 and $2,443,159, respectively. During December 1995, Community
transferred $8,254,566 of securities classified as held to maturity to available
for sale under the terms of the Special Report issued by the FASB in November
1995. Additionally, during this time Community transferred $201,314 of
securities classified as available for sale to held to maturity.
Throughout 1994 and 1995, Community's asset-liability position was asset
sensitive, thereby benefiting net interest margins during the rising rate
environment and adversely affecting net interest margins in late 1995 as
interest rates decreased.
Because Community has historically maintained high loan-to-deposit ratios and
a great percentage of those loans are in commercial loans, Community's policy
has been to minimize credit risk in the securities portfolio. As of December
31, 1995, Community's available for sale securities were primarily U.S.
Government securities or obligations guaranteed by the U.S. Government. The
balance of the available for sale account was invested in FHLB stock. As of
December 31, 1995, substantially all of held to maturity securities were
Collateralized Mortgage Obligations collateralized by mortgage obligations
issued by the Federal National Mortgage Association. The remaining balance in
the held to maturity account was invested in municipal and corporate
obligations.
In addition, Missouri State Bank has a small amount of tax exempt securities.
The total amount of these issues as of December 31, 1995 was $174,289. Missouri
State Bank became a member of the FHLB of Des Moines in 1995, which required an
initial equity investment of $133,700.
As of March 31, 1996, securities available for sale were $10,919,210 and
securities held to maturity totaled $4,522,108. Substantially all of the
securities held in the available for sale category were U.S. Government or
obligations guaranteed by the U.S. Government. The balance of the account was
invested in FHLB stock. The composition of the held to maturity category was
unchanged from year-end 1995.
41
<PAGE>
As of December 31, 1995, the contractual maturities of securities and their
average yield in the held to maturity and available for sale portfolios were as
follows:
<TABLE>
<CAPTION>
OVER ONE OVER FIVE WEIGHTED
ONE YEAR THROUGH THROUGH OVER TEN AVERAGE
OR LESS FIVE YEARS TEN YEARS YEARS YIELDS
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
United States Treasury securities $2,931,591 $3,496,885 $ --- $ --- 6.15%
Obligations of United States 3,996,944 503,442 3,350,389 --- 5.73
Government agencies
States and political subdivisions (1) 10,057 19,782 135,588 8,862 7.86
Collateralized mortgage obligations --- --- 2,097,421 1,063,607 6.82
Corporate obligations --- 1,188,856 --- --- 7.21
Federal Home Loan Bank stock 133,700 --- --- --- 8.00
---------- ---------- ---------- ----------
Total securities $7,072,292 $5,208,965 $5,583,398 $1,072,469 6.18%
========== ========== ========== ==========
Weighted average yields/(1)/ 5.86% 6.28% 6.52% 7.73%
========== ========== ========== ==========
</TABLE>
____________________________________
(1) Rates on state and political subdivisions have been adjusted to tax
equivalent yields using the marginal statutory federal income tax rate of
34%.
42
<PAGE>
DEPOSITS
Deposits are the principal source of funds for Community. At March 31, 1996,
Community's total deposits were $53,578,521, as compared to $50,070,981 at
December 31, 1995 and $38,750,549 at December 31, 1994. Deposits consist
primarily of core deposits from the local market areas surrounding each of
Missouri State Bank's offices. Deposit growth was primarily achieved by the
offering of competitive rates on time deposits, and an aggressive commercial
account promotion at its locations which coincided with ongoing commercial loan
solicitation programs. Community has not used brokered deposits as a source of
funds, although its capitalization would permit such activity on an unrestricted
basis under current regulations.
The following table sets forth the distribution of Community's deposit
accounts at the dates indicated and the historical weighted average interest
rates for each category of deposit.
<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT DECEMBER 31, 1995 AT DECEMBER 31, 1994
----------------------------- ----------------------------- ----------------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
----------- --------- ----- ----------- --------- ----- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits $ 8,610,682 16.07% ---% $ 8,880,695 17.73% ---% $ 6,745,124 17.41% ---%
NOW accounts 1,686,746 3.15 2.07 1,742,820 3.48 2.00 1,604,706 4.14 2.09
Money market accounts 9,365,214 17.48 4.14 8,770,770 17.52 4.15 6,493,492 16.76 3.12
Savings accounts 1,598,174 2.98 2.93 1,537,074 3.07 2.86 1,779,394 4.59 3.04
Time deposits of $100,000 8,667,850 16.18 5.53 6,889,922 13.76 5.61 5,851,892 15.10 4.52
and more
Other time deposits 23,649,855 44.14 5.91 22,249,700 44.44 5.77 16,275,941 42.00 5.05
----------- ------ ----------- ------ ----------- ------
Total deposits $53,578,521 100.00% 5.19% $50,070,981 100.00% 5.07% $38,750,549 100.00% 4.27%
=========== ====== ==== =========== ====== ==== =========== ====== ====
</TABLE>
43
<PAGE>
AMOUNTS AND MATURITIES OF TIME DEPOSITS OF $100,000 AND OVER
The following table sets forth the amount and maturities of time deposits of
$100,000 and over at December 31, 1995 and December 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Three months or less $ 599,518 $1,523,077
Over three months through six months 1,003,712 1,665,103
Over six months through twelve months 4,978,092 2,663,712
Over twelve months 308,600 --
---------- ----------
Total $6,889,922 $5,851,892
========== ==========
</TABLE>
SENSITIVITY TO CHANGES IN INTEREST RATES
Community monitors its interest rate sensitivity position and attempts to
limit the exposure to interest rate risk but not always eliminate it. Subject
to management's best estimates of probable maturities, Community's policy is
that the ratio of maturing assets to maturing liabilities, excluding deposits
considered to be core deposits, repricing in the one year or less time period
shall be no less than 90% and no greater than 120%. Community does not utilize
any interest rate related contracts, such as futures and options, to manage its
overall interest rate risk.
The following table represents Community's interest rate position based upon
repricing opportunity dates or contractual maturities for the time periods set
forth below, as of March 31, 1996.
<TABLE>
<CAPTION>
0 TO 3 4 TO 12 1 TO 3 OVER 3
MONTHS MONTHS YEARS YEARS TOTAL
------------ ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans, fixed rate $ 2,416,855 $ 4,123,330 $ 6,070,707 $3,225,852 $15,836,744
Loans, variable rate 28,069,986 --- --- --- 28,069,986
Securities 396,091 3,417,230 7,318,484 4,309,513 15,441,318
Other short-term investments --- --- --- --- ---
----------- ------------ ----------- ---------- -----------
Total earning assets $30,882,932 $ 7,540,560 $13,389,191 $7,535,365 $59,348,048
=========== ============ =========== ========== ===========
Funding Sources
Demand deposit accounts $ 8,610,682 $ --- $ --- $ --- $ 8,610,682
Money market accounts 9,365,214 --- --- --- 9,365,214
Time deposits 7,751,889 16,537,383 3,762,822 4,265,611 32,317,705
Savings accounts 1,598,174 --- --- --- 1,598,174
NOW accounts 1,686,746 --- --- --- 1,686,746
Other borrowed funds 2,245,351 --- --- --- 2,245,351
----------- ------------ ----------- ---------- -----------
Total funding sources $31,258,056 $ 16,537,383 $ 3,762,822 $4,265,611 $55,823,872
=========== ============ =========== ========== ===========
Interest sensitivity gap ($375,124) ($8,996,823) $ 9,626,369 $3,269,754
Cumulative gap(1) ($375,124) ($9,371,947) $ 254,422 $3,524,176
</TABLE>
________________
(1) The one year or less cumulative gap includes approximately $8.6 million of
demand deposits which management believes to be core deposits. Such
deposits are generally not sensitive to interest rate fluctuations on a
short-term basis.
44
<PAGE>
COMPETITION
Missouri State Bank encounters competition primarily in seeking deposits and
in obtaining loan customers. The level of competition for deposits is quite
high. Missouri State Bank's principal competitors for deposits are other
financial institutions within a few miles of its offices, including other banks,
savings and loan institutions, and credit unions. Competition among these
institutions is based primarily on interest rates offered, service charges
imposed on deposit accounts, the quality of services rendered and the
convenience of banking facilities. Missouri State Bank's competitors are
generally permitted, subject to regulatory approval, to establish branches
throughout Missouri State Bank's market area. Additional competition for
depositors' funds comes from United States Government securities, private
issuers of debt obligations and suppliers of other investment alternatives for
depositors, such as securities firms.
While Missouri State Bank also encounters a great deal of competition in its
lending activities, Community believes that there is less competition in
Missouri State Bank's specialty--the middle market niche--than there was up to a
few years ago. Missouri State Bank's competitive position has been strengthened
by the advent of branch banking in Missouri, which has resulted in
consolidations of bank subsidiaries of several large bank holding companies.
Missouri State Bank's strategy, by contrast, is to maintain close, long-term
contacts between its customers and the Bank's officers.
Missouri State Bank also competes in its lending activities with other
financial institutions such as savings and loan institutions, credit unions,
securities firms, insurance companies, small loan companies, finance companies,
mortgage companies and other sources of funds. Many of Missouri State Bank's
non-bank competitors are not subject to the same extensive federal regulations
that govern bank holding companies and federally insured banks and state
regulations governing state chartered banks. As a result, such non-bank
competitors have advantages over Missouri State Bank in providing certain
services. Many of the financial institutions with which Missouri State Bank
competes in both lending and deposit activities are larger than Missouri State
Bank.
EMPLOYEES
As of March 31, 1996, Missouri State Bank had approximately 24 full-time
equivalent employees. None of its employees is subject to a collective
bargaining agreement. Community considers Missouri State Bank's relationships
with its employees to be good.
PROPERTIES
Missouri State Bank's principal office occupies approximately 15,000 square
feet of leased space on the ground floor and mezzanine level of an eight-story,
multi-tenant office building at 300 North Tucker Boulevard, at the corner of
Tucker Boulevard and Olive Street, in the City of St. Louis. Missouri State
Bank's facilities are more than adequate to handle anticipated future growth at
that location. Missouri State Bank's lease expires in January 2002 and provides
Missouri State Bank with options to renew for two successive five-year periods.
Adequate surface parking is located in close proximity to the office.
Missouri State Bank's St. Louis Hills branch is located in a one-story
building located at 3280 Hampton Avenue at Fyler, in the City of St. Louis.
This office handles depository transactions and provides a contact for lending
activities in that area, with loan applications subsequently referred to the
main office. Adequate parking and convenient drive-up facilities are adjacent
to the branch.
LEGAL PROCEEDINGS INVOLVING COMMUNITY CHARTER CORPORATION
AND MISSOURI STATE BANK AND TRUST COMPANY
From time to time, Community and Missouri State Bank are involved as
plaintiffs or defendants in various legal proceedings arising in the normal
course of their respective businesses. On August 14, 1995, four plaintiffs
brought an action against Missouri State Bank and a broker who maintained a
personal account at Missouri State Bank, in the Circuit Court of the City of St.
Louis, Missouri. The plaintiffs allege that Missouri State Bank violated the
Missouri Uniform Fiduciary Law by permitting the broker to deposit checks
belonging to the plaintiffs into his
45
<PAGE>
personal account in violation of the broker's fiduciary duty to the plaintiffs.
The plaintiffs seek to recover from Missouri State Bank $300,000 in actual
damages and $400,000 in punitive damages, plus prejudgment interest. Management
believes these claims are without merit and intends to defend against this
action. Management believes the resolution of this matter will not have a
material adverse effect on the financial condition or results of operation of
Community and Missouri State Bank.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF COMMUNITY CHARTER CORPORATION
GENERAL
The following presents management's discussion and analysis of Community's
consolidated financial condition and results of operations as of the dates and
for the periods indicated. This discussion should be read in conjunction with
"Selected Consolidated Financial and Other Data of Community Charter
Corporation," and the financial statements of Community and the accompanying
notes appearing elsewhere herein.
Although Community was formed in 1993, Community's operations began during
1994. Community's 1994 results include the operations of its subsidiary,
Missouri State Bank, for the seven months beginning May 31, 1994, which was the
date Community acquired Missouri State Bank. Due to the inclusion of only seven
months of results from Missouri State Bank, most of the income and expense
figures for 1994 which follow are different than if the Bank's 12 months'
figures had been included.
NET INCOME
Consolidated net income for 1995 was $606,179, an increase of $438,428 or
261% above 1994 earnings of $167,751. On a per share basis, net income for 1995
was $1.31, up 134% from $0.56 in 1994. Greater net earnings were primarily
attributable to the 123% increase in net interest income generated by increased
loans outstanding and additional investment securities and the inclusion of a
full year of operations for Missouri State Bank. Total noninterest income rose
sharply from 1994 due to increased transaction account service charges and non-
loan fee income and the inclusion of a full year of operations of Missouri State
Bank. Comparative noninterest expenses were up $531,484, or 47%, from 1994
reflecting a full year of cost from the operations of Missouri State Bank and in
part to increased personnel expenses relating to the growth of Community. Even
considering higher overhead costs, operating efficiencies improved from 1994 as
the efficiency ratio of Community improved to 63.3% from 95.4%. The efficiency
ratio is the ratio of noninterest expense to the sum of net interest income and
noninterest income.
Consolidated net income was $173,879, as compared to $118,866, for the three
months ended March 31, 1996 and 1995, respectively. On a per share basis, net
income for the three months ended March 31, 1996 was $0.37, up 48% from $0.25
for the three months ending March 31, 1995. The earnings increase was primarily
attributable to an increase in net interest income resulting from increased
loans outstanding and additional investment securities. Although noninterest
expense increased in the first quarter of 1996 as compared to the first quarter
of 1995, the efficiency ratio of Community improved to 60.2% for the first
quarter of 1996 from 68.4% for the first quarter of 1995, respectively.
NET INTEREST INCOME
Net interest income is the difference between income earned on assets and
interest expense paid on deposits and borrowings used to fund them. Net
interest income, the primary component of net income, increased 123% to
$2,394,210 in 1995 from $1,072,241 in 1994. Continued growth in earning assets
has been responsible for the consistent increases in net interest income, along
with the inclusion of a full year of operations for Missouri State Bank.
Net interest income increased to $2,394,210 in 1995, up $1,321,969 from the
1994 amount of $1,072,241, as greater interest income exceeded the higher
interest expense costs. Community's net interest margin increased
46
<PAGE>
to 4.86% in 1995 from 4.67% the previous year, as the yield on earning assets
increased more than the cost of interest-bearing liabilities and higher-yielding
assets, such as loans, grew as a percentage of total assets.
Net interest income was $672,262 for the first three months of 1996, a 27%
increase from the same period in 1995. Interest income increased $347,221 while
interest expense increased $204,466. This increase in interest income was
primarily the result of increased loan volume, while the increased interest
expense is primarily the result of the increased volume of time deposits. Loan
demand remains fairly strong in Community's primary markets of St. Louis City
and St. Louis County.
Net interest income divided by average interest-earning assets represents
Community's net interest margin. During the years presented, Community's net
interest margins have been comparable with its peers. Community's total funding
costs are slightly above those of its peers; however, such funding costs have
been offset by slightly higher yields achieved on commercial loans and
investment securities as compared to its peers.
INTEREST INCOME
Total interest income for 1995 was $4,344,862, up $2,539,373, or 141%, above
$1,805,489 in 1994. The increase was primarily generated from the growth of
Community's earning asset base and the inclusion of a full year of operations
for Missouri State Bank. Average loans outstanding grew $10,395,788 and average
investments increased $485,017 above prior year levels. Combined with the
benefits of asset growth were the higher yields earned on a majority of assets.
Total loan yields increased to 9.92% in 1995, up from 8.89% in 1994, as loan
yields rose with an average prime rate of 8.83% in 1995, compared with an
average prime rate of 7.14% in 1994. Total earning asset yields increased to
8.82% in 1995, up 96 basis points from 7.86% in 1994.
Total interest income for the three months ended March 31, 1996 was
$1,264,281, compared to $917,060 for the three months ended March 31, 1995.
This increase was primarily a result of increased loans outstanding and
additional investment securities.
The funding of the 1995 asset growth was accomplished using two separate
strategies. During the first half of 1995, loan growth and investment security
purchases were funded primarily with existing balance sheet liquidity and
increased time deposits. In June 1995, Community launched an aggressive
commercial account promotion at its locations to coincide with ongoing
commercial loan solicitation programs. In addition to offering commercial
checking and money market accounts, the bank successfully developed and marketed
a commercial sweep account. This account provided an attractive rate, liquidity
and security for deposit amounts in excess of FDIC insurance limitations.
INTEREST EXPENSE
Total interest expense increased $1,217,404 in 1995 to $1,950,652, up from
$733,248 in the prior year. Total interest expense for the three months ended
March 31, 1996 was $592,019, compared to $387,553 for the three months ended
March 31, 1995. The increase was primarily a result of the increased
certificates of deposit and the higher rates paid thereon. The remainder of the
increased interest expense was a result of the higher average volume of money
market accounts, short-term borrowings and higher rates paid on nearly all
interest-bearing liabilities in 1995. Overall rates paid on total interest
bearing liabilities increased to 5.07% in 1995 from 4.25% paid in 1994.
47
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS
The following table sets forth for the periods indicated the composition of
average interest-earning assets and interest-bearing liabilities along with
accompanying interest income, expense and rates.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE (4) EXPENSE RATE
------------ ---------- --------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1)(2) $33,469,064 3,318,491 9.92% $23,073,276 1,202,226 8.89%
Investments in debt and equity securities (3) 14,231,228 938,726 6.60 13,746,211 544,069 6.75
Federal funds sold 1,534,534 87,645 5.71 1,711,378 47,061 4.69
Interest-bearing bank deposits --- --- --- 642,114 12,133 3.22
----------- ---------- ----------- ----------
Total interest-earning assets 49,234,826 4,344,862 8.82 39,172,979 1,805,489 7.86
----------- ---------- ---- ----------- ---------- ----
Noninterest-earning assets:
Cash and due from banks 1,579,322 1,459,017
Premises and equipment 497,727 499,157
Other assets 847,676 507,698
Excess of cost over fair value of net assets 415,081 532,596
acquired
Allowance for loan losses (637,664) (805,058)
----------- -----------
Total assets $51,936,968 $41,366,389
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 1,665,964 33,317 2.00% $ 1,543,025 18,863 2.09
Money market accounts 8,725,039 362,090 4.15 5,985,069 109,580 3.12
Savings accounts 1,720,728 49,178 2.86 1,928,409 34,330 3.04
Time deposits $100,000 and over 6,531,580 366,554 5.61 4,938,846 130,989 4.52
Other time deposits 18,977,087 1,095,684 5.77 14,486,643 429,259 5.05
----------- ---------- ----------- ----------
Total interest-bearing deposits 37,620,398 1,906,823 5.07 28,881,992 723,021 4.27
Short-term borrowings 882,368 43,829 4.97 516,753 10,227 3.38
----------- ---------- ----------- ----------
Total interest-bearing liabilities 38,502,766 1,950,652 5.07 29,398,745 733,248 4.25
----------- ---------- ---- ----------- ---------- ----
Noninterest-bearing liabilities:
Demand deposits 7,932,011 6,301,077
Other liabilities 440,437 908,157
Stockholders' equity 5,061,754 4,758,410
----------- -----------
Total liabilities and stockholders' equity $51,936,968 $41,366,389
=========== ===========
Net interest income $2,394,210 $1,072,241
========== ==========
Net interest margin 4.86% 4.67%
==== ====
</TABLE>
_______________________________________
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
(2) Interest income on loans includes loans fees, which were not material to
any period presented.
(3) Community has an immaterial amount of tax-exempt securities and
accordingly, tax-equivalent yields are not presented.
(4) Average balances for 1994 were determined on the basis of the period from
May 31, 1994, the date of acquisition of Missouri State Bank, through
December 31, 1994, as Community had no substantive operations until the
date of acquisition.
48
<PAGE>
CHANGES IN INTEREST INCOME AND EXPENSE/VOLUME AND RATE VARIANCES
The following table sets forth the changes in interest income and
interest expense which are attributable to changes in average volume and average
rates, in comparison with the same period in the preceding year. The change in
interest due to the combined rate-volume variance has been allocated to rate and
volume changes in proportion to the absolute dollar amounts of the changes in
each. The changes between 1994 and 1993 were insignificant as Community had no
substantive operations during 1993.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
COMPARED TO
DECEMBER 31, 1994
-------------------------------------
INCREASE (DECREASE)
ATTRIBUTABLE TO CHANGE IN:
VOLUME YIELD/RATE NET CHANGE
----------- ----------- -----------
INTEREST EARNED ON:
<S> <C> <C> <C>
Loans (1)(2) $1,962,269 $153,996 $2,116,265
Investments in debt and equity securities (3) 407,384 (12,727) 394,657
Federal funds sold 28,756 11,828 40,584
Interest-bearing bank deposits (12,133) --- (12,133)
----------- ----------- -----------
Total interest income 2,386,276 153,097 2,539,373
----------- ----------- -----------
INTEREST PAID ON:
NOW accounts 15,255 (801) 14,454
Money market accounts 206,755 45,755 252,510
Savings accounts 16,971 (2,123) 14,848
Time deposits $100,000 and over 197,686 37,879 235,565
Other time deposits 597,485 68,940 666,425
Short-term borrowings 26,956 6,646 33,602
----------- ----------- -----------
Total interest expense 1,061,108 156,296 1,217,404
Net interest income $1,325,168 ($3,199) $1,321,969
=========== =========== ===========
</TABLE>
_____________________________________________
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
(2) Interest income on loans includes loans fees, which were not material to
any period presented.
(3) Community has an immaterial amount of tax-exempt securities and
accordingly, tax-equivalent yields are not presented.
NONINTEREST INCOME
The following table sets forth Community's noninterest income for the
periods indicated.
YEAR ENDED
DECEMBER 31
-------------------
1995 1994
--------- --------
Service charges on deposit accounts $160,790 $ 66,228
Other service charges and fee income 47,650 24,703
Loss on sale of debt securities (8,043) ---
Other 37,982 25,893
--------- --------
Total noninterest income $238,379 $116,824
======== ========
49
<PAGE>
Total noninterest income for 1995 was $238,379, up over 104% from $116,824 in
1994. In 1995, service charges on depository accounts increased from 1994
levels as the volume of accounts and the related service charges increased.
Increases in other noninterest income resulted from increased customer service
fees and fees on credit card merchant accounts. Increases in all major
categories were also the result of the inclusion of a full year of operations
for Missouri State Bank.
Net realized losses on available for sale securities were $8,043 in 1995,
compared with no gain or loss in 1994. Most 1995 losses were realized in the
fourth quarter as Community took advantage of market conditions on selected
securities sales to reposition the portfolio to reduce interest rate risk.
There were no sales of securities classified as held to maturity in 1995 and
1994.
Noninterest income for the first three months of 1996 was $61,033 as compared
to $56,839 for the same period in 1995, due primarily to increased service
charges on depository accounts.
NONINTEREST EXPENSE
The following table sets forth Community's noninterest expense for the periods
indicated.
YEAR ENDED
DECEMBER 31
----------------------
1995 1994
---------- ----------
Salaries and employees benefits $ 935,595 $ 473,976
Occupancy 204,684 120,554
Equipment 67,624 69,264
FDIC insurance premiums 50,380 59,343
Consulting fees --- 190,000
Other 407,832 221,494
---------- ----------
Total noninterest expense $1,666,115 $1,134,631
========== ==========
Noninterest expenses increased to $1,666,115 in 1995, up from $1,134,631 in
1994. The inclusion of a full year of operations for Missouri State Bank,
Community's overall growth, merit increases in compensation and greater benefit
costs were primarily responsible for the increased total overhead costs in 1995.
Partially offsetting the previously discussed overhead increases was a reduction
in FDIC insurance costs, despite the 29% increase in deposits. In the last half
of 1995, Missouri State Bank received a rebate from the FDIC of overpaid
insurance premiums for the months of June through September. Fourth quarter
FDIC costs were also significantly reduced to minimum required levels from
historical levels.
Consulting expense was $190,000 in 1994, with no comparable expense in 1995.
In conjunction with the purchase of Missouri State Bank, Community entered into
an agreement with the former majority stockholder for independent consulting
services in the collection of certain specified loans. In accordance with the
terms of that agreement, the stockholder fulfilled his obligations and Community
paid $190,000 in January 1995 that was included in noninterest expenses for the
year ended 1994. Community has no further obligations under this agreement.
Even though overhead costs grew considerably from 1994 to 1995, Community's
operating efficiency ratios in 1995 were consistent with peer group standards.
In 1995, Community's efficiency ratio improved to 63.3% from 95.4% in 1994. The
efficiency ratio is the ratio of noninterest expense to the sum of net interest
income and noninterest income.
Noninterest expense increased to $441,349 in the first quarter of 1996, up
from $401,295 for the same period in 1995. Community's overall growth and merit
increases in compensation were primarily responsible for the increased costs in
1996. These increases were partially offset by a significant decrease in FDIC
insurance costs as discussed above.
50
<PAGE>
Despite the increase in noninterest expense, Community's operating
efficiency continued to improve as the efficiency ratio decreased to 60.2% from
68.4% for the first three months of 1996 as compared to the same period in 1995.
INCOME TAXES
Income taxes for 1995 increased to $360,295, from $76,683 in 1994. The 295%
increase in pre-tax income, along with an increase in state tax obligations,
contributed to greater income tax expense. Income taxes increased to $107,567
for the three months ended March 31, 1996, as compared to $66,185 for the three
months ended March 31, 1995. The 52% increase in pre-tax income, along with an
increase in state tax obligations, contributed to greater income tax expense.
At December 31, 1995, Community had net operating loss carryforwards for
federal income tax purposes of approximately $344,000. If unused, such
carryforwards will expire in years 2006 through 2009. The majority of the net
operating losses are subject to the annual limitation on the amount of any loss
carryforward that can be used to offset federal taxable income under the
applicable tax regulations.
CAPITAL MANAGEMENT AND RESOURCES
At March 31, 1996, Community's stockholders' equity had increased to
$5,661,325, up $132,015 from year-end 1995. Earnings of $173,879 accounted for
the increase in capital, which was partially offset by a $41,864 decrease in the
unrealized gain on investment securities categorized as available for sale. At
March 31, 1996, retained earnings were $942,070, or 16.6% of total stockholders'
equity.
At December 31, 1995, Community's stockholders' equity was $5,529,310, up
$733,066 from the end of 1994. Earnings of $606,179 provided the largest portion
of Community's capital accumulation in 1995. At December 31, 1995, retained
earnings were $768,191, or 13.9% of total stockholders' equity.
During 1994, Community's equity base grew by $4,701,983. New capital was
provided by the sale of common stock in the initial stock offering and net
earnings from operations.
The analysis of capital is dependent upon a number of factors, including
asset quality, earnings strength, liquidity, economic conditions and
combinations thereof. Capital adequacy guidelines adopted by the FRB provide two
primary criteria for examining capital. The measurements include the risk-based
capital guidelines and the capital to total assets or leverage ratio minimum
requirements.
The risk-based capital guidelines require the assignment of a risk-weighting
factor to all of Community's assets and various off-balance sheet exposures.
The risk-based capital ratio is calculated by dividing qualifying capital by the
sum of risk-weighted assets and risk-weighted off-balance sheet items.
Qualifying capital is classified into two tiers, Tier 1 and Tier 2. At March
31, 1996, Tier 1 capital equaled total stockholders' equity of $5,658,652 less
unamortized goodwill of $113,156, and Tier 2 capital included $589,586 of the
allowance for loan losses. As required by the risk-based capital guidelines, no
asset or equity adjustments related to the market value adjustments of
securities available for sale were recognized for these purposes.
The FRB guidelines require that Community's Tier 1 capital equal or exceed
4.00% of risk-weighted assets, and that the total risk-based capital ratio equal
or exceed 8.00%. As of March 31, 1996, Tier 1 and total risk-weighted capital
ratios were 11.78% and 12.98%, respectively, as compared to 11.60% and 12.85% at
December 31, 1995 and 14.70% and 15.95% at December 31, 1994. The minimum
acceptable ratio of Tier 1 capital to total assets, or leverage ratio, has been
established by the FRB at 3.00%; however, for all but the most highly rated bank
holding companies and for bank holding companies seeking to expand, the FRB
expects an additional cushion of at least 100 to 200 basis points. As of March
31, 1996, December 31, 1995 and December 31, 1994, Community's leverage ratios
were 8.97%, 8.23% and 9.71%, respectively. The declines in capital ratios since
1994 reflect the growth of Community and the utilization of initial capital.
See "Supervision and Regulation of Community Charter Corporation and Missouri
State Bank--Capital Adequacy."
51
<PAGE>
Management believes that a strong capital position provided by a mix of equity
and qualifying long-term debt is essential. Changing economic conditions and
the regulatory environment also continue to emphasize the importance of capital
strength and depth. Capital provides safety and security for deposits, and it
enhances value for stockholders by providing opportunities for growth with the
selective use of leverage. Various leverage options are also available to
Community, including negotiated long-term bank borrowings, short-term revolving
lines of credit or other qualifying long-term debt. Community had no long-term
debt outstanding at March 31, 1996, December 31, 1995, or December 31, 1994.
LIQUIDITY
Community needs to maintain a level of liquidity which will provide a readily
available source of funds for new loans and to meet loan commitments and other
obligations on a timely basis. Historically, Community has been loan driven,
which means that as loans have increased above 80% of deposits, Community has
taken action to increase the level of core deposits. This action generally
involves the use of deposit promotions, paying premium rates coupled with
advertising to attract new customers to Missouri State Bank. It has been
Community's experience that the majority of deposits raised through promotions
have remained at Missouri State Bank after the promotion is over and so have
provided a steadily growing base of core deposits at the Bank. In addition, a
steady flow of maturing securities provides a source of liquidity.
In 1995, Missouri State Bank became a shareholder and member of the FHLB of
Des Moines. One of the benefits of this membership was the new source of
liquidity. Other sources of liquidity include bank Federal funds lines,
securities repurchase agreements, Treasury tax and loan options and negotiated
bank lines of credit.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1995, Community adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS
114") and Statement of Financial Accounting Standards No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures" ("SFAS
118"), which amends SFAS 114.
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and loans for
which terms have been modified in troubled debt restructurings (a restructured
loan). Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all amounts due - both principal and interest
- - according to the contractual terms of the loan agreement.
When measuring impairment, the expected future cash flows of an impaired loan
are required to be discounted at the loan's effective interest rate.
Alternatively, impairment can be measured by reference to an observable market
price, if one exists, or the fair value of the collateral for a collateral-
dependent loan. Regardless of the historical measurement method used, SFAS 114
requires a creditor to measure impairment based on the fair value of the
collateral when the creditor determines foreclosure is probable. Additionally,
impairment of a restructured loan is measured by discounting the total expected
future cash flows at the loan's effective rate of interest as stated in the
original loan agreement.
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. Community has elected to
continue to use its existing nonaccrual methods for recognizing interest on
impaired loans. Community continues to apply all payments received on impaired
loans to the outstanding balance of the loan until such time as the loan balance
is reduced to zero, after which payments are applied to interest income until
such time as the forgone interest is recovered, or until such time as an
improvement in the condition of the loan has occurred which would warrant
resumption of interest accruals.
As of the adoption date of January 1, 1995, Community had impaired loans in
the amount of $250,487, which is represented by the loans on nonaccrual status
at December 31, 1994. A specific reserve of $37,573 was allocated to impaired
loans at January 1, 1995. The adoption of SFAS 114 and SFAS 118 resulted in no
prospective adjustment to the provision for possible loan losses.
52
<PAGE>
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), provides guidance for recognition and measurement of impairment of
long-lived assets, certain identifiable intangibles, and goodwill related both
to assets to be held and used and assets to be disposed of. The statement
requires entities to perform separate calculations for assets to be held and
used to determine whether recognition of an impairment loss is required and, if
so, to measure impairment. If the sum of the expected future cash flows,
undiscounted and without interest charges, is less than the asset's carrying
amount, an impairment loss can be recognized. If the sum of the expected future
cash flows is more than the asset's carrying amount, an impairment loss cannot
be recognized. Measurement of an impairment loss is based on the fair value of
the asset. SFAS 121 also requires long-lived assets and certain identifiable
intangibles to be disposed of to be reported at the lower of carrying amount or
fair value less cost to sell.
SFAS 121 is effective for financial statements issued for fiscal years
beginning after December 31, 1995. SFAS 121 will not have a material effect on
the consolidated financial statements of Community.
In May 1995, the FASB issued Statement of Financial Accounting Standard No.
122, "Accounting for Mortgage Servicing Rights" (SFAS 122), which requires that
a mortgage banking enterprise recognize as separate assets the rights to service
mortgage loans for others at the origination or purchase date of the loan, when
the enterprise has a definitive plan to sell or securitize the loans and retain
the mortgage servicing rights, assuming the fair value of the loans and
servicing rights may be practically estimated. Otherwise, servicing rights
should be recognized when the underlying loans are sold or securitized, using an
allocation of total cost of the loans based on the relative fair values at the
date of sale. SFAS 122 also requires an assessment of capitalized mortgage
servicing rights for impairment to be based on the current fair value of those
rights. SFAS 122 is effective for financial statements issued for fiscal years
beginning after December 31, 1995. Community does not retain servicing rights
on loans it sells, and this statement will not impact the financial position of
Community.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") provides
guidance for accounting and reporting standards for stock-based employee
compensation plans. SFAS 123 defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, ("Opinion 25"). Entities electing to remain with
the accounting in Opinion 25 must make pro forma disclosures of net income and,
if presented, earnings per share, as if the fair value based method of
accounting defined in SFAS 123 had been applied. Under the fair value based
method, compensation cost is measured at the grant date on the value of the
award and is recognized over the service period, which is usually the vesting
period. Under the intrinsic value based method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock.
Most fixed stock option plans, including Community's stock option plan, have no
intrinsic value at grant date, and under Opinion 25 no compensation cost is
recognized.
SFAS 123 is effective for financial statements for fiscal years beginning
after December 15, 1995. Pro forma disclosures required for entities that elect
to continue to measure compensation cost using Opinion 25, upon the
effectiveness of SFAS 123, must include the effects of all awards granted in
fiscal years that begin after December 15, 1994. Community has elected to
continue its current accounting for stock-based compensation and, accordingly,
does not believe that SFAS 123 will have a material effect on the consolidated
financial statements of Community.
EFFECTS OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of a bank holding company is
substantially different from that of an industrial company, in that virtually
all assets and liabilities of a bank holding company are monetary in nature.
Accordingly, changes in interest rates may have a significant impact on a bank
holding
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company's performance. Interest rates do not necessarily move in the same
direction, or in the same magnitude, as the prices of other goods and services.
Inflation does have an impact on the growth of total assets in the banking
industry, often resulting in a need to increase equity capital at higher than
normal rates to maintain an appropriate equity to assets ratio. One of the most
important effects that inflation could have on the banking industry would be to
reduce the proportion of earnings paid out in the form of dividends.
Although it is obvious that inflation affects the growth of total assets, it
is difficult to measure the impact precisely. Only new assets acquired in each
year are directly affected, so a simple adjustment of asset totals by use of an
inflation index is not meaningful. Through the results of operations also have
been affected by inflation, as sated above, there is no simple way to measure
the effect on the various categories of income and expense.
Interest rates in particular are significantly affected by inflation, but
neither the timing nor the magnitude of the changes coincides with changes in
standard measurements of inflation such as the consumer price index.
Additionally, changes in interest rates on some types of consumer deposits may
be delayed. These factors in turn affect the composition of sources of funds by
reducing the growth of deposits that are less interest sensitive and increasing
the need for funds that are more interest sensitive.
SUPERVISION AND REGULATION OF COMMUNITY CHARTER
CORPORATION AND MISSOURI STATE BANK
GENERAL
Community and Missouri State Bank are extensively regulated under federal and
state law. These laws and regulations are intended to protect depositors, not
shareholders. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable laws
or regulations may have a material effect on the business and prospects of
Community and Missouri State Bank. The operations of Community and Missouri
State Bank may be affected by legislative changes and by the policies of various
regulatory authorities. Community cannot predict the nature or the extent of
the effects on its business and earnings that fiscal or monetary policies,
economic control or new federal or state legislation may have in the future.
FEDERAL BANK HOLDING COMPANY REGULATION
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,
Community is required to file reports with the FRB and such additional
information as the FRB requires, and is 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 bank 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.
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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, 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.
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. 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.
Additional aspects of the regulation of bank holding companies under federal
law are discussed below.
STATE BANK HOLDING COMPANY REGULATION
Community, as a Missouri bank holding company, is subject to regulation by the
MDF. Under the Missouri banking laws, prior approval of the MDF is required
before a bank holding company may acquire control of a Missouri chartered bank
or a bank holding company incorporated in Missouri. In addition, under the
Missouri banking laws, it is unlawful for any bank holding company to obtain
control of any bank if the total deposits in the bank together with the total
deposits in all banks in Missouri controlled by such bank holding company exceed
13% of the total deposits held by all depository financial institutions in
Missouri. In computing deposits for purposes of this calculation, certificates
of deposit in the face amount of $100,000 or more, deposits from outside the
United States, and deposits from banks not controlled by the bank holding
company are excluded. A "depository financial institution" is defined as any
financial institution which accepts deposits and which can insure such deposits
through an agency of the federal government. As of March 31, 1996, Community's
consolidated Missouri deposits represented less than 0.1% of the total deposits
held by all Missouri depository financial institutions.
FEDERAL AND STATE BANK REGULATION
Missouri State Bank, as a federally-insured Missouri-chartered bank which is
not a member of the Federal Reserve System, is subject to the supervision and
regulation of the MDF, and to the supervision and regulation of the FDIC. These
agencies may prohibit Missouri State Bank from engaging in what they believe
constitutes unsafe or unsound banking practices.
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The maximum legal rate of interest which Missouri State Bank may charge on a
particular loan depends on a variety of factors such as the type of borrower,
the purpose of the loan, the amount of the loan and the date the loan is made.
There are several state and federal statutes which set maximum legal rates of
interest for various kinds of loans.
The ability of banks and bank holding companies to operate in multiple
locations or in more than one state is regulated by both federal and state law.
Under the Riegle-Neal Act, "adequately capitalized and adequately managed" bank
holding companies may acquire bank subsidiaries located in any state
notwithstanding any state laws to the contrary. The Riegle-Neal Act also
provides that beginning June 1, 1997, adequately capitalized and adequately
managed national and state-chartered banks will be permitted to merge across
state lines and keep the branches of the merging banks.
The Riegle-Neal Act permits states to require banks to be in existence for a
specified period of time up to five years before they can be acquired (either by
purchase or through an interstate bank merger) by an out-of-state bank holding
company, and to impose statewide market share limits on out-of-state bank
holding companies after their initial entry into the state. States may also
elect to permit interstate mergers before June 1, 1997, or to affirmatively opt
out of the interstate merger provisions if they do so before June 1, 1997. The
Riegle-Neal Act does not authorize interstate branching other than by a bank
merger, such as by opening a new branch in another state or by acquiring a
branch in another state (without acquiring the entire bank); however, any state
may opt to permit out-of-state banks to branch within the state by those
methods.
The Community Reinvestment Act ("CRA") requires that, in connection with
examinations of financial institutions within their jurisdiction, the FRB or the
FDIC shall evaluate the record of financial institutions in meeting the credit
needs of their local communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of those banks.
These factors are also considered in evaluating mergers, acquisitions and
applications to open a branch or facility. Banks having branch offices in two
or more states will receive both an overall CRA performance rating and separate
CRA ratings for each of the states in which they have branches.
Missouri State Bank is also subject to certain restrictions imposed by the
Federal Reserve Act on extensions of credit to executive officers, directors,
principal shareholders or any related interest of such persons. Extensions of
credit (i) must be made on substantially the same terms, including interest
rates and collateral as, and following credit underwriting procedures that are
not less stringent than, those prevailing at the time for comparable
transactions with persons not covered above and who are not employees, and (ii)
must not involve more than the normal risk of repayment or present other
unfavorable features. Missouri State Bank is also subject to certain lending
limits and restrictions on overdrafts to such persons. A violation of these
restrictions may result in the assessment of substantial civil monetary
penalties on Missouri State Bank or any officer, director, employee, agent or
other person participating in the conduct of the affairs of Missouri State Bank,
the imposition of a cease and desist order, and other regulatory sanctions.
Section 23A of the Federal Reserve Act is designed to protect banks from abuse
in financial transactions with companies with which the bank is affiliated, by
(i) limiting a bank's extensions of credit and other covered transactions with
any single affiliate to no more than 10% of the bank's capital and surplus, and
with all affiliates to no more than 20% of the bank's capital and surplus, (ii)
requiring that all of a bank's extensions of credit to an affiliate be
appropriately secured by collateral, and (iii) requiring that all transactions
between a bank and its affiliates be on terms and conditions consistent with
safe and sound banking practices, and (iv) prohibiting a bank or its
subsidiaries from purchasing low-quality loans or other assets from the bank's
affiliate.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), each federal banking agency is required to prescribe, by regulation,
non-capital safety and soundness standards for institutions under its authority.
These standards are to cover internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation, fees and benefits, such other operational and
managerial standards as the agency determines to be appropriate, and standards
for asset quality, earnings and stock valuation. An institution which fails to
meet these standards must develop a plan acceptable to the agency, specifying
the steps that the institution will take to meet the standards. Failure to
submit
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or implement such a plan may subject the institution to regulatory sanctions.
FDICIA also imposed new capital standards on insured depository institutions.
See "--Capital Adequacy."
DEPOSIT INSURANCE
As an FDIC-insured institution, the deposits of Missouri State Bank are
currently insured to a maximum of $100,000 per depositor through the BIF, and
Missouri State Bank is required to pay semiannual deposit insurance premium
assessments to the FDIC.
FDICIA included provisions to reform the federal deposit insurance system,
including the implementation of risk-based deposit insurance premiums, and
permits the FDIC to make special assessments on insured depository institutions
in amounts determined by the FDIC to be necessary to give it adequate assessment
income to repay amounts borrowed from the U.S. Treasury and other sources or for
any other purpose the FDIC deems necessary. Under the risk-based insurance
premium system, banks are assessed insurance premiums according to how much risk
they are deemed to present to the BIF. Banks with higher levels of capital and
involving a low degree of supervisory concern are assessed lower premiums than
banks with lower levels of capital or involving a higher degree of supervisory
concern.
Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), an FDIC-insured depository institution can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default (the "Cross
Guarantee"). "Default" is defined generally as the appointment of a conservator
or receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating either that there is no reasonable prospect that
the institution will be able to meet the demands of its depositors or pay its
obligations in the absence of regulatory assistance, or that its capital has
been depleted and there is no reasonable prospect that it will be replenished in
the absence of regulatory assistance. The Cross Guarantee thus enables the FDIC
to assess a holding company's healthy FDIC members for the losses of any of such
holding company's failed FDIC members. Cross Guarantee liabilities are generally
superior in priority to obligations of the depository institution to its
shareholders due solely to their status as shareholders and obligations to other
affiliates. Under FIRREA, failure to meet applicable capital guidelines could
subject a banking institution to a variety of enforcement remedies available to
federal regulatory authorities, including the termination of deposit insurance
by the FDIC and a prohibition on the taking of "brokered deposits."
DIVIDENDS
The Missouri banking laws impose certain limitations on the payment of
dividends by Missouri state chartered banks as follows: (i) no dividends may be
paid which would impair capital; (ii) until the surplus fund of a bank is equal
to 40% of its capital no dividends may be declared unless there has been carried
to the surplus account no less than one-tenth of its net profits for the
dividend period; and (iii) dividends are payable only out of a bank's undivided
profits. In addition, the appropriate regulatory authorities are authorized to
prohibit banks and bank holding companies from paying dividends which would
constitute an unsafe and unsound banking practice.
CAPITAL ADEQUACY
The federal banking agencies use capital adequacy guidelines in their
examination and regulation of bank holding companies and banks. If the capital
falls below the minimum levels established by these guidelines, the bank holding
company or bank may be denied approval to acquire or establish additional banks
or non-bank businesses or to open facilities.
The FRB and the FDIC have adopted risk-based capital guidelines for banks and
bank holding companies. The risk-based capital guidelines are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, to account for off-balance sheet
exposure and to minimize disincentives for holding liquid assets. Assets and
off-balance sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets
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and off-balance sheet items. The guidelines are minimums, and the FRB has noted
that bank holding companies contemplating significant expansion programs should
not allow expansion to diminish their capital ratios and should maintain ratios
well in excess of the minimum. The current guidelines require all bank holding
companies and federally-insured banks to maintain a minimum risk-based total
capital ratio equal to 8%, of which at least 4% must be Tier 1 capital (see
descriptions of Tier 1 capital and Tier 2 capital below). Bank holding
companies are required under such guidelines to deduct all intangibles except
purchased mortgage servicing rights from capital.
Tier 1 capital for bank holding companies includes common shareholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital,
if cumulative; under a FRB rule, redeemable perpetual preferred stock may not be
counted as Tier 1 capital unless the redemption is subject to the prior approval
of the FRB) and minority interests in equity accounts of consolidated
subsidiaries, less intangibles except as described above. Tier 2 capital
includes: (i) the allowance for loan losses up to 1.25% of risk-weighted assets;
(ii) any qualifying perpetual preferred stock which exceeds the amount which may
be included in Tier 1 capital; (iii) hybrid capital instruments; (iv) perpetual
debt; (v) mandatory convertible securities and (vi) subordinated debt and
intermediate term preferred stock of up to 50% of Tier 1 capital. Total capital
is the sum of Tier 1 and Tier 2 capital less reciprocal holdings of other
banking organizations, capital instruments and investments in unconsolidated
subsidiaries.
Assets of banks and bank holding companies assets are given risk-weights of
0%, 20%, 50% or 100%, depending on the type of asset. In addition, certain off-
balance sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk-weight category, except for first mortgage loans fully secured
by residential property, which carry a 50% rating. Most investment securities
are assigned to the 20% category, except for municipal or state revenue bonds,
which have a 50% risk-weight, and direct obligations of or obligations
guaranteed by the United States Treasury or United States Government agencies,
which have a 0% risk-weight. In converting off-balance sheet items, direct
credit substitutes, including general guarantees and standby letters of credit
backing financial obligations, are given a 100% conversion factor. Transaction
related contingencies such as bid bonds, other standby letters of credit and
undrawn commitments, including commercial credit lines with an initial maturity
of more than one year, have a 50% conversion factor. Short-term, self-
liquidating trade contingencies are converted at 20%, and short-term commitments
have a 0% factor.
The current risk-based capital guidelines account for only credit risk, i.e.
the risk that the institutions will be unable to recover its investment in its
assets. However, the federal banking agencies have proposed amending the risk-
weighted capital standards to provide also for the consideration of market risk,
i.e. the risk of loss from sales of assets and purchases of liabilities. See "-
- -Proposed Regulations."
The FRB also has implemented a leverage ratio, which is Tier 1 capital as a
percentage of total assets less intangibles, to be used as a supplement to the
risk-based guidelines. The principal objective of the leverage ratio is to
place a constraint on the maximum degree to which a bank holding company may
leverage its equity capital base. The FRB requires a minimum leverage ratio of
3%. However, for all but the most highly rated bank holding companies and for
bank holding companies seeking to expand, the FRB expects an additional cushion
of at least 100 to 200 basis points.
FDICIA also created a new system of supervisory actions indexed to the capital
level of each insured depository institution. Under the implementing
regulations adopted by the FDIC, an institution is assigned to one of five
capital categories depending on its total risk-based capital ratio, Tier 1 risk-
based capital ratio, and leverage ratio, which may be lowered by certain
subjective factors including, less than satisfactory non-capital elements of the
"CAMEL" rating resulting either from an examination or unsafe or unsound
practices or conditions determined by an examination. Institutions which are
deemed to be "undercapitalized" are subject to certain mandatory corrective
actions depending on the category to which they are assigned.
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So long as Missouri State Bank has less than $150 million in assets and is the
only bank subsidiary of its bank holding company, FRB regulations and policies
will apply the capital requirements based on Bank-only capital and assets.
However, if Missouri State Bank exceeds $150 million in assets or if the holding
company acquires an additional bank, the FRB will apply the capital requirements
to the holding company on a consolidated basis. As of March 31, 1996, Missouri
State Bank and Community were in compliance with applicable capital ratio
requirements based on the capital ratios of Missouri State Bank, as follows:
AT
MARCH 31, 1996
--------------
AMOUNT RATIO
-------------- ------
(dollars in thousands)
RISK BASED CAPITAL RATIOS:
-------------------------
Tier 1 capital.......................... $ 5,257 11.16%
Minimum Tier 1 capital requirement...... 1,883 4.00
Total capital........................... $ 5,847 12.42%
Minimum total capital requirement....... 3,766 8.00
Risk-adjusted assets, net of
goodwill and excess allowance........... $47,081
LEVERAGE RATIO:
--------------
Tier 1 capital.......................... $ 5,257 8.53%
Minimum leverage requirement............ 1,849 3.00
Adjusted total assets, net of goodwill.. $61,631
MONETARY POLICY
The earnings of a bank holding company are affected by the policies of
regulatory authorities, including the FRB, in connection with the FRB's
regulation of the money supply. Various methods employed by the FRB are open
market operations in United States Government securities, changes in the
discount rate on member bank borrowings and changes in reserve requirements
against member bank deposits. These methods are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or paid
on deposits. The monetary policies of the FRB have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future.
PROPOSED REGULATIONS
The FDIC, the FRB and other federal banking agencies have published for
comment proposed regulations to supplement their risk-based capital adequacy
standards, which currently measure credit risk, so as to require additional
capital against activities creating market risks due to interest rates, such as
foreign currency and commodity activities and the trading of debt and equity
instruments. The proposed standards would generally apply only to institutions
with (a) total assets exceeding $5 billion and either on-balance-sheet trading
activities representing at least 3% of total assets or a volume of off-balance-
sheet trading activities with notional amounts exceeding $5 billion, or (b)
total assets of $5 billion or less and a volume of trading activities
representing at least 10% of total assets. Under the proposed regulations,
market risks would be measured under either the institution's own internal model
or risk measurement techniques promulgated by its federal regulatory agency.
The agency would be able to require the results of an institution's internal
model to be increased based on a retrospective
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assessment of the quality and historical accuracy of the institution's internal
model. These proposals are subject to change before final adoption, and an
implementation timetable has not been published. However, based on Missouri
State Bank's current investment policies and limited exposure to interest rate
risk, the proposals, if adopted in substantially the form published, would not
apply to Community or Missouri State Bank.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ROOSEVELT FINANCIAL GROUP, INC.
AND COMMUNITY CHARTER CORPORATION
INTRODUCTION
As a result of the Merger, holders of Community Common Stock, whose rights
are presently governed by Missouri law and the Articles of Incorporation and
Bylaws of Community (the "Community Articles" and the "Community Bylaws"), will
become stockholders of Roosevelt, a Delaware corporation (other than
shareholders who perfect dissenters' rights under Missouri law). Accordingly,
their rights will be governed by the General Corporation Law of the State of
Delaware (the "DGCL") and the Certificate of Incorporation and Bylaws of
Roosevelt (the "Roosevelt Certificate" and the "Roosevelt Bylaws").
Certain differences in rights of stockholders arise from this change of
governing law, as well as from distinctions between the Community Articles and
Community Bylaws and the Roosevelt Certificate and Roosevelt Bylaws. The
following is a brief description of those differences. This description does
not purport to be a complete statement of all differences between the rights of
stockholders of Community and Roosevelt. While Community and Roosevelt believe
that all material differences are discussed, other differences may arise that
may be deemed material. The following summary is qualified in its entirety by
reference to the DGCL, the Missouri Act, the Community Articles and Community
Bylaws and the Roosevelt Certificate and Roosevelt Bylaws.
Each shareholder should carefully consider these differences, including
provisions of the Roosevelt Certificate and Roosevelt Bylaws that may have an
anti-takeover effect, in connection with the decision to vote for or against the
adoption and approval of the Merger Agreement and the Merger.
CAPITAL STOCK
The Community Articles authorize the issuance of 1,000,000 shares of common
stock, $.10 par value per share. The Roosevelt Certificate authorizes the
issuance of 90,000,000 shares of common stock, $.01 par value per share,
1,000,000 shares of Class I serial preferred stock, $.01 par value per share,
and 2,000,000 shares of Class II serial preferred stock, no par value, and
provides that the Roosevelt Board may issue any authorized shares from time to
time and may fix the rights and preferences of the serial preferred stock, all
without stockholder action. At May 16, 1996, there were 42,135,593 shares of
Roosevelt Common Stock, 1,000,000 shares of 6 1/2% Non-Cumulative Convertible
Preferred Stock, Series A (Class I) and 301,000 shares of 6 1/2% Non-Cumulative
Convertible Preferred Stock, Series F (Class II) issued and outstanding. As of
the same date, there were 471,499 shares of Community Common Stock issued and
outstanding.
PAYMENT OF DIVIDENDS
Dividends paid on the Community Common Stock may be declared by the
Community Board at any regular or special meeting, provided that such meeting
has been duly called and that ion taken thereat has been properly taken.
Dividends may be paid in cash, in property or in shares of Community's capital
stock, subject to certain restrictions of the Missouri Act.
Under the Roosevelt Bylaws, dividends upon the capital stock of Roosevelt
may be declared by the Roosevelt Board at any regular or special meeting, and
may be paid in cash, in property, or in shares of the capital stock. Certain
restrictions generally imposed on Delaware corporations may have an impact on
Roosevelt's ability to pay dividends. The DGCL provides that dividends may be
paid in cash, in property or in shares of Roosevelt's capital stock either out
of the corporation's surplus (defined as the excess of the net assets of the
corporation over
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the stated capital of the corporation) 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. For additional limitations on Roosevelt's ability to pay
dividends, see "Comparative Stock Prices and Dividend Information."
SPECIAL MEETINGS OF STOCKHOLDERS
The Community Bylaws provide that special meetings of stockholders of
Community for any purpose or purposes may be called by the chairman of the
board, the president or any one or more directors. The Roosevelt Certificate
and Roosevelt Bylaws provide that special meetings of stockholders of Roosevelt
may be called only by the chairman of the board or the president and shall be
called by either individual at the written request of a majority of the
directors of Roosevelt then in office. Such request must state the purpose or
purposes of the proposed meeting.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS AND PRESENTATION OF NEW
BUSINESS AT MEETINGS OF STOCKHOLDERS
The Roosevelt 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. The Roosevelt 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.
The Community Bylaws do not contain any advance notice requirements for
nominations of directors or presentation of new business at meetings of
stockholders.
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Under Missouri law and Delaware law, written action of stockholders is
permitted unless the articles or certificate of incorporation or bylaws of the
corporation provide otherwise. Community's Bylaws provide that its stockholders
may take action without a meeting by written consent of all stockholders
entitled to vote on ion. Conversely, the Roosevelt Certificate provides that
Roosevelt stockholders may take action only at an annual or a special meeting of
stockholders, and not by written consent. Therefore, if a Roosevelt stockholder
desired to take action by written consent, he or she would not be permitted to
do so.
CUMULATIVE VOTING FOR ELECTION OF DIRECTORS
Cumulative voting entitles each stockholder to cast a number of votes in the
election of directors equal to the number of such stockholder's shares of stock
multiplied by the number of directors to be elected, and to distribute such
votes in favor of one nominee or among two or more of the nominees to be
elected. The Community Bylaws do not permit cumulative voting by stockholders
of any class or series in the election of directors. Holders of Roosevelt
Common Stock also are not permitted cumulative voting rights in the election of
directors.
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RIGHTS OF STOCKHOLDERS TO DISSENT
Under Missouri law, stockholders of Community have dissenters' appraisal
rights provided the dissenting shareholder files a written objection to the
Merger with Community prior to or at the Special Meeting, does not vote in favor
of the Merger and, within 20 days after the Effective Time of the Merger, makes
written demand on Roosevelt for payment of the fair value of the shares held by
the shareholder as of the day prior to the date of the Special Meeting. See
"The Merger--Appraisal Rights." Under Delaware law, unless the certificate of
incorporation of the corporation provides otherwise, no appraisal rights are
accorded to stockholders of any corporation involved in a merger or
consolidation if their stock is registered on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers (the "NASD"), or held
of record by more than 2,000 stockholders or to stockholders of a constituent
corporation surviving a merger if the merger does not require the approval of
such stockholders, except that appraisal rights are provided to stockholders of
a constituent corporation if they are required to accept as consideration
anything other than (i) stock of the surviving or resulting corporation, (ii)
stock registered on a national exchange or designated as a national market
system security on an interdealer quotation system by the NASD, or held of
record by more than 2,000 stockholders, (iii) cash in lieu of fractional shares,
or (iv) any combination of cash and stock of the types described in the
foregoing clauses (i), (ii) and (iii). In addition, under Delaware law, no
dissenters' appraisal rights exist with respect to sale of assets transactions.
Roosevelt Common Stock is a national market system security traded on the Nasdaq
National Market System and Roosevelt currently has more than 2,000 holders of
record of Roosevelt Common Stock. Furthermore, the Roosevelt Certificate does
not provide for dissenters' appraisal rights.
NUMBER AND TERM OF DIRECTORS
The Community Articles provide that the number of directors shall consist of
not less than three members as set forth in the Community Bylaws. The Roosevelt
Certificate provides that the Roosevelt Board shall consist of not less than six
nor more than 18 members, as set forth in the Roosevelt Bylaws. The Roosevelt
Bylaws presently set the number of directors at ten persons.
The Roosevelt Certificate and Roosevelt Bylaws require the Roosevelt Board to
be divided into three classes as nearly equal in number as possible and that the
members of each class shall be elected for a term of three years and until their
successors are elected and qualified, with one class being elected annually.
The Community Articles and Community Bylaws do not require the Community Board
to be divided into classes.
REMOVAL OF DIRECTORS
The Missouri Act provides that any director of a corporation may be removed
for cause by action of a majority of the entire board of directors if the
director to be removed shall, at the time of removal, fail to meet the
qualifications stated in the articles of incorporation or bylaws for election as
a director or shall be in breach of any agreement between such director and the
corporation relating to such director's services as a director or employee of
the corporation. Notice of the proposed removal shall be given to all directors
of the corporation prior to action thereon. The DGCL provides that directors
serving on a classified board may be removed only for cause unless the
corporation's charter provides otherwise. Under the Roosevelt Certificate, a
member of the Roosevelt Board may be removed, but only for cause as defined
under OTS regulations, by the affirmative vote of (i) not less than a majority
of the directors then in office and (ii) the holders of not less than a majority
of the then outstanding shares of capital stock entitled to vote generally in
the election of directors, voting as a single class. If less than the entire
Roosevelt Board is to be removed, no individual director may be removed from
office if the votes cast against the removal would be sufficient to elect a
director if the shares were cumulatively voted at an election for the class of
directors of which such director is a part. Therefore, Roosevelt stockholders
are required to meet a lesser vote requirement to remove a member of the
Roosevelt Board. If less than the entire Roosevelt Board is to be removed, no
individual director may be removed from office if the votes cast against the
removal would be sufficient to elect a director if the shares were cumulatively
voted at an election for the class of directors of which such director is a
part.
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VACANCIES ON THE BOARD OF DIRECTORS
Under the Community Articles and the Roosevelt Certificate and Roosevelt
Bylaws, vacancies in the Community Board and the Roosevelt Board, respectively,
including vacancies created by newly created directorships resulting from an
increase in the number of directors, may be filled by the Board of Directors,
acting by a vote of a majority of the directors then in office, even if less
than a quorum, and any director so chosen shall serve for the unexpired term of
his or her predecessor in office and until his or her successor is elected and
qualified. The ability of the Board of Directors to fill vacancies created by
newly created directorships resulting from an increase in the number of
directors may have the effect of allowing the Board of Directors to retain
control by creating and filling new directorships.
APPROVAL OF MERGERS, CONSOLIDATIONS, SALES OF SUBSTANTIALLY ALL ASSETS AND
DISSOLUTIONS
Under the Missouri Act, an agreement providing for the merger or
consolidation, or the sale, lease or exchange of substantially all of the assets
(not made in the usual or ordinary course of business) of Community must be
approved by the holders of two-thirds of the outstanding shares of Community.
In addition, the Missouri Act contains a "business combination statute" which
restricts certain "business combinations" between a Missouri corporation having
100 or more shareholders and substantial business contacts with Missouri and an
"interested shareholder" or affiliates of the interested shareholder for a
period of five years unless certain conditions are met. A "business combination"
under the Missouri Act includes a merger or consolidation, certain sales,
leases, exchanges, pledges and similar dispositions of corporate assets or stock
and certain reclassifications and recapitalizations. The Missouri Act defines
"interested shareholder" to include any person or entity which beneficially owns
or controls 20% or more of the outstanding voting shares of the corporation.
Pursuant to the Missouri Act, a business combination may occur during the five-
year period if (i) prior to the stock acquisition by the interested shareholder,
the board of directors approves the transaction in which the interested
shareholder became such or approves the business combination in question, (ii)
the holders of a majority of the outstanding voting stock, other than shares
owned by the interested shareholder, approve the business combination; or (iii)
the business combination satisfies certain detailed fairness and procedural
requirements.
The Missouri Act also contains a "control share acquisition statute" which
provides that an "acquiring person" who after any acquisition of shares of a
publicly traded corporation has the voting power, when added to all shares of
the same corporation previously owned or controlled by the acquiring person, to
exercise or direct the exercise of (i) 20% but less than 33 1/3%, (ii) 33 1/3%
or more but less than a majority or (iii) a majority, of the voting power of
outstanding stock of such corporation, must obtain shareholder approval for the
purchase of "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.
In addition to the shareholder vote requirements of Missouri law, the
Community Articles provide that the affirmative vote of the holders of not less
than 75% of the outstanding shares of capital stock of Community entitled to
vote in the election of directors (the "Voting Stock"), voting separately as a
class, and the vote of at least a majority of Voting Stock, excluding all the
shares of Voting Stock beneficially owned by an "interested shareholder" or an
affiliate of an interested shareholder shall be required for the approval of any
"business combination" unless certain conditions are met. The Community
Articles define an "interested shareholder" as any person, firm, corporation or
other entity which is the "beneficial owner" (as defined therein) of 10% or more
of Voting Stock. A "business combination" is defined generally to include sales,
exchanges, leases, transfers or other dispositions of assets, mergers, or
consolidations, issuances of securities, liquidations or dissolutions of
Community, reclassifications of securities or recapitalization of Community,
between Community and an interested shareholder. If, however, a majority of the
Community Board approves the business combination, the business combination is
permitted to occur with only the two-thirds affirmative vote of the shareholders
otherwise required under Missouri law.
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<PAGE>
Under Delaware law, an agreement providing for the merger (other than a merger
of the corporation with its 90%-owned subsidiary) or consolidation, the sale of
substantially all of the assets, or the dissolution of Roosevelt must be
approved by the holders of a majority of the outstanding shares of Roosevelt,
except that no stockholder approval is required if Roosevelt is the corporation
surviving any merger involving, among other things, the issuance of shares of
Roosevelt amounting to 20% or less of the shares of Roosevelt Common Stock
outstanding immediately prior to the transaction. One exception under Delaware
law to the majority approval requirement applies to a stockholder owning 15% or
more of the common stock of a corporation for a period of less than three years.
Such 15% stockholder, in order to obtain approval of a business combination,
must obtain the approval of 66 2/3% of the outstanding stock, excluding the
stock owned by such 15% stockholder, or satisfy other requirements under
Delaware law relating to the board of director approval of the 15% stockholder's
acquisition of the shares of the corporation. The holders of the voting stock
of Roosevelt are subject to these increased voting requirements in connection
with any such transaction involving an "interested stockholder" (the definition
of which under Delaware law is similar to the definition of an "interested
shareholder" under Missouri law) which can be construed as having an anti-
takeover affect.
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% or more of the
outstanding shares of voting stock of Roosevelt), the Roosevelt Certificate
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 such or unless certain fair price criteria are met. The
Roosevelt Certificate defines "Business Combination" as: (i) 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 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 the Roosevelt Certificate; and
(vii) any agreement, contract or other arrangement or understanding providing,
directly or indirectly, for any of the transactions described in this paragraph.
The DGCL does not contain a statute similar to the control share acquisition
statute of the Missouri Act.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
The Missouri Act provides that the board of directors of a corporation may
adopt a resolution setting forth the proposed amendment and directing that it be
submitted to a vote at a meeting of shareholders, which may be either an annual
or special meeting, except that the proposed amendment need not be adopted by
the board of directors and may be directly submitted to any annual or special
meeting of shareholders. Written notice setting forth the proposed amendment or
a summary of the changes to be effected thereby shall be given to each
shareholder of record entitled to vote thereon. The proposed amendment shall be
adopted upon receiving the affirmative vote of a majority of the outstanding
shares entitled to vote thereon.
A proposed amendment to the articles of incorporation which provides that the
control share acquisition statute does not apply to control share acquisitions
of shares of a corporation shall be adopted upon receiving the affirmative vote
of two-thirds of all outstanding shares entitled to vote thereon.
The DGCL provides that the certificate of incorporation of a Delaware
corporation may be amended only if first approved by the corporation's board of
directors and thereafter by a majority of the outstanding stock entitled to vote
thereon, and, if applicable, a majority of each class of shares entitled to vote
thereon as a class. The Roosevelt Certificate provides that the Certificate may
be amended only if first approved by two-thirds of the
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<PAGE>
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 at such meeting
shall be required to amend, add to, change or repeal the provisions of the
Roosevelt Certificate governing (i) Roosevelt's internal affairs, (ii) the
calling of special meetings of stockholders, (iii) indemnification, (iv)
limitation on the personal liability of directors, (v) approval for acquisitions
of control and offers to acquire control, and (vi) amendment of the Roosevelt
Certificate and that the provisions of the Roosevelt Certificate governing
Business Combinations may be amended, added to, changed or repealed only as
provided for therein.
The Community Articles provide that the Community Bylaws may be amended or
repealed either by the shareholders or by a vote of the majority of the
directors then in office, provided that any such action by the Community Board
may be rescinded or repealed, or may be prohibited as to any Bylaw or portion
thereof, by the shareholders. The Community Bylaws may be amended by the vote
of a majority of the Community Board except the provisions relating to the
number, term, qualification and vacancies of the Community Board and amendment
of the Bylaws. Amendment of such provisions requires the affirmative vote of at
least 75% of the shareholders, unless the amendment has been approved by the
affirmative vote or consent of at least 66 2/3% of the number of directors then
authorized by, or in the manner provided in, the Bylaws, in which case
requirement of a vote of at least 75% of the shareholders does not apply. The
Roosevelt Certificate provides that the Roosevelt Bylaws may be amended or
repealed by a two-thirds vote of the 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.
TRANSACTIONS WITH AFFILIATES
Under Missouri law, no contract or transaction between a corporation and one
or more of its directors, or between a corporation and another organization in
which one or more of its directors is a director or officer or has a financial
interest, shall be void or voidable solely for this reason, or solely because
the director is present at or participates in the meeting of the board of
directors or committee thereof which authorizes the transactions, or solely
because his vote is counted for such purpose, provided that the material facts
of the relationship or interest of the parties to the transaction are either
disclosed or are known to the board of directors or a committee thereof and the
contract or transaction is authorized in good faith by a majority of the
disinterested directors, a committee thereof or by a majority of the
shareholders entitled to vote thereon, or, at the time of such authorization,
the contract or transaction is fair and reasonable to the corporation as of the
time it is authorized by the board of directors, committee thereof or
shareholders. The DGCL and the Roosevelt Bylaws contain similar provisions.
INSPECTION OF BOOKS AND RECORDS
Under Missouri law, any shareholder, in person or by attorney, may, during
normal business hours, examine the books and records of Community, including the
books and records of account (the amount of its assets and liabilities, minutes
of the proceedings of its shareholders and board of directors, and the names and
places of residence of its officers), and books and records that contain the
number of shares subscribed, the names of the owners of the shares with the
number of shares owned by them, respectively, the amount of shares paid and by
whom, and the transfer of such shares with the date of transfer. Under Delaware
law, any Roosevelt stockholder, in person or by attorney or other agent, upon
written demand under oath stating the purpose thereof, has the right during the
usual hours of business to inspect for any proper purpose Roosevelt's stock
ledger, a list of its stockholders and certain other books and records and to
make copies or extracts therefrom.
LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
The Community Articles provide that Community shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of Community, by
reason of the fact that such person is or was a director or officer of
Community, or is or was serving at the request of Community as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise,
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against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of Community, and, with respect to any criminal action or proceeding,
had no reasonable cause to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of
Community, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
The Community Articles also provide that Community shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of Community to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of Community, or is or was serving at the request of
Community as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, and amounts paid in settlement actually and
reasonably incurred by such person in connection with the defense or settlement
of ion or suit if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of Community,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to Community
unless and only to the extent that the court in which ion or suit was brought
determined upon application that, despite the adjudication of liability and in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Delaware law provides corporations with broad indemnification powers. Such
powers include the ability to provide forms of indemnification in addition to
the type of indemnification set forth in the statute. Roosevelt has purchased
insurance to protect its officers, directors and employees. Notwithstanding the
foregoing, indemnification for liability under the federal securities laws may
be considered void as against public policy. In addition, the Roosevelt
Certificate eliminates a director's personal liability to Roosevelt or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
Roosevelt or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. In accordance with the Roosevelt
Certificate, the authorization of indemnification shall be made by a majority
vote of a quorum of directors who were not parties to actions, if authorized by
the Roosevelt Board, independent legal counsel, by the stockholders, or in some
situations, by a court. These provisions do not affect the availability of
equitable remedies, such as an injunction or rescission, for a breach of
fiduciary duty.
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 Community by
Armstrong, Teasdale, Schlafly & Davis.
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
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.
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The consolidated financial statements of Community as of December 31, 1995 and
1994 and for each of the years in the two-year period ended December 31, 1995
included in this Proxy Statement/Prospectus have been included herein in
reliance upon the report appearing herein of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
STOCKHOLDER MATTERS
Community will not hold a 1996 Annual Meeting of Stockholders if the Merger is
consummated by the end of the third quarter of 1996.
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 1996 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 KPMG Peat Marwick LLP, Community'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 Community Board is not aware of any business to come before the Special
Meeting other than those matters described above in this Proxy
Statement/Prospectus. However, 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.
BY ORDER OF THE BOARD OF DIRECTORS
OF COMMUNITY CHARTER CORPORATION
JAMES A. SAITZ
President, Chief Executive Officer
and Chairman of the Board
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COMMUNITY CHARTER CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1994
Independent Auditors' Report of KPMG Peat Marwick LLP...................................... F-2
Consolidated Balance Sheets for the Years Ended December 31, 1995 and 1994................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1995 and 1994........... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995 and 1994............................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1994....... F-6
Notes to Consolidated Financial Statements for the Years Ended December 31, 1995 and 1994.. F-7
CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED MARCH 31, 1996
Interim Consolidated Balance Sheet for the Three Months Ended March 31, 1996 (unaudited)... M-1
Interim Consolidated Statements of Income for the Three Months Ended
March 31, 1996 and 1995 (unaudited)...................................................... M-2
Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996
and 1995 (unaudited)..................................................................... M-3
Notes to Interim Consolidated Financial Statements for the Three Months Ended
March 31, 1996 and 1995 (unaudited)...................................................... M-4
</TABLE>
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Community Charter Corporation:
We have audited the accompanying consolidated balance sheets of Community
Charter Corporation and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years 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 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Charter
Corporation and subsidiary as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
March 15, 1996
F-2
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 516,796 750,383
Federal funds sold 2,480,000 3,795,000
Investments in debt and equity securities:
Available for sale, at market value 14,412,951 2,443,159
Held to maturity, at amortized cost (market value of
$4,683,389 and $10,224,479 at December 31, 1995 and
1994, respectively) 4,524,173 10,646,170
----------- ----------
Total investments in debt and
equity securities 18,937,124 13,089,329
----------- ----------
Loans 41,315,429 25,807,878
Less allowance for loan losses 664,714 597,417
----------- ----------
Loans, net 40,650,715 25,210,461
----------- ----------
Premises and equipment 611,831 481,733
Accrued interest receivable 436,334 246,977
Other real estate owned 90,000 249,479
Excess of cost over fair value of net assets acquired 215,335 573,604
Other assets 358,282 266,255
----------- ----------
Total assets $64,296,417 44,663,221
=========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Non-interest-bearing demand deposits 8,880,695 6,745,124
Interest-bearing deposits:
NOW and money market accounts 10,513,590 8,098,198
Savings accounts 1,537,074 1,779,394
Time deposits $100,000 and over 6,889,922 5,851,892
Other time deposits 22,249,700 16,275,941
----------- ----------
Total deposits 50,070,981 38,750,549
Short-term borrowings 8,343,885 539,931
Other liabilities 352,241 576,497
----------- ----------
Total liabilities 58,767,107 39,866,977
----------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock - par value $.10; 1,000,000 shares
authorized, 471,499 and 471,496 shares issued
and outstanding at December 31, 1995 and 1994,
respectively 47,150 47,150
Surplus 4,669,432 4,653,899
Retained earnings 768,191 162,012
Unrealized gains (losses) on available-for-sale
securities, net 44,537 (66,817)
----------- ----------
Total stockholders' equity 5,529,310 4,796,244
----------- ----------
Total liabilities and stockholders'
equity $64,296,417 44,663,221
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $3,318,491 1,202,226
Interest and dividends on debt and equity
securities 938,726 544,069
Interest on federal funds sold 87,645 47,061
Interest on interest-bearing deposits in
other financial institutions - 12,133
---------- ---------
Total interest income 4,344,862 1,805,489
---------- ---------
Interest expense:
NOW and money market accounts 395,407 128,443
Savings accounts 49,178 34,330
Time deposits $100,000 and over 366,554 130,989
Other time deposits 1,095,684 429,259
Short-term borrowings 43,829 10,227
---------- ---------
Total interest expense 1,950,652 733,248
---------- ---------
Net interest income 2,394,210 1,072,241
Provision for loan losses - (190,000)
---------- ---------
Net interest income after
provision for loan losses 2,394,210 1,262,241
---------- ---------
Noninterest income:
Service charges on deposit accounts 160,790 66,228
Other service charges and fee income 47,650 24,703
Loss on sale of debt securities (8,043) -
Other 37,982 25,893
---------- ---------
Total noninterest income 238,379 116,824
---------- ---------
Noninterest expense:
Salaries and employee benefits 935,595 473,976
Occupancy 204,684 120,554
Equipment 67,624 69,264
FDIC insurance premiums 50,380 59,343
Consulting fees - 190,000
Other 407,832 221,494
---------- ---------
Total noninterest expense 1,666,115 1,134,631
---------- ---------
Income before income tax expense 966,474 244,434
Income tax expense 360,295 76,683
---------- ---------
Net income $ 606,179 167,751
========== =========
Share data:
Average common shares outstanding 461,552 300,906
======= =======
Earnings per common share $ 1.31 .56
==== ===
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Unrealized
gains
(losses) on Total
Common stock available- stock-
------------------ Retained Treasury for-sale holders'
Shares Amount Surplus earnings stock securities equity
-------- -------- ---------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Decem-
ber 31, 1993 10,000 $ 1,000 99,000 (5,739) - - 94,261
Net income - - - 167,751 - - 167,751
Issuance of common
stock 461,498 46,150 4,554,919 - - - 4,601,069
Retirement of common
stock (2) - (20) - - - (20)
Change in unrealized
gains (losses) on
available-for-sale
securities, net - - - - - (66,817) (66,817)
------- -------- --------- -------- -------- ----------- ---------
Balance, Decem-
ber 31, 1994 471,496 47,150 4,653,899 162,012 - (66,817) 4,796,244
Net income - - - 606,179 - - 606,179
Purchase of treasury
stock (33,500 shares) - - - - (353,675) - (353,675)
Issuance of treasury
stock (33,500 shares) - - 15,499 - 353,675 - 369,174
Issuance of common
stock 3 - 34 - - - 34
Change in unrealized
gains (losses) on
available-for-sale
securities, net - - - - - 111,354 111,354
------- -------- --------- -------- -------- ----------- ---------
Balance, Decem-
ber 31, 1995 471,499 $47,150 4,669,432 768,191 - 44,537 5,529,310
======= ======== ========= ======== ======== =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 606,179 167,751
Adjustments to reconcile net income to net cash provided
by operating activities:
Net amortization and accretion of debt securities (79,945) (54,428)
Loss on sale of debt and equity securities 8,043 -
Amortization of the cost over fair value of net assets
acquired 29,845 21,402
Depreciation and amortization 52,128 59,592
Provision for loan losses - (190,000)
Provision for deferred income taxes 166,880 76,683
Increase in accrued interest receivable (189,357) (55,210)
Net (gain) loss on other real estate owned 6,109 (534)
Other operating activities, net (177,683) 285,675
------------ ----------
Net cash provided by operating activities 422,199 310,931
------------ ----------
Cash flows from investing activities:
Purchases of held-to-maturity securities (2,046,527) (2,520,781)
Purchases of available-for-sale securities (8,118,973) -
Proceeds from sales of available-for-sale securities 4,273,178 -
Proceeds from maturities of and principal payments on
held-to-maturity securities 250,727 356,977
Increase in loan originations, net (15,518,289) (6,121,082)
Recoveries of loans previously charged off 78,035 14,565
Purchases of premises and equipment (182,226) (19,372)
Proceeds from sale of other real estate owned 154,082 221,237
Capitalized expenses on other real estate owned (712) (23,682)
Cash and cash equivalents acquired in acquisition of
subsidiary bank, net of cash paid - 1,982,519
------------ ----------
Net cash used in investing activities (21,110,705) (6,109,619)
------------ ----------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing deposits 2,135,571 (488,755)
Net increase in interest-bearing deposits 9,184,861 6,778,155
Net increase in short-term borrowings 7,803,954 212,023
Net proceeds from sale of common stock 34 3,772,309
Retirement of common stock - (20)
Purchase of treasury stock (353,675) -
Proceeds from issuance of treasury stock 369,174 -
------------ ----------
Net cash provided by financing activities 19,139,919 10,273,712
------------ ----------
Net increase (decrease) in cash and cash
equivalents (1,548,587) 4,475,024
Cash and cash equivalents, beginning of year 4,545,383 70,359
------------ ----------
Cash and cash equivalents, end of year $ 2,996,796 4,545,383
============ ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,880,761 698,428
Income taxes 113,000 48,500
============ ==========
Noncash transactions:
Transfers to other real estate owned in settlement
of loans $ - 189,000
Transfers of securities to available for sale 8,254,566 -
Transfers of securities to held to maturity 201,314 -
Issuance of common stock in conjunction with acquisition
of subsidiary bank - 828,760
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Organization and Business Combination
-------------------------------------
Community Charter Corporation (the Company) was formed as a holding company
in August 1993 with the express intention of acquiring Missouri State Bank
and Trust Company (the Bank), which occurred during May 1994, and acquiring
other banking institutions. The Company had no substantive operating
assets or operating activities for the period from inception through
December 31, 1993.
On May 31, 1994, the Company acquired all of the outstanding common stock of
Missouri State Bank and Trust Company. The acquisition was accounted for
using the purchase method of accounting and, accordingly, the assets and
liabilities of the Bank were adjusted to their estimated fair values on
that date. The total purchase price of $1,682,045 consisted of $853,285 of
cash paid and $828,760 of the Company's common stock (82,876 shares). The
Bank's total purchase price was allocated to its assets and liabilities as
follows:
<TABLE>
<CAPTION>
<S> <C>
Total purchase price $ 1,682,045
Less net asset value of the Bank at acquisition (1,376,495)
Adjustments to the Bank's historical carrying
values of:
Investments in debt securities 512,896
Other assets (253,225)
-----------
Excess of cost over fair value of net assets
acquired (goodwill) $ 565,221
===========
</TABLE>
Simultaneous with the purchase of the Bank, the Company contributed
$1,813,169 of capital to the Bank. In addition, the Company contributed
another $604,786 of available capital to the Bank subsequent to
acquisition.
In conjunction with the purchase of the Bank, the Company entered into an
agreement with the former majority stockholder for independent consulting
services in the collection of certain specified loans. In accordance with
the terms of that agreement, the stockholder fulfilled his obligations and
the Company paid $190,000 in January 1995 that was included in noninterest
expenses in the accompanying consolidated statement of income for the year
ended December 31, 1994. The Company has no further obligations under this
agreement.
(2) Summary of Significant Accounting Policies
------------------------------------------
The Company provides a full range of banking services through the Bank to
individual and corporate customers located within St. Louis, Missouri, and
the surrounding communities. The Company is subject to competition from
other financial institutions and nonfinancial institutions providing
financial products in the markets served by the Company. Additionally, the
Company is subject to the regulations of certain regulatory agencies and
undergoes periodic examinations by those regulatory agencies.
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles and conform to
predominant practices within the banking industry. In preparing the
(Continued)
F-7
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
consolidated financial statements, management is required to make estimates
and assumptions which significantly affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported revenues and
expenses during the reporting period. Estimates which are particularly
susceptible to significant change in a short period of time relate to the
determination of the allowance for loan losses and the valuation of real
estate acquired in connection with foreclosure or in satisfaction of
amounts due from borrowers on loans. Actual results may differ from those
estimates.
The more significant accounting policies used by the Company in the
preparation of the consolidated financial statements are summarized as
follows:
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of the Company
and the Bank. All significant intercompany accounts and transactions
have been eliminated.
Investment Securities
---------------------
The Company classifies its debt securities in one of the following
categories: available for sale or held to maturity. Held-to-maturity
securities are those securities in which the Company has the ability and
intent to hold until maturity. All other securities not included in held
to maturity are classified as available for sale.
Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization
or accretion of premiums or discounts. Unrealized gains and losses, net
of the related tax effect, on available-for-sale securities are excluded
from earnings and reported as a separate component of stockholders'
equity until realized.
In November 1995, the Financial Accounting Standards Board (FASB) issued a
Special Report, A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities (the Special
Report). Due to uncertainties surrounding the regulatory capital
treatment for unrealized gains and losses on available-for-sale
securities at the time Statement 115 was required to be implemented, the
Special Report was issued to allow all entities a one-time opportunity to
reconsider their ability and intent to hold securities to maturity and
transfer securities from held to maturity without "tainting" the
remaining held-to-maturity securities. Those securities transferred are
accounted for prospectively under Statement 115. These transfers were
only allowed during the period from the date of issuance of the Special
Report through December 31, 1995. The Company transferred certain
securities in December 1995 as discussed in note 4.
Transfers of securities between categories subsequent to purchase are
recorded at fair value at the date of transfer. Unrealized gains and
losses associated with transfers of securities from the held-to-maturity
category to the available-for-sale category are recorded as a separate
component of stockholders' equity. The unrealized gains and losses
included in the separate component of stockholders' equity for securities
(Continued)
F-8
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
transferred from the available-for-sale category to the held-to-maturity
category are maintained and amortized into earnings over the remaining
life of the security as an adjustment to yield using the interest method.
A decline in the market value of any security below cost that is deemed
other than temporary results in a charge to earnings and the
establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest
method. Dividend and interest income are recognized when earned.
Realized gains and losses are included in earnings and are derived using
the specific-identification method for determining the cost of securities
sold.
Loans
-----
Interest on loans is credited to income based on the principal amount
outstanding. The accrual of interest on loans is discontinued when, in
management's judgment, payment of principal or interest is in doubt.
Subsequent interest payments received on such loans are applied to
principal if any doubt exists as to the collectibility of such principal;
otherwise, such receipts are recorded as interest income. Loans are
returned to accrual status when management believes full collectibility
of principal and interest is expected.
Loan origination fees and costs, which management considers to be
insignificant, are recognized as incurred.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan (SFAS
114), as amended by Statement of Financial Accounting Standards No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures (SFAS 118), on January 1, 1995.
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and
loans for which terms have been modified in troubled-debt restructurings
(a restructured loan). Specifically, a loan is considered impaired when
it is probable a creditor will be unable to collect all amounts due, both
principal and interest, according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows of
an impaired loan are required to be discounted at the loan's effective
interest rate. Alternatively, impairment can be measured by reference to
an observable market price, if one exists, or the fair value of the
collateral for a collateral-dependent loan. Regardless of the historical
measurement method used, SFAS 114 requires a creditor to measure
impairment based on the fair value of the collateral when the creditor
determines foreclosure is probable. Additionally, impairment of a
restructured loan is measured by discounting the total expected future
cash flows at the loan's effective rate of interest as stated in the
original loan agreement.
(Continued)
F-9
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. Management has elected
to continue to use its existing nonaccrual methods for recognizing
interest on impaired loans. The adoption of SFAS 114 and SFAS 118
resulted in no prospective adjustment to the provision for loan losses.
Allowance for Loan Losses
-------------------------
The allowance for loan losses is available to absorb loan charge-offs. The
allowance for loan losses is increased by provisions charged to
operations and reduced by loans charged off, net of recoveries.
Management utilizes a systematic, documented approach in determining the
appropriate level of the allowance for loan losses. Management's
approach, which provides for general and specific allowances, is based on
current economic conditions, past losses, collection experience, risk
characteristics of the portfolio, assessing collateral values by
obtaining independent appraisals for significant properties, and such
other factors which, in management's judgment, deserve current
recognition in estimating loan losses.
Management believes the allowance for loan losses is adequate to absorb
possible loan losses in the loan portfolio. While management uses
available information to recognize losses on loans, future additions to
the allowance may be necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of the
examination process, periodically review the allowance for loan losses of
the Company. Such agencies may require the Company to increase the
allowance for loan losses based on their judgment about information
available to them at the time of their examinations.
Premises and Equipment
----------------------
Premises and equipment are stated at cost, less accumulated depreciation
and amortization computed using the straight-line method over their
respective estimated useful lives.
Other Real Estate Owned
-----------------------
Other real estate owned represents property acquired through foreclosure or
deeded to the Bank in lieu of foreclosure on real estate loans for which
the borrowers have defaulted as to payment of principal and interest.
Other real estate owned is recorded on an individual asset basis at the
lower of current fair value minus estimated selling costs, or fair value
at the time of acquisition. If the fair value minus estimated selling
costs is less than cost, the deficiency is recorded in a valuation
reserve account through a provision charged to expense. Subsequent
increases in the fair value minus estimated selling costs are recorded
through a reversal of the valuation reserve, but not below zero.
Gains and losses resulting from the sale of other real estate owned are
credited or charged to current period earnings. Costs of maintaining and
operating other real estate owned are expensed as incurred and
expenditures to complete or improve other real estate owned properties
are capitalized if the expenditures are expected to be recovered upon
ultimate sale of the property.
(Continued)
F-10
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Excess of Cost Over Fair Value of Net Assets Acquired (Goodwill)
----------------------------------------------------------------
The excess of cost over the fair value of the net assets acquired
(goodwill) of $565,221 is being amortized to noninterest expense on a
straight-line basis over 15 years. At the time of acquisition of the
Bank, there were certain unresolved contingencies relating to the
collection of certain loans. These contingencies were resolved in
December 1994, which resulted in the establishment of an additional
$100,000 in goodwill on that date. During the years ended December 31,
1995 and 1994, the Company reduced goodwill by $328,000 and $76,000,
respectively, as a result of the utilization of acquired deferred tax
assets.
Fair Value Purchase Adjustments
-------------------------------
Assets and liabilities acquired in the purchase of the Bank were recorded
at their estimated fair value at the date of acquisition. The premiums
and discounts related to fair value adjustments are amortized to income
using a method which approximates the interest method over their
remaining estimated lives.
Income Taxes
------------
The Company and the Bank file a consolidated income tax return. The
Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.
Stock-Based Compensation
------------------------
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123),
which established financial accounting and reporting standards for stock-
based employee compensation plans, including the Company's nonqualified
stock option plan. SFAS 123 defines a fair value based method of
accounting for an employee stock option and encourages all entities to
adopt that method of accounting for all employee stock compensation
plans. However, SFAS 123 allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (Opinion 25). Entities electing
to continue to account for stock-based compensation under Opinion 25 must
make pro forma disclosures of net income and earnings per share as if the
fair value based method of accounting defined in SFAS 123 had been
applied.
Under the fair value based method prescribed in SFAS 123, compensation cost
is measured at the grant date based on the value of the award, as
determined using an option-pricing model, and is recognized over the
service period, which is usually the vesting period. Under the intrinsic
value based method of Opinion 25, compensation cost is the excess, if
(Continued)
F-11
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
any, of the quoted market price of the stock at the grant date or other
measurement date over the amount an employee must pay to acquire the
stock.
SFAS 123 is effective for financial statements for fiscal years beginning
after December 15, 1995. Pro forma disclosures required for entities
that elect to continue to measure compensation cost using Opinion 25,
upon the effectiveness of SFAS 123, must include the effects of all
awards granted in fiscal years that begin after December 15, 1994. The
Company anticipates electing to continue its current accounting for
stock-based compensation and, accordingly, does not believe SFAS 123 will
have a material effect on the consolidated financial statements of the
Company.
Cash Flow Information
---------------------
For purposes of the consolidated statements of cash flows, the Company
considers cash and amounts due from banks and federal funds sold to be
cash and cash equivalents.
Reclassifications
-----------------
Certain 1994 amounts have been reclassified to conform with the current
year presentation. Such reclassifications had no effect on previously
reported net income.
(3) Restrictions on Cash and Due-From-Bank Accounts
-----------------------------------------------
The Company is required to maintain certain daily reserve balances with the
Federal Reserve Bank in accordance with regulatory requirements. The
reserve balances maintained in accordance with such requirements at
December 31, 1995 and 1994 were $164,000 and $91,000, respectively.
(4) Investments in Debt and Equity Securities
-----------------------------------------
During December 1995, the Company transferred $8,254,566 of securities
classified as held to maturity to available for sale under the terms of
the Special Report issued by the FASB in November 1995. Additionally, the
Company transferred $201,314 of securities classified as available for
sale to held to maturity during this time.
Debt and equity securities available for sale as of December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995
-------------------------------------------
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
------------ ------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 6,382,807 47,267 (1,598) 6,428,476
U.S. government agencies
and corporations 7,828,963 31,188 (9,376) 7,850,775
FHLB stock 133,700 - - 133,700
------------ ------ ------- ----------
$14,345,470 78,455 (10,974) 14,412,951
============ ====== ======= ==========
</TABLE>
(Continued)
F-12
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1994
-----------------------------------------
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
----------- ------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities $1,717,121 - (24,777) 1,692,344
U.S. government agencies
and corporations 593,956 - (34,115) 559,841
Mortgage-backed securities 198,899 - (7,925) 190,974
----------- ------- ------- ---------
$2,509,976 - (66,817) 2,443,159
=========== ======= ======= =========
</TABLE>
Debt and equity securities classified as available for sale at December 31,
1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
---- -----
<S> <C> <C>
Due in one year or less $ 6,910,876 6,928,535
Due after one year through five years 7,300,894 7,350,716
FHLB stock $ 133,700 133,700
---------- ----------
$14,345,470 14,412,951
=========== ==========
</TABLE>
Debt securities classified as held to maturity as of December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------------
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
------------ ------------ ------- ----------
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $ 174,289 6,187 - 180,476
Corporate debt obligations 1,188,856 29,285 - 1,218,141
Mortgage-backed securities 3,161,028 123,744 - 3,284,772
---------- ----------- ------- ----------
$4,524,173 159,216 - 4,683,389
========== =========== ======= ==========
</TABLE>
(Continued)
F-13
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1994
------------------------------------------
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
------------ ----- --------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 2,501,440 - (72,540) 2,428,900
U.S. government agencies
and corporations 4,137,227 3,238 (106,702) 4,033,763
Obligations of states and
political subdivisions 38,791 - (1,490) 37,301
Corporate debt obligations 792,833 - (21,594) 771,239
Mortgage-backed securities 3,175,879 - (222,603) 2,953,276
----------- ----- -------- ----------
$10,646,170 3,238 (424,929) 10,224,479
=========== ===== ======== ==========
</TABLE>
Debt securities classified as held to maturity at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
----------- ---------
<S> <C> <C>
Due in one year or less $ 10,058 10,065
Due after one year through five years 1,208,638 1,238,319
Due after five years through ten years 334,484 342,386
Due after ten years 2,970,993 3,092,619
---------- ---------
$4,524,173 4,683,389
========== =========
</TABLE>
Debt securities with carrying amounts aggregating $13,441,973 and $4,357,470
at December 31, 1995 and 1994, respectively, were pledged to secure public
funds and for other purposes as required by law.
Proceeds from sales of debt securities during 1995 were $4,273,178. Gross
gains of $11,221 and gross losses of $19,264 were recognized on those
sales. There were no sales of debt and equity securities during 1994.
As members of the Federal Home Loan Bank System administered by the Federal
Housing Finance Board, the Bank is required to maintain investments in
capital stock of the Federal Home Loan Bank of Des Moines (FHLB) in an
amount equal to the greater of 1% of the aggregate outstanding balance of
loans secured by dwelling units at the beginning of each year or .3% of the
total assets of the Bank. The stock is recorded at cost, which represents
redemption value.
(Continued)
F-14
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) Loans
-------
A summary of loans, by classification, as of December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Commercial $15,216,215 11,035,061
Real estate 24,410,270 13,514,105
Installment and other consumer 1,688,944 1,258,712
----------- ----------
$41,315,429 25,807,878
=========== ==========
</TABLE>
The Company grants commercial, real estate, installment, and other consumer
loans to customers located within St. Louis, Missouri, and the surrounding
communities. As such, the Company is susceptible to changes in the
economic environment in St. Louis, Missouri, and the surrounding
communities. The Company does not have a concentration of credit in any
one economic sector; however, a substantial portion of the portfolio is
concentrated in and secured by real estate within the Company's market
areas. The ability of the Company's borrowers to honor their contractual
obligations is dependent upon the local economies and their effect on the
real estate market.
Loans to officers and directors and loans made to corporations or
partnerships in which officers and directors hold a beneficial interest as
stockholders, officers, or directors aggregated $2,645,750 and $2,212,564
at December 31, 1995 and 1994, respectively. Such loans were made in the
normal course of business on substantially the same terms, including
interest rates and collateral requirements, as those prevailing at the same
time for comparable transactions with other persons and did not involve
more than the normal risk of collectibility. A summary of activity for
loans to executive officers and directors for the year ended December 31,
1995 is as follows:
<TABLE>
<S> <C>
Balance, December 31, 1994 $2,212,564
New loans and advances 743,230
Payments received (123,904)
Other (186,140)
----------
Balance, December 31, 1995 $2,645,750
==========
</TABLE>
An analysis of the activity in the allowance for loan losses for the years
ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of year $ 597,417 -
Acquisition of subsidiary bank - 897,137
Provision credited to operations - (190,000)
Loans charged off (10,737) (124,285)
Recoveries of loans previously charged off 78,034 14,565
---------- --------
Balance at end of year $ 664,714 597,417
========== ========
</TABLE>
F-15
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
A summary of nonaccrual and impaired loans at December 31, 1995 follows:
<TABLE>
<CAPTION>
Allowance Impaired
for loan loans with
Impaired loans Total losses on no related
Nonaccrual continuing to impaired impaired allowance for
loans accrue interest loans loans loan losses
----- --------------- ----- ----- -----------
<S> <C> <C> <C> <C>
$ 249,687 116,092 365,779 54,867 -
========= ======= ======= ====== ========
</TABLE>
The average balance of impaired loans during 1995 was approximately $250,000.
As of January 1, 1995, the Company had impaired loans of $250,487, for
which specific reserves of $37,573 were allocated.
A summary of interest income on nonaccrual and other impaired loans for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
Impaired
loans
Non- continuing
accrual to accrue
loans interest Total
-------- ---------- ------
<S> <C> <C> <C>
Income recognized $ - 10,530 10,530
Interest income had interest
accrued 26,089 10,530 36,619
======== ========== ======
</TABLE>
At December 31, 1994, the Company's subsidiary bank had loans on a
nonaccrual basis totaling $250,487. If interest on these loans had been
accrued, such income would have amounted to $13,504 for the year ended
December 31, 1994.
(6) Premises and Equipment
----------------------
A summary of premises and equipment as of December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $100,000 100,000
Buildings and improvements 395,537 358,542
Furniture and equipment 228,014 82,783
-------- -------
723,551 541,325
Less accumulated depreciation
and amortization 111,720 59,592
-------- -------
$611,831 481,733
======== =======
</TABLE>
Depreciation and amortization of premises and equipment included in operating
expenses amounted to $52,128 and $59,592 for the years ended December 31,
1995 and 1994, respectively.
(Continued)
F-16
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Company leases its main operating facility under a noncancellable
operating lease expiring in 2002. Rent expense amounted to $145,080 and
$84,630 during the years ended December 31, 1995 and 1994, respectively.
Future minimum rentals under the lease are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 109,080
1997 109,080
1998 109,080
1999 109,080
2000 109,080
2001 and thereafter 118,170
----------
$ 663,570
==========
</TABLE>
(7) Short-Term Borrowings
---------------------
A summary of short-term borrowings as of December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Treasury tax and loan notes $ 35,595 211,559
Securities sold under agreements
to repurchase 8,308,290 328,372
---------- -------
$8,343,885 539,931
========== =======
</TABLE>
Treasury tax and loan notes consist of amounts borrowed under the note option
plan relating to the treasury tax and loan accounts with the Federal
Reserve Bank of St. Louis.
The Company has entered into three overnight repurchase agreements with
customers for which the Company has pledged debt securities with a book
value of $8,702,343 and a fair value of $8,810,443 at December 31, 1995.
The weighted average interest rate on these borrowings was 4.15% at
December 31, 1995. The average principal balance of these borrowings was
$651,299 during 1995, and the maximum amount outstanding at any month-end
was $8,308,290.
(8) Income Taxes
------------
Components of income tax expense for the years ended December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current $193,415 -
Deferred 166,880 76,683
-------- ------
$360,295 76,683
======== ======
</TABLE>
(Continued)
F-17
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
A reconciliation of reported income tax expense to income tax expense
computed by applying the federal statutory rate of 34% to income before
income tax expense for the years ended December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Computed income tax expense $328,601 83,108
Amortization of goodwill 10,147 7,277
Other, net 21,547 (13,702)
-------- -------
Federal income tax expense $360,295 76,683
======== =======
</TABLE>
The tax effects of temporary differences that gave rise to deferred tax
assets and deferred tax liabilities as of December 31, 1995 and 1994 are
presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $116,819 211,000
Loans, principally due to allowance
for loan losses 88,061 91,592
Tax basis over book basis in debt and
equity securities 68,203 152,554
Other real estate owned 34,357 44,900
Unrealized loss on securities available
for sale - 22,718
Other 18,529 8,989
-------- -------
Gross deferred tax assets 325,969 531,753
Less valuation allowance 116,819 455,245
-------- -------
Total deferred tax assets 209,150 76,508
-------- -------
Deferred tax liabilities:
Premises and equipment, primarily
due to depreciation 60,322 76,508
Unrealized gain on securities available
for sale 22,944 -
-------- -------
Total gross deferred tax
liabilities 83,266 76,508
-------- -------
Net deferred tax asset $125,884 -
======== =======
</TABLE>
A valuation allowance is provided on deferred tax assets when it is more
likely than not that some portion of the assets will not be realized. The
Company has established a valuation allowance for the deferred tax assets
that, due to the extended period of realization and the recent operating
history of the Company, management believed did not meet the criteria for
recognition. In the event the net deferred tax assets for which a
valuation allowance has been provided are subsequently realized, these
benefits would first be applied to reduce goodwill and then to reduce
income tax expense. During the years ended December 31, 1995 and 1994,
approximately $328,000 and $76,000, respectively, of deferred tax benefit
was applied to reduce recorded goodwill.
(Continued)
F-18
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
At December 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $344,000. If unused, such
carryforwards will expire in 2006 through 2009. The majority of the net
operating losses are subject to the annual limitation on the amount of
any loss carryforward that can be used to offset federal taxable income
under the applicable tax regulations.
(9) Employee Benefits
-----------------
The Company sponsors a contributory 401k profit-sharing plan with
provisions for Company-matching contributions. Essentially all employees
meeting certain age and service requirements are eligible to participate
in the plan. The amount charged to expense for contributions to the plan
for the years ended December 31, 1995 and 1994 was $8,037 and $1,588,
respectively.
In October 1994, a nonqualified stock option plan was adopted by the
Company's Board of Directors under which options to purchase up to 95,000
shares of common stock can be granted to certain executive officers and
directors of the Company. On October 12, 1994, the Board of Directors
granted options to purchase 75,000 shares, which have an exercise price
of $10 per share. The options vest over a three-year period and expire 10
years from the date of grant. During 1995, 5,000 shares have been
forfeited, leaving 25,000 shares available for future grants. As of
December 31, 1995, no options have been exercised.
(10) Regulatory Matters and Administrative Order
-------------------------------------------
The Company is subject to regulations by regulatory authorities which
require the maintenance of minimum capital requirements and limit the
amount of dividends payable by the Company. The Company, as a state-
chartered bank, is subject to regulation by the Federal Deposit Insurance
Corporation (the FDIC) and the State of Missouri Division of Finance.
On January 23, 1995, the Company entered into an order (the Order) with the
FDIC which superseded a previously established 1992 order. The Order
requires, among other things: appointment of a compliance officer,
development of a written compliance program, and the institution of a
compliance review process. Management believes it has achieved
substantial compliance with the terms of the Order and that the Order
will not restrict future operations.
(11) Disclosures About Financial Instruments
---------------------------------------
Financial instruments are defined as cash, evidence of an ownership
interest in an entity, or a contract that both: (1) imposes on one entity
a contractual obligation to deliver cash or another financial instrument
to a second entity or to exchange other financial instruments with the
second entity; and (2) conveys to that second entity a contractual right
to receive cash or another financial instrument from the first entity or
to exchange other financial instruments with the first entity.
(Continued)
F-19
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and commercial and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for its financial
instruments included on the balance sheets.
The contractual amount of commitments to extend credit and standby letters
of credit as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Commitments to extend credit $8,111,981 3,290,555
Standby letters of credit 568,444 533,200
========== =========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses. Of the total commitments to extend credit at December 31, 1995,
$845,483 represents fixed rate loan commitments. 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 Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, premises and equipment, and income-
producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
(12) Fair Value of Financial Instruments
-----------------------------------
At December 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards 107, Disclosures About Fair Value of
Financial Instruments. SFAS 107 extends existing fair value disclosure
for some financial instruments by requiring disclosure of the fair value
of such financial instruments, both assets and liabilities recognized and
not
F-20
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
recognized in the consolidated balance sheets. The fair value estimates
of the Company's financial instruments and the methods and assumptions
used in determining these values at December 31, 1995 are set forth
below:
<TABLE>
<CAPTION>
Carrying Estimated
amount fair value
------ ----------
<S> <C> <C>
Balance sheet assets:
Cash and due from banks $ 516,796 516,796
Federal funds sold 2,480,000 2,480,000
Investments in debt and equity
securities:
Available for sale 14,412,951 14,412,951
Held to maturity 4,524,173 4,683,389
Loans, net 40,650,715 40,702,419
Accrued interest receivable 436,334 436,334
=========== ==========
Balance sheet liabilities:
Deposits $50,070,981 50,350,306
Short-term borrowings 8,343,885 8,343,885
Accrued interest payable 218,616 218,616
=========== ==========
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
such value:
Cash and Due From Banks, Federal Funds Sold, Accrued Interest
-----------------------------------------------------------------
Receivable, Short-Term Borrowings, and Accrued Interest Payable
-----------------------------------------------------------------
The carrying values reported in the consolidated balance sheets approximate
fair values, due to the demand or short-term nature of these instruments.
Investments in Debt and Equity Securities
-----------------------------------------
Fair values of securities are based upon quoted market prices where
available. If quoted market prices are not available, fair values were
based upon quoted market prices of comparable instruments.
Loans, Net
----------
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, real
estate, and installment. Each loan category is further segmented into
fixed and adjustable rate interest terms and by performing and
nonperforming status.
For the various homogeneous categories of performing loans, the fair value
is estimated by discounting the future cash flows using current rates at
which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities.
The fair value of nonperforming loans is based on estimated cash flows
discounted using a rate commensurate with the risk associated with the
loan. Assumptions regarding credit risk, cash flows, and discount rates
were judgmentally determined using available market and specific borrower
information.
(Continued)
F-21
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Deposits
--------
The fair value of deposits with no stated maturity, such as non-interest-
bearing demand deposits, NOW and money market accounts, and savings
accounts, is equal to the amounts payable on demand as of December 31,
1995. The fair value of time deposits is based on the discounted value
of contractual cash flows. The discount rate is estimated using the
rates currently offered for deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit
----------------------------------------------------------
The fair values of commitments to extend credit and standby letters of
credit are estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements, the likelihood of the parties drawing on such financial
instruments, and the present creditworthiness of such counterparties.
The Company believes such commitments have been made on terms which are
competitive in the markets in which it operates. Accordingly, no
premium or discount is offered thereon and fair values for such
instruments have not been assigned for purposes of this disclosure as
they are considered immaterial.
Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Because no market exists
for a significant portion of the Company's financial instruments, fair
value estimates are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on- and off-balance-sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in many of the estimates.
(13) Litigation
----------
Various legal claims have arisen during the normal course of business
which, in the opinion of management after discussion with legal counsel,
will not result in any material liability to the Company.
(14) Parent Company Financial Information
------------------------------------
Subsidiary bank dividends are the principal source of funds for payment of
dividends by the Company to its shareholders. Both federal and state laws
impose restrictions on the ability of the subsidiary bank to pay
dividends.
F-22
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Following are condensed balance sheets as of December 31, 1995 and 1994 and
the related condensed schedules of income and cash flows for each of the
years in the two-year period ended December 31, 1995 of the Company (parent
company only):
<TABLE>
<CAPTION>
Years ended
December 31,
------------
Condensed Schedules of Income 1995 1994
----------------------------- ---- ----
<S> <C> <C>
Assets:
Cash $ 145,284 522,754
Investment in subsidiary bank 5,021,158 3,834,433
Excess of cost over fair value of net assets
acquired 215,335 573,604
Other assets 147,533 158,952
---------- ----------
Total assets $5,529,310 5,089,743
========== ==========
Liabilities - accounts payable and accrued
expenses - 293,499
Total stockholders' equity 5,529,310 4,796,244
---------- ----------
Total liabilities and
stockholders' equity $5,529,310 5,089,743
========== ==========
<CAPTION>
Years ended
December 31,
------------
Condensed Schedules of Income 1995 1994
----------------------------- ---- ----
<S> <C> <C>
Revenue - interest income $ 8,609 51,281
----------- ----------
Total revenue
Expenses:
Consulting expense - 190,000
Other operating expense 40,308 26,516
----------- ----------
Total expenses 40,308 216,516
----------- ----------
Loss before income tax benefits
and equity in undistributed
net income of subsidiary bank (31,699) (165,235)
Income tax benefits 10,778 58,131
----------- ----------
(20,921) (107,104)
Equity in undistributed net income of
subsidiary bank 627,100 274,855
----------- ----------
Net income $ 606,179 167,751
=========== ==========
</TABLE>
(Continued)
F-23
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Years ended
December 31,
------------
Condensed Schedules of Income 1995 1994
----------------------------- ---- ----
<S> <C> <C>
Cash and cash equivalents at beginning of year $ 522,754 70,359
Cash flows from operating activities:
Net income 606,179 167,751
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of goodwill 29,845 21,402
Undistributed earnings of subsidiary bank (627,100) (274,855)
Other, net (311,927) 37,048
---------- ----------
Total adjustments (909,182) (216,405)
---------- ----------
Net cash used in operating
activities (303,003) (48,654)
---------- ----------
Cash flows from investing activities:
Acquisition of subsidiary bank - (853,285)
Capital injections in subsidiary bank (90,000) (2,417,955)
---------- ----------
Net cash used in investing
activities (90,000) (3,271,240)
---------- ----------
Cash flows from financing activities:
Net proceeds from the sale of common stock 34 3,772,309
Retirement of common stock - (20)
Purchase of treasury stock (353,675) -
Proceeds from issuance of treasury stock 369,174 -
---------- ----------
Net cash provided by financing
activities 15,533 3,772,289
---------- ----------
Net increase (decrease) in cash
and cash equivalents (377,470) 452,395
---------- ----------
Cash and cash equivalents at end of year $ 145,284 522,754
========== ==========
</TABLE>
(15) Event (Unaudited) Subsequent to the Date of the Independent Auditors'
---------------------------------------------------------------------
Report
------
On April 16, 1996, the Company entered into an Agreement and Plan of Merger
and Reorganization with Roosevelt Financial Group, Inc. (Roosevelt) to
merge Community Charter Corporation into Roosevelt. At December 31, 1995,
Roosevelt had total assets of approximately $9.01 billion. The merger
agreement with Roosevelt will be effected through a stock-for-stock
exchange. The merger is contingent upon approval of various regulatory
agencies and the stockholders of Community Charter Corporation and the
Federal Reserve Bank under the Agreement. If approved, the merger is
expected to close by the third quarter of 1996.
F-24
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Interim Consolidated Balance Sheet
March 31, 1996
(Unaudited)
Assets
------
<TABLE>
<CAPTION>
<S> <C>
Cash and due from banks $ 1,420,059
Investments in debt and equity securities:
Available for sale, at market value 10,919,210
Held to maturity, at amortized cost (market value of $4,638,896) 4,522,108
-----------
Total investments in debt and equity securities 15,441,318
-----------
Loans 43,906,730
Less allowance for loan losses 676,371
-----------
Loans, net 43,230,359
-----------
Premises and equipment 631,001
Accrued interest receivable 463,642
Other real estate owned 90,000
Excess of cost over fair value of net assets acquired 113,156
Other assets 527,479
-----------
Total assets $61,917,014
===========
Liabilities and Stockholders' Equity
------------------------------------
Non-interest-bearing demand deposits 8,610,682
Interest-bearing deposits:
NOW and money market accounts 11,051,960
Savings accounts 1,598,174
Time deposits $100,000 and over 8,667,850
Other time deposits 23,649,855
-----------
Total deposits 53,578,521
Short-term borrowings 2,245,351
Other liabilities 431,817
-----------
Total liabilities 56,255,689
-----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock - par value $.10; 1,000,000 shares
authorized, 471,499 shares issued and outstanding 47,150
Surplus 4,669,432
Retained earnings 942,070
Unrealized gain on available-for-sale
securities, net 2,673
-----------
Total stockholders' equity 5,661,325
-----------
Total liabilities and stockholders' equity $61,917,014
===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
M-1
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Interim Consolidated Statements of Income
Three months ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -------
<S> <C> <C>
Interest income:
Interest and fees on loans $1,011,999 656,184
Interest and dividends on debt and equity
securities 238,143 229,695
Interest on federal funds sold 14,139 30,820
Interest on interest-bearing deposits in
other financial institutions - 361
---------- -------
Total interest income 1,264,281 917,060
---------- -------
Interest expense:
NOW and money market accounts 101,663 72,100
Savings accounts 11,456 12,853
Time deposits $100,000 and over 96,452 76,680
Other time deposits 339,181 220,913
Short-term borrowings 43,267 5,007
---------- -------
Total interest expense 592,019 387,553
---------- -------
Net interest income 672,262 529,507
Provision for loan losses 10,500 -
---------- -------
Net interest income after
provision for loan losses 661,762 529,507
---------- -------
Noninterest income:
Service charges on deposit accounts 45,597 33,910
Other service charges and fee income 10,717 12,395
Other 4,719 10,534
---------- -------
Total noninterest income 61,033 56,839
---------- -------
Noninterest expense:
Salaries and employee benefits 277,213 213,564
Occupancy 51,338 51,033
Equipment 19,275 23,755
FDIC insurance premiums 500 23,822
Other 93,023 89,121
---------- -------
Total noninterest expense 441,349 401,295
---------- -------
Income before income tax expense 281,446 185,051
Income tax expense 107,567 66,185
---------- -------
Net income $ 173,879 118,866
========== =======
Share data:
Average common shares outstanding 471,499 471,496
========== =======
Earnings per common share $.37 .25
========== =======
</TABLE>
See accompanying notes to interim consolidated financial statements.
M-2
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Interim Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 173,879 118,866
Adjustments to reconcile net income to net cash from
operating activities:
Net amortization and accretion of debt securities (16,872) 28,652
Amortization of cost over fair value of net assets
acquired 3,360 10,333
Depreciation and amortization 14,049 18,705
Provision for loan losses 10,500 -
Increase in accrued interest receivable (27,308) (59,851)
Net gain on other real estate owned - (16,250)
Other operating activities, net 33,004 (266,361)
----------- ----------
Net cash provided by (used in) operating activities 190,612 (165,906)
----------- ----------
Cash flows from investing activities:
Purchases of held-to-maturity securities - (1,085,000)
Purchases of available-for-sale securities (1,059,900) -
Proceeds from maturities of available-for-sale
securities 4,500,000 -
Proceeds from maturities of and principal payments on
held-to-maturity securities 6,908 154,561
Increase in loan originations, net (2,591,300) (2,593,887)
Recoveries of loans previously charged off 1,156 19,262
Purchases of premises and equipment (33,219) (22,498)
Proceeds from sale of other real estate owned - 76,441
Capitalized expenses on other real estate owned - (712)
----------- ----------
Net cash provided by (used in) investing activities 823,645 (3,451,833)
----------- ----------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing
demand deposits (270,013) 313,402
Net increase in interest-bearing deposits 3,777,553 1,443,909
Net decrease in short-term borrowings (6,098,534) (227,778)
------------ ----------
Net cash provided by (used in) financing activities (2,590,994) 1,529,533
------------ ----------
Net decrease in cash and cash equivalents (1,576,737) (2,088,206)
Cash and cash equivalents, beginning of period 2,996,796 4,545,383
------------ ----------
Cash and cash equivalents, end of period $ 1,420,059 2,457,177
=========== ==========
Supplemental disclosures of cash flow information -
cash paid during the period for:
Interest $ 568,462 368,972
Income taxes - -
=========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
M-3
<PAGE>
COMMUNITY CHARTER CORPORATION AND SUBSIDIARY
Notes to Interim Consolidated Financial Statements
March 31, 1996 and 1995
(1) Basis of Presentation
---------------------
The accounting policies and reporting practices of Community Charter
Corporation are based upon generally accepted accounting principles and
conform to predominant practices within the banking industry. In
preparing financial statements, management is required to make
assumptions and estimates which affect the Company's reported amounts of
assets and liabilities and the results of operations. Estimates and
assumptions involve future events and may change. The accompanying
consolidated financial statements are unaudited and should be read in
conjunction with the notes to consolidated financial statements contained
in the financial statements as of DecemberE31, 1995 and 1994 and for the
years then ended (included elsewhere in this document). In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1996.
(2) Merger With Roosevelt Financial Group, Inc.
-------------------------------------------
On April 16, 1996, the Company entered into an Agreement and Plan of Merger
and Reorganization with Roosevelt Financial Group, Inc. (Roosevelt) to
merge Community Charter Corporation into Roosevelt. At DecemberE31, 1995,
Roosevelt had total assets of approximately $9.01 billion. The merger
agreement with Roosevelt will be effected through a stock-for-stock
exchange. The merger is contingent upon approval of various regulatory
agencies and the stockholders of Community Charter Corporation and the
Federal Reserve Bank under the Agreement. If approved, the merger is
expected to close by the third quarter of 1996.
(3) Accounting for Stock-Based Compensation
---------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (FAS 123), effective for the year
beginning January 1, 1996. FAS 123 defines the accounting available for
employee stock compensation plans. The statement defines a fair value
based method of accounting for an employee stock option and permits
companies to switch to this method to record compensation costs for new
and modified employee stock options. The Company elected to continue to
apply APB Opinion 25 and related interpretations to account for the
Company's stock option plan. Accordingly, consistent with previous
Company accounting practices, no compensation cost is recognized in the
consolidated statements of income.
M-4
<PAGE>
APPENDIX I
------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
ROOSEVELT FINANCIAL GROUP, INC.,
and
COMMUNITY CHARTER CORPORATION
------------------------
----------------
APRIL 16, 1996
----------------
<PAGE>
TABLE OF CONTENTS
Page
RECITALS..................................................................... 1
ARTICLE I
PLAN OF MERGER........................................................... 1
1.1 Merger; Surviving Corporation..................................... 1
------------------------------
1.2 Effective Time of the Merger....................................... 2
----------------------------
1.3 Merger............................................................. 2
------
1.4 Missouri State Bank Matters........................................ 5
---------------------------
1.5 Closing............................................................ 5
-------
1.6 Reservation of Right to Revise Transaction......................... 5
------------------------------------------
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CCC......................... 6
2.1 Organization and Authority......................................... 6
--------------------------
2.2 Subsidiaries....................................................... 6
------------
2.3 Capitalization..................................................... 6
--------------
2.4 Authorization...................................................... 7
-------------
2.5 CCC Financial Statements........................................... 8
------------------------
2.6 CCC Reports........................................................ 8
-----------
2.7 Properties and Leases.............................................. 8
---------------------
2.8 Taxes.............................................................. 8
-----
2.9 Material Adverse Change............................................ 9
-----------------------
2.10 Commitments and Contracts.......................................... 9
-------------------------
2.11 Litigation and Other Proceedings................................... 10
--------------------------------
2.12 Insurance.......................................................... 10
---------
2.13 Compliance with Laws............................................... 10
--------------------
2.14 Labor.............................................................. 12
-----
2.15 Material Interests of Certain Persons.............................. 12
-------------------------------------
2.16 Allowance for Loan Losses.......................................... 12
-------------------------
2.17 Employee Benefit Plans............................................. 12
----------------------
2.18 Conduct to Date.................................................... 14
---------------
2.19 Prospectus/Proxy Statement, etc.................................... 14
-------------------------------
2.20 Registration Obligations........................................... 15
------------------------
2.21 Takeover Provisions Not Applicable................................. 15
----------------------------------
2.22 Regulatory, Tax and Accounting Matters............................. 15
--------------------------------------
2.23 Brokers and Finders................................................ 15
-------------------
2.24 Accuracy of Information............................................ 15
-----------------------
2.25 Community Reinvestment Act Compliance.............................. 15
-------------------------------------
2.26 Fairness Opinion................................................... 15
----------------
2.27 Governmental Approvals and Other Conditions........................ 15
-------------------------------------------
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ROOSEVELT FINANCIAL................................................... 16
3.1 Organization and Authority.......................................... 16
--------------------------
3.2 Capitalization of Roosevelt Financial............................... 16
-------------------------------------
3.3 Authorization....................................................... 17
-------------
3.4 Roosevelt Financial Statements...................................... 17
------------------------------
<PAGE>
3.5 Roosevelt Reports................................................... 18
-----------------
3.6 Material Adverse Change............................................. 18
-----------------------
3.7 Registration Statement, etc......................................... 18
---------------------------
3.8 Brokers and Finders................................................. 18
-------------------
3.9 Accuracy of Information............................................. 18
-----------------------
3.10 Community Reinvestment Act Compliance............................... 19
-------------------------------------
3.11 Litigation and Other Proceedings.................................... 19
--------------------------------
3.12 Compliance with Laws................................................ 19
--------------------
3.13 Governmental Approvals and Other Conditions......................... 19
-------------------------------------------
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME........................ 20
4.1 Conduct of Businesses Prior to the Effective Time................... 20
-------------------------------------------------
4.2 Forbearances........................................................ 20
------------
ARTICLE V
ADDITIONAL AGREEMENTS.................................................... 21
5.1 Access and Information.............................................. 21
----------------------
5.2 Registration Statement; Regulatory Matters.......................... 22
------------------------------------------
5.3 Stockholder Approval................................................ 22
--------------------
5.4 Current Information................................................. 22
-------------------
5.5 Agreements of Affiliates............................................ 23
------------------------
5.6 Expenses............................................................ 23
--------
5.7 Miscellaneous Agreements and Consents............................... 23
-------------------------------------
5.8 Press Releases...................................................... 23
--------------
5.9 Takeover Provisions................................................. 23
-------------------
5.10 D&O Indemnification................................................. 24
-------------------
5.11 Third Parties....................................................... 24
-------------
5.12 Dissenting Shareholders' Appraisal Rights........................... 24
-----------------------------------------
5.13 Nasdaq Listing...................................................... 24
--------------
5.14 Assistance with Third Parties....................................... 24
-----------------------------
5.15 Insurance Policy Claims............................................. 24
-----------------------
ARTICLE VI
CONDITIONS............................................................... 24
6.1 Conditions to Each Party's Obligation to Effect the Merger.......... 24
----------------------------------------------------------
6.2 Conditions to Obligations of CCC to Effect the Merger............... 25
-----------------------------------------------------
6.3 Conditions to Obligations of Roosevelt Financial to
Effect the Merger................................................... 26
----------------
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER........................................ 27
7.1 Termination......................................................... 27
-----------
7.2 Effect of Termination............................................... 28
---------------------
7.3 Amendment........................................................... 28
---------
7.4 Severability........................................................ 28
------------
7.5 Waiver.............................................................. 28
------
ii
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS....................................................... 28
8.1 Non-Survival of Representations, Warranties and Agreements.......... 28
----------------------------------------------------------
8.2 Notices............................................................. 29
-------
8.3 Miscellaneous....................................................... 30
-------------
Exhibit A - Form of Voting Agreement (Intentionally Omitted)
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
-----------------------------------------------
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"),
dated April , 1996, is by and among ROOSEVELT FINANCIAL GROUP, INC., a
--
Delaware corporation ("Roosevelt Financial") and COMMUNITY CHARTER CORPORATION,
a Missouri corporation ("CCC").
A. Roosevelt Financial and CCC wish to provide for the terms and
conditions of the following described business combination in which CCC will be
merged with Roosevelt Financial (the "Merger"), resulting in Missouri State Bank
and Trust Company ("Missouri State Bank"), a wholly owned first tier subsidiary
of CCC, becoming a stand-alone first tier subsidiary of Roosevelt Financial.
B. For federal income tax purposes, it is intended that the 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") 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 CCC 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
PLAN OF MERGER
This Article I and the provisions hereof shall constitute the Plan of
Merger between the parties under the General and Business Corporation Law of
Missouri (the "Missouri Act").
1.1 Merger; Surviving Corporation. 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"), and the BHCA (as defined in Section
2.1) at the Effective Time (as defined in Section 1.2), CCC shall be merged with
and into Roosevelt Financial pursuant to the terms and conditions set forth
herein. Upon the consummation of the Merger, the separate corporate existence of
CCC shall cease and Roosevelt Financial shall continue as the surviving
corporation. The name of Roosevelt Financial, as the surviving corporation of
the Merger shall remain "Roosevelt Financial Group, Inc." From and after the
Effective Time, Roosevelt Financial, as the surviving corporation of the Merger,
shall possess
1
<PAGE>
all of the properties and rights and be subject to all of the liabilities and
obligations of Roosevelt Financial and CCC, all as more fully described in the
DGCL and the Missouri Act.
1.2 Effective Time of the Merger. As soon as practicable after each of
----------------------------
the conditions set forth in Article VI hereof have been satisfied or waived, the
parties will file, or cause to be filed, with the Secretary of State of Delaware
and the Secretary of State of the State of Missouri such certificate or articles
of merger and other documents as they may deem necessary or appropriate for the
Merger, which certificate or articles of merger and other documents shall in
each case be in the form required by and executed in accordance with the
applicable provisions of the DGCL and the Missouri Act, respectively. The
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").
1.3 Merger.
------
(a) Conversion of CCC Stock. At the Effective Time:
-----------------------
(i) Each share of common stock of CCC, $0.10 par value per share
("CCC 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 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 1.6 shares (the
"Exchange Ratio") of common stock of Roosevelt Financial, par value
$.01 per share ("Roosevelt Financial Common Stock"). 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 CCC Common Stock issued and outstanding immediately prior to the
Effective Time which are then owned beneficially or of record by
Roosevelt Financial, CCC or by any direct or indirect Subsidiary (as
hereinafter defined) of any of them or held in the treasury of CCC
(other than any shares of CCC Common Stock held (A) directly or
indirectly in 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 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 CCC
Common Stock shall cease to have any rights as stockholders of CCC,
except such rights, if any, as they may have pursuant to the Missouri
Act. Except as provided herein, until certificates representing shares
of CCC 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
2
<PAGE>
whole shares of Roosevelt Financial Common Stock into which their
shares of CCC Common Stock shall have been converted by the 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 CCC's stockholders in accordance herewith.
(c) Dissenting Shares. Any shares of CCC Common Stock held by a holder
-----------------
who dissents from the 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 CCC. If any holder of
CCC 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 the shares of CCC Common
Stock of such holder shall be subject to conversion pursuant to Section 1.3(a)
hereof, and such holder shall only be entitled to receive the Merger
Consideration as provided herein.
(d) Exchange of CCC 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 CCC Common Stock (the "Certificates") shall be
instructed to tender such Certificates to Roosevelt Financial or to an
independent exchange agent 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 holders. Such
letter of transmittal shall specify that risk of loss and title to
Certificates shall pass only upon acceptance of such Certificates by
Roosevelt Financial or the Exchange Agent.
(ii) After the Effective Time, each holder of a Certificate that
surrenders such Certificate to Roosevelt Financial or the Exchange
Agent will, upon acceptance thereof by Roosevelt Financial or 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.
3
<PAGE>
(v) After the Effective Time, holders of Certificates shall cease
to have rights with respect to the CCC 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
CCC of Certificates, and if such Certificates are presented to CCC 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 CCC 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 CCC 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 CCC 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 CCC 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.
(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 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 (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). No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share
interest.
(f) Stock Options. The CCC 1994 Non-Qualified Stock Option Plan for
-------------
Executive Officers and Directors (the "CCC Stock Option Plan") and each
option granted thereunder (the "CCC Stock Options"), listed in Schedule
2.3, outstanding on the date hereof and remaining outstanding immediately
prior to the Effective Time shall, at the Effective Time, be vested and
assumed by Roosevelt Financial and each such option shall be converted
automatically into an option to purchase shares of Roosevelt Financial
Company Stock in an amount and at an exercise price determined as provided
below (and otherwise subject to the terms of the CCC Stock Option Plan,
and applicable corporate resolutions and option agreements included in
Schedule 2.17A hereto, and the applicable requirements of law or
regulation):
(i) The number of shares of Roosevelt Financial Common Stock to be
subject to the substitute option shall be equal to the product of the
number of shares of CCC
4
<PAGE>
Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of Roosevelt Financial Common
Stock resulting from such multiplication shall be rounded to the
nearest share; and
(ii) The exercise price per share of Roosevelt Financial Common
Stock under the substitute option shall be equal to the exercise price
per share of Common Stock under the original option divided by the
Exchange Ratio, provided that such exercise price shall be rounded to
the nearest cent.
The duration and other terms of the substitute option shall be the same as
the original option, except that (x) all references to CCC shall be deemed
to be references to Roosevelt Financial and (y) no service requirement on
the part of option holders will be required after the Effective Time.
(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 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 Merger, until their respective successors
shall be duly elected and qualified or otherwise duly selected.
1.4 Missouri State Bank Matters. Prior to the Effective Time, CCC shall
---------------------------
cause (a) Stanley J. Bradshaw to be elected as a director of Missouri State Bank
for the longest term permitted by the by-laws of Missouri State Bank with a term
commencing at the Effective Time and (b) Missouri State Bank to change its name
to "Roosevelt Bank and Trust Company" as of the Effective Time.
1.5 Closing. Subject to the provisions of Article VI 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 CCC. The
date on which the Closing actually occurs is herein referred to as the "Closing
Date."
1.6 Reservation of Right to Revise Transaction. Roosevelt Financial shall
------------------------------------------
have the unilateral right to change the method of structuring the Merger, 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) materially impede or delay the
consummation of the Merger or (c) adversely affect the tax treatment of CCC
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 CCC
CCC represents and warrants to and covenants with Roosevelt Financial as
follows:
2.1 Organization and Authority. CCC 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 CCC and the CCC 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 or may be consolidated with such party
for financial reporting purposes. CCC is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended ("BHCA"). True and
complete copies of the Articles of Incorporation and Bylaws of CCC and of the
Articles of Agreement and Bylaws of Missouri State 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 CCC (each a "CCC Subsidiary" and collectively the "CCC
Subsidiaries"). Other than the CCC Subsidiaries, there are no entities in which
CCC has a two percent or greater direct or indirect equity or ownership
interest. All outstanding Equity Securities (as defined in Section 2.3) of each
CCC Subsidiary are owned directly or indirectly by CCC. All of the outstanding
shares of capital stock of the CCC Subsidiaries are validly issued, fully paid
and nonassessable and are owned directly or indirectly by CCC free and clear of
any lien, claim, charge, option, encumbrance, agreement, mortgage, pledge,
security interest, restriction or rights of third parties (each a "Lien") with
respect thereto. Each of the CCC Subsidiaries is a corporation, trust company,
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
CCC 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 CCC
and the CCC 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"), CCC does not own beneficially, directly or indirectly, any shares
of any class of Equity Securities or similar interests of any corporation, trust
company, bank, business trust, association or similar organization. Missouri
State Bank is a Missouri chartered stock trust company with full commercial bank
powers. The deposits of Missouri State Bank are insured up to applicable limits
by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
(the "FDIC"). Missouri State Bank is a member in good standing of the FHL Bank.
Missouri State Bank is not a member of the Federal Reserve System.
2.3 Capitalization. The authorized capital stock of CCC consists of
--------------
1,000,000 shares of CCC Common Stock, of which, as of the date hereof, 471,499
shares are issued and outstanding including 10 shares of director qualifying
shares (and no shares of CCC Common Stock are held in the treasury of CCC). As
of the date hereof, 71,000 shares of CCC Common Stock are subject to outstanding
option rights under the CCC Stock Option Plan. Since December 31, 1995, no
Equity Securities of CCC have been issued, except pursuant to the exercise of
CCC Stock Options. Except as set forth above, there are no Equity
6
<PAGE>
Securities of CCC 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 CCC Common Stock are
validly issued, fully paid, and nonassessable, and have not been issued in
violation of any preemptive right of any stockholder of CCC.
2.4 Authorization.
-------------
(a) CCC has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The only stockholder
vote required for CCC to approve this Agreement and the Merger is the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of CCC Common Stock entitled to vote at a meeting called for such
purpose. The execution, delivery and performance of this Agreement by CCC
and the consummation by CCC of the transactions contemplated hereby have
been duly authorized by the Board of Directors of CCC. Subject to the
approval of CCC'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 or regulation, this Agreement is a valid and binding
obligation of CCC enforceable against CCC 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 CCC of this
Agreement, nor the consummation by CCC of the transactions contemplated
hereby, nor compliance by CCC with any of the provisions hereof, will (i)
violate or conflict with any term, condition or provision of its articles
of incorporation, articles of agreement, charter or bylaws of CCC or any
CCC Subsidiary, (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 CCC or any CCC Subsidiary
under any of the terms, conditions or provisions of, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement (other than
the acceleration of vesting under outstanding Stock Options) or other
instrument or obligation to which CCC or any CCC Subsidiary is a party or
by which it may be bound, or to which CCC or any CCC Subsidiary or any of
their properties or assets may be subject, or (iii) subject to compliance
with the statutes and regulations referred to in subsection (c) of this
Section 2.4, to the best knowledge of the senior officers and directors of
CCC (the "Best Knowledge of CCC"), violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to CCC or
any CCC Subsidiary or any of their respective 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 BHCA, the Savings and Loan Holding Company Act (the "Thrift 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 or
third party is necessary on the
7
<PAGE>
part of CCC or any CCC Subsidiary for the consummation of the transactions
contemplated by this Agreement.
2.5 CCC Financial Statements. The consolidated balance sheets of CCC
------------------------
and the CCC Subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for each of the two years in the two-year period ended December 31, 1995,
together with the notes thereto, audited by the accounting firm of KPMG Peat
Marwick LLP (collectively, the "CCC Financial Statements"), have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis ("GAAP"), present fairly the consolidated financial position of
CCC and the CCC Subsidiaries at such dates, and the consolidated results of
operations, cash flows and changes in stockholders' equity of CCC and the CCC
Subsidiaries for the periods stated therein and are derived from the books and
records of CCC and the CCC Subsidiaries, which are complete and accurate in all
material respects and have been maintained since June 30, 1994 in accordance
with good business practices. Neither CCC nor any of the CCC Subsidiaries has
any material contingent liabilities that are not described in the financial
statements described above.
2.6 CCC Reports. Since June 30, 1994, each of CCC and the CCC
-----------
Subsidiaries has filed all material reports, registrations and statements,
together with any required material amendments thereto, that it was required to
file with (i) the State of Missouri Division of Finance (the "Division"), (ii)
the Board of Governors of the Federal Reserve System (the "FRB"), (iii) FDIC,
(iv) the FHL Bank and the Federal Home Loan Bank System and (v) any other
federal, state, municipal, local or foreign government, securities, trust
company, 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 referred to herein as the "CCC Reports." As of its respective
date, each CCC 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 CCC
---------------------
Financial Statements, (ii) any Lien for current taxes not yet delinquent and
(iii) with respect to assets classified as other real estate owned, CCC and the
CCC Subsidiaries have good and marketable title free and clear of any material
Lien to all the real and personal property reflected in CCC's consolidated
balance sheet as of December 31, 1995 and, in each case, all real and personal
property acquired since such date, except such real and personal property as has
been disposed of since such date for fair value in the ordinary course of
business. All leases material to CCC or any CCC Subsidiary, pursuant to which
CCC or any CCC 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 CCC or any CCC
Subsidiary or any event which, with notice or lapse of time or both, would
constitute a material default by CCC or any CCC Subsidiary. All of CCC's and
the CCC 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 CCC, none of the buildings, structures
and equipment of CCC or any CCC Subsidiary violates or fails to comply with any
applicable health, fire, environmental, safety, zoning or building laws or
ordinances or any restrictive covenant pertaining thereto.
2.8 Taxes. During the past two years (and to the Best Knowledge of
-----
CCC, at all times prior thereto), CCC and each CCC 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 ("CCC's Returns"). Each of CCC and the CCC
Subsidiaries has paid, or set up
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adequate reserves on the CCC Financial Statements for the payment of, all taxes
required to be paid or accrued in respect of the periods covered by such returns
and reports. Neither CCC nor any CCC Subsidiary will have any material liability
for any such taxes in excess of the amounts so paid or reserves so established
and no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or definitely) against CCC or any
CCC Subsidiary which would not be covered by existing reserves. Neither CCC nor
any CCC 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 or reports 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 CCC and the CCC 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 CCC and the CCC Subsidiaries have not been
audited during the past seven years. There is no deficiency or refund litigation
or matter in controversy with respect to CCC's Returns. Neither CCC nor any CCC
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 CCC has the IRS 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 December 31, 1995, there has been no material adverse change in the
Condition of CCC and the CCC 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) Except as set forth in Schedule 2.10, neither CCC nor any CCC
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 CCC or any of the CCC Subsidiaries is or may
become obligated to invest in or contribute capital to any CCC
Subsidiary or any other entity;
(ii) any agreement, indenture or other instrument not disclosed
in the CCC Financial Statements relating to the borrowing of money by
CCC or any CCC Subsidiary or the guarantee by CCC or any CCC
Subsidiary of any such obligation (other than trade payables or
instruments related to transactions entered into in the ordinary
course of business by Missouri State Bank, 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
CCC or any CCC Subsidiary to compete in any line of business or with
any person or containing any
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restriction of the geographical area in which, or method by which,
CCC or any CCC 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;
or
(vi) any contract or agreement (A) that has a remaining term as
of the date hereof in excess of six months, (B) is not terminable by
CCC or any CCC Subsidiary on 30 or fewer days' notice without penalty
or premium and (C) involves a monetary obligation on the part of CCC
or any CCC Subsidiary in excess of 10,000.
(b) Neither CCC nor any CCC Subsidiary is in violation of its
organizational documents or bylaws or in material 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 material default.
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 CCC, threatened against CCC or any CCC
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, but not
excepting any actions, suits or proceedings which request non-monetary relief or
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 CCC, threatened against CCC or any CCC Subsidiary or any of
their respective officers or directors by any stockholder of CCC or any CCC
Subsidiary (or by any former stockholder of CCC or any CCC Subsidiary relating
to or arising out of such person's status as a stockholder or former
stockholder) or involving claims under federal or state securities laws, the
Community Reinvestment Act of 1977 (the "CRA") or the fair lending laws.
2.12 Insurance. Each of CCC and the CCC 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, if any, 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 CCC. 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 CCC nor any CCC Subsidiary have any interest other than as collateral
for mortgage loans held by Missouri State Bank) maintained by or for the benefit
of CCC or any of the CCC Subsidiaries or their respective directors, officers,
employees or agents. Neither CCC nor any of the CCC Subsidiaries has, during
the past two 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) CCC and each of the CCC 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
10
<PAGE>
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
CCC, no suspension or cancellation of any of them is threatened and all
such filings, applications and registrations are current.
(b) (i) Each of CCC and the CCC 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 Missouri State Bank, all statutes, rules,
regulations and policy statements pertaining to the conduct of a banking,
trust company, 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 CCC and the CCC Subsidiaries, taken as a whole,
and (ii) neither CCC nor any CCC 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 as set
forth in Schedule 2.13B, neither CCC nor any CCC Subsidiary is subject to
or reasonably likely to incur any liability as a result of its past or
present ownership, operation, or use of any Property (as defined below) of
CCC or any CCC Subsidiary (whether directly or, to the Best Knowledge of
CCC, as a consequence of such Property being collateral for any loan or
investment made by CCC or any CCC 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 CCC and the CCC 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 CCC or
any CCC Subsidiary relating to Property of CCC or any CCC Subsidiary
before any court or other Regulatory Authority or arbitration tribunal
relating to Toxic Substances, pollution, or the environment, and there is
no outstanding judgment, order, writ, injunction, decree, or award against
or affecting CCC or any CCC Subsidiary with respect to the same. Except
for statutory or regulatory restrictions of general application or as set
forth in Schedule 2.13B, no Regulatory Authority has currently in effect
any restriction on the business of CCC or any CCC Subsidiary.
(c) Except as set forth in Schedule 2.13C, since December 31, 1993,
neither CCC nor any CCC Subsidiary has received any notification or
communication as to any matter which has not been resolved from any
Regulatory Authority (i) asserting that CCC or any CCC 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 that
is material to the Condition of CCC and the CCC Subsidiaries, taken as a
whole, including without limitation Missouri State Bank's status as an
insured depositary institution under the FDIA, (iii) requiring or
threatening to require CCC or any of the CCC Subsidiaries, or indicating
that CCC or any of the CCC Subsidiaries may be required, to enter into any
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 CCC or any of the CCC Subsidiaries, including
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without limitation any restriction on the payment of dividends. Except as
set forth in Schedule 2.13B or C and specifically noted therein, no such
order, agreement, memorandum of understanding or other agreement or
directive currently in effect.
(d) After May 31, 1996, neither CCC nor any CCC Subsidiary will be
required by Section 32 of the FDIA or under Missouri law to give prior
notice to any federal banking agency or the Division 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 CCC or any CCC Subsidiary is
-----
pending or, to the Best Knowledge of CCC, threatened. Neither CCC nor any CCC
Subsidiary is involved in, or, to the Best Knowledge of CCC, 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 CCC and the CCC Subsidiaries, taken as a whole. No
employees of CCC or any CCC 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 Schedule 2.15 A, to the Best Knowledge of
CCC, no officer or director of CCC or any CCC Subsidiary, 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 CCC or any CCC Subsidiary, which
in the case of CCC would be required to be disclosed by Item 404 of
Regulation S-B promulgated by the SEC if CCC was a reporting company or
in the case of any CCC Subsidiary would be required to be so disclosed if
such CCC Subsidiary had a class of securities registered under Section 12
of the Exchange Act.
(b) Except as set forth in Schedule 2.15, there are no loans in
excess of $25,000 from CCC or any CCC 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 CCC's or any CCC Subsidiary's Board of
Directors ("Insider Loans"). All outstanding Insider Loans from CCC or
any CCC Subsidiary were approved by or reported to the appropriate board
of directors in accordance with applicable law and regulations.
2.16 Allowance for Loan Losses. The allowances for loan losses
-------------------------
contained in the CCC Financial Statements as of December 31, 1995, were
established in accordance with the past practices and experiences of CCC and the
CCC Subsidiaries, are in compliance with the requirements of GAAP and the rules,
regulations and policies of the FRB, Division and FDIC and are, in the opinion
of management of CCC, 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 thereof.
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,
incentive compensation, 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
CCC or any CCC
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<PAGE>
Subsidiary in respect of any of the present or former directors, officers,
or other employees of and/or consultants to CCC or any CCC Subsidiary
(collectively, the "CCC Employee Plans").
(b) All of the CCC 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 the CCC Employee Plans have been
made.
(c) With respect to each of the CCC 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 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, 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 CCC or any
CCC 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 CCC nor any CCC Subsidiary would have any liability or
obligation to post a bond under Section 4063 of ERISA if CCC and all CCC
Subsidiaries were to withdraw from such Multiple Employer Pension Plan;
and (ii) neither CCC nor any CCC Subsidiary would have any liability under
Section 4064 of ERISA if such Multiple Employer Pension Plan were to
terminate.
(d) Neither CCC nor any CCC Subsidiary has any liability for any
post-retirement health, medical or similar benefit of any kind whatsoever
except as required by statute.
(e) Neither CCC nor any CCC 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 CCC nor any CCC 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) 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
current or former director or employee of CCC or any CCC Subsidiary from
any of such entities, (ii) increase any benefit otherwise payable under
any of the CCC Employee Plans or (iii) result in the acceleration of the
time of payment of any such benefit. No amounts paid or to become payable
by CCC, the CCC Subsidiaries or their successors interest to or with
respect to any current or former
13
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director or employee of CCC or any CCC Subsidiary will fail to be
deductible for federal income tax purposes by reason of Section 280G or
162(m) of the Code or otherwise.
2.18 Conduct to Date. From and after December 31, 1995 through the
---------------
date of this Agreement, except as set forth on Schedule 2.18: (i) CCC and the
CCC Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practices; (ii) neither CCC nor any CCC
Subsidiary has issued, sold, granted, conferred or awarded any of its Equity
Securities except the issuance of CCC Common Stock pursuant to the exercise of
CCC Stock Options, or any corporate debt securities which would be classified
under GAAP as long-term debt on the balance sheets of CCC; (iii) CCC has not
effected any stock split or adjusted, combined, reclassified or otherwise
changed its capitalization; (iv) CCC 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 CCC nor any CCC
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 CCC nor
any CCC 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 CCC nor any CCC 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 law, neither CCC nor any CCC 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, compensation,
severance, or other similar contract, (C) entered into, terminated, or
substantially modified any of the CCC Employee Plans or (D) agreed to do any of
the foregoing; (ix) neither CCC nor any CCC 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 CCC nor any CCC Subsidiary has canceled or compromised
any debt; (xi) neither CCC nor any CCC Subsidiary has entered into any material
transaction, contract or commitment outside the ordinary course of its business
and (xii) neither CCC nor any CCC Subsidiary has made or guaranteed any loan to
any of the CCC Employee Plans.
2.19 Prospectus/Proxy Statement, etc. None of the information
--------------------------------
regarding CCC or any CCC Subsidiary supplied or to be supplied by CCC for
inclusion or included in (i) the registration statement on Form S-4 to be filed
with the Securities and Exchange Commission ("SEC") by Roosevelt Financial for
the purpose of registering the shares of Roosevelt Financial Common Stock to be
exchanged for shares of CCC Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the prospectus/proxy statement to
be mailed to the CCC 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 CCC 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
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CCC or any CCC 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. Neither CCC nor any CCC Subsidiary is
------------------------
under any obligation, contingent or otherwise, 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 this Agreement and the Merger are not otherwise subject to any anti-
takeover protection applicable to CCC or any CCC Subsidiary. CCC and the CCC
Subsidiaries are not subject to any agreement, arrangement or legal requirement
restricting the ownership or acquisition of their securities or imposing any
"fair price" or supermajority director or stockholder vote requirements.
2.22 Regulatory, Tax and Accounting Matters. CCC 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 or the Merger from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
2.23 Brokers and Finders. Except for the agreement set forth in
-------------------
Schedule 2.23 with Stifel, Nicolaus & Company, Inc., which agreement has not
been amended since such date, neither CCC nor any CCC 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 in connection with this Agreement or the
transactions contemplated hereby.
2.24 Accuracy of Information. The statements of CCC contained in this
-----------------------
Agreement, the Schedules hereto and any other written document executed and
delivered by or on behalf of CCC pursuant to the terms of this Agreement are
true and correct in all material respects.
2.25 Community Reinvestment Act Compliance. Missouri State Bank is in
-------------------------------------
material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and, as of the date hereof, Missouri State
Bank has a CRA rating of satisfactory or better from the FDIC. To the Best
Knowledge of CCC, there is no fact or circumstance or set of facts or
circumstances which would cause the CRA rating of Missouri State Bank to fall
below satisfactory.
2.26. Fairness Opinion. CCC has received from Stifel, Nicolaus &
----------------
Company, Inc. a fairness opinion, dated as of the date of this Agreement, to the
effect that the consideration to be received by the holders of CCC 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 CCC, there is no reason relating specifically to CCC or any of the CCC
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 be unduly burdensome to
Roosevelt Financial or any of its Subsidiaries or 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
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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
Roosevelt Financial represents and warrants to and covenants with CCC 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, 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 bank or 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 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 CCC 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 or the Merger from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) 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 Merger will, upon issuance in
16
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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 has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Roosevelt
Financial and the consummation by Roosevelt Financial of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action of Roosevelt Financial. 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
enforceable against it 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 of this Agreement, nor the consummation by Roosevelt Financial
of the transactions contemplated hereby, nor compliance by Roosevelt
Financial 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 of Roosevelt Financial or any Roosevelt Financial
Subsidiary, (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 the senior officers and directors of
Roosevelt Financial (the "Best Knowledge of Roosevelt Financial"), 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 Missouri Act, the Securities Act, the Exchange
Act, the securities or blue sky laws of the various states or filings,
consents, reviews, authorizations, approvals or exemptions required under
the BHCA, the Thrift 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
or third party is necessary on the part of Roosevelt Financial for the
consummation by it of the transactions contemplated by this Agreement.
3.4 Roosevelt 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 Statements"), have been prepared in accordance
17
<PAGE>
with GAAP, 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 Roosevelt Financial Statements.
3.5 Roosevelt Reports. Since December 31, 1993, 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 of stockholders of CCC 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 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.
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
-----------------------
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.
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3.10 Community Reinvestment Act Compliance. Roosevelt Bank, a Roosevelt
-------------------------------------
Financial Subsidiary, is in material compliance with the applicable provisions
of the CRA and the regulations promulgated thereunder and currently has a CRA
rating of satisfactory or better from the OTS. To the Best Knowledge of
Roosevelt Financial, there is no fact or circumstance or set of facts or
circumstances which would 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 Financial, 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 CCC 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 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. 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 Financial, no
suspension or cancellation of any of them is threatened and all such filings,
applications and registrations are current.
3.13 Governmental Approvals and Other Conditions. To the Best
-------------------------------------------
Knowledge of Roosevelt Financial, there is no reason relating specifically to
Roosevelt Financial or any of the Roosevelt Financial 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 be unduly burdensome to Roosevelt
19
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Financial or any Roosevelt Financial Subsidiary or 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 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, CCC shall, and it
shall cause each of the CCC Subsidiaries to, conduct its business only in the
ordinary and usual course consistent with past practices 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, CCC shall not and
shall not permit any of the CCC 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 CCC to CCC or
another wholly owned Subsidiary of CCC);
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director or officer or employee, or
modify any of the CCC 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 normal individual bonuses
and increases in compensation to employees, in each case and in the
aggregate consistent with past practice or to the extent required by law;
(c) authorize, recommend, propose or announce an intention to
authorize, so recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the 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 to facilitate the consummation of the
transactions contemplated herein, propose or adopt any amendments to its
articles of incorporation, articles of agreement, or other charter
document or bylaws;
(e) issue, sell, grant, confer or award any of its Equity Securities
except pursuant to the exercise of CCC Stock Options outstanding on the
date hereof 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;
20
<PAGE>
(g) (i) change its underwriting policies relating to lending
activities, (ii) change its deposit-taking policies, (iii) create any new
lending or deposit products, or (iv) engage in a new line of business;
(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 CCC or any CCC Subsidiary or the acquisition of 10%
or more of any class of Equity Securities of CCC or any CCC Subsidiary or
the merger of CCC or any CCC 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 fulfillment of the fiduciary duties of
CCC's directors requires such action, as determined in consultation with
CCC'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 or engage in
discussions with any such person with respect to an Acquisition
Transaction, and CCC 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 CCC 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 or the Merger from qualifying as a reorganization
within the meaning of Section 368(a)(1)(A) 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 CCC and the CCC Subsidiaries, on
the other hand, shall each afford to each other, and to the other's accountants,
counsel and other representatives, 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 all information concerning its
business, properties and personnel as such other party may reasonably request.
Except as may
21
<PAGE>
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 CCC, shall prepare and,
subject to the review and consent of CCC with respect to matters relating
to CCC (which consent shall not be unreasonably withheld or delayed), 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 CCC and the CCC Subsidiaries shall furnish
Roosevelt Financial all information concerning CCC and the CCC
Subsidiaries and the stockholders thereof as Roosevelt Financial may
reasonably request in connection with any such action. CCC authorizes
Roosevelt Financial to utilize in the Registration Statement the
information concerning CCC and the CCC Subsidiaries provided to Roosevelt
Financial for inclusion in the Prospectus/Proxy Statement. Roosevelt
Financial shall advise CCC promptly when the Registration Statement has
become effective and of any supplements or amendments thereto, and shall
furnish CCC with copies of all such documents.
(b) CCC 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 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 CCC 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. CCC 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 CCC shall cooperate in the preparation of the
Prospectus/Proxy Statement and, with the approval of each of Roosevelt Financial
and CCC, which approvals will not be unreasonably withheld or delayed, the
Prospectus/Proxy Statement shall be mailed to the stockholders of CCC. The Board
of Directors of CCC shall submit for approval of CCC's stockholders the matters
to be voted upon at such meeting. The Board of Directors of CCC hereby does and
will recommend this Agreement and the transactions contemplated hereby to the
stockholders of CCC and (except to the extent that the fulfillment of the
fiduciary duties of CCC's directors so requires relating to an Acquisition
Transaction, as determined in consultation with CCC's outside counsel) will use
its best efforts to obtain any vote of CCC'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
22
<PAGE>
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 or any of its Subsidiaries 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, CCC shall deliver to Roosevelt Financial a letter, reviewed
by its counsel, identifying all persons whom CCC believes to be "affiliates" of
CCC for purposes of Rule 145 under the Securities Act or for purposes of
qualifying for pooling of interests accounting treatment for the Merger. CCC
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 CCC 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, CCC 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 Regulatory Authorities necessary or, in the reasonable opinion of
Roosevelt Financial, desirable for the consummation of the transactions
contemplated by this Agreement.
5.8 Press Releases. The initial press release announcing this
--------------
Agreement shall be as previously agreed upon by Roosevelt Financial and CCC.
Except as deemed by CCC, after consultation with its outside counsel, to be
necessary to comply with applicable law, CCC 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 or delayed.
5.9 Takeover Provisions. CCC 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 organizational documents or bylaws of CCC or any
23
<PAGE>
CCC Subsidiary restricting the ownership, acquisition or voting of securities or
imposing any "fair price" or supermajority director or stockholder vote
requirements.
5.10 D&O Indemnification. For at least three years after the Effective
-------------------
Time (to the extent permitted by applicable law), Roosevelt Financial will cause
Roosevelt Bank and Trust Company to continue to maintain the corporate
indemnification currently in effect at Missouri State Bank for the benefit of
its current officers and directors relating to their acts or omissions occurring
prior to the Effective Time.
5.11 Third Parties. CCC and each CCC 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.
5.12 Dissenting Shareholders' Appraisal Rights. Roosevelt Financial
-----------------------------------------
and CCC, as applicable, will comply with all applicable notification and other
provisions of regulations or statutes relating to Dissenting Shares.
5.13 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.
5.14 Assistance with Third Parties. CCC and its Subsidiaries shall
------------------------------
cooperate with, and use all reasonable efforts to assist, Roosevelt Financial in
(i) gaining access to all of CCC's and CCC Subsidiaries' third-party vendors,
and the landlords of each property leased by them, 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 timetable at or after
the Effective Time. CCC and the CCC Subsidiaries shall also, at Roosevelt
Financial'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.
5.15 Insurance Policy Claims. CCC shall inform Roosevelt Financial
-----------------------
no later than the Effective Time of any material unfiled insurance claims of CCC
or any CCC Subsidiary which it has knowledge and for which it believes 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) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Regulatory
Authorities having approval authority with respect to the Merger and all
applicable waiting periods shall have expired.
(b) The Registration Statement shall have been declared effective
and shall not be subject to a stop order or any threatened stop order.
24
<PAGE>
(c) Neither Roosevelt Financial nor CCC 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.
(d) A tax opinion addressed to both Roosevelt Financial and CCC by
counsel or independent certified accountants mutually acceptable to
Roosevelt Financial and CCC 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:
(i) The Merger will qualify as a "reorganization" under Section
368(a) of the Code;
(ii) No gain or loss will be recognized by Roosevelt Financial
or CCC by reason of the Merger;
(iii) No gain or loss will be recognized by any CCC stockholder
(except in connection with the receipt of cash in lieu of a
fractional share of Roosevelt Financial Common Stock) upon the
exchange of CCC Common Stock solely for Roosevelt Financial Common
Stock in the Merger;
(iv) The basis of the Roosevelt Financial Common Stock received
by a CCC stockholder who exchanges CCC Common Stock solely for
Roosevelt Financial Common Stock will be the same as the basis of
the CCC 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 CCC stockholder in the Merger will include the period
during which the CCC Common Stock surrendered in exchange therefor
was held by such stockholder (provided that such Common Stock of
such CCC stockholder was held as a capital asset at the Effective
Time); and
(vi) Cash received by a CCC stockholder 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 for capital gain or loss (assuming the CCC stock was a
capital asset in his hands at the Effective Time).
(e) Listing of Shares. The securities to be issued in the Merger
shall be approved for listing as contemplated by Section 5.13 hereof,
subject to official notice of issuance.
6.2 Conditions to Obligations of CCC to Effect the Merger. The
-----------------------------------------------------
obligations of CCC 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 set forth in Article III of this
Agreement shall be true and correct as of the date of this Agreement and
in all material respects 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 and
(ii) for the effect of transactions contemplated by this
25
<PAGE>
Agreement and CCC shall have received a certificate of the president and
chief executive officer of Roosevelt Financial to that effect.
(b) Performance of Obligations. Roosevelt Financial shall have
--------------------------
performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Effective Time, and CCC
shall have received a certificate of the president and chief executive
officer of Roosevelt Financial to that effect.
(c) Opinion of Counsel. CCC shall have received an opinion from
------------------
Silver, Freedman & Taff, L.L.P., counsel to Roosevelt Financial, dated the
Closing Date, in form and substance substantially as heretofore provided
to CCC.
6.3 Conditions to Obligations of Roosevelt Financial to Effect the
--------------------------------------------------------------
Merger. The obligations of Roosevelt Financial 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 CCC set forth in Article II of this Agreement shall be true
and correct as of the date of this Agreement and in all material respects
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 and (ii) for the effect of
transactions contemplated by this Agreement and Roosevelt Financial shall
have received a certificate of the president and chief executive officer
of CCC to that effect.
(b) Performance of Obligations. CCC shall have performed in all
--------------------------
material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Roosevelt Financial shall
have received a certificate of the president and chief executive officer
of CCC to that effect.
(c) Opinion of Counsel. Roosevelt Financial shall have received an
------------------
opinion from Armstrong, Teasdale, Schlafly & Davis, counsel to CCC, dated
the Closing Date, in form and substance substantially as heretofore
provided to Roosevelt Financial.
(d) Voting Agreements. Simultaneous with the execution and delivery
-----------------
of this Agreement, each of the directors of CCC shall have executed and
delivered to Roosevelt Financial a Voting Agreement in the form attached
hereto as Exhibit A.
(e) No Unduly Burdensome Condition or Commercial Banking Power
----------------------------------------------------------
Restriction. No regulatory approval obtained in connection with the
-----------
transactions contemplated herein shall (i) contain a condition which
Roosevelt Financial reasonably determines is unduly burdensome to
Roosevelt Financial or any Roosevelt Financial Subsidiary (including
Roosevelt Bank and Trust Company) or (ii) limit or restrict the powers of
Missouri State Bank.
(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.
26
<PAGE>
(h) Dissenting Shares. No more than 5% of the outstanding CCC Common
-----------------
Stock shall be Dissenting Shares.
(i) Name Change. No applicable Regulatory Authority denies Missouri
-----------
State Bank's request or application to change its name as of the Effective Time
to Roosevelt Bank and Trust Company.
(j) Significant Restriction on Activities. The consummation of the
-------------------------------------
Merger will not result in any significant restriction on the activities of, or
significant limitation upon the conduct of business by, any existing Roosevelt
Financial Subsidiary, other than a significant restriction or limitation that
can be cured by having another Roosevelt Financial Subsidiary perform such
activity or conduct such business in the manner theretofore performed or
conducted.
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 Boards of Directors of Roosevelt
Financial and CCC;
(b) by the Board of Directors of Roosevelt Financial or the Board of
Directors of CCC at any time after March 31, 1997, if the 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 CCC if (i) any Regulatory Authority denies approval of the
Merger or (ii) no Acquisition Transaction is proposed or initiated by a
third party prior to the meeting referred to in Section 5.3 and the
stockholders of CCC do not approve this Agreement and the Merger at such
meeting (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 CCC 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 CCC by Roosevelt Financial;
(e) by the Board of Directors of CCC in the event of a material
breach by Roosevelt Financial 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 CCC, unless Roosevelt Financial elects to terminate this
Agreement pursuant to Section 7.1(f);
(f) by the Board of Directors of Roosevelt Financial, upon the
payment of $1,000,000 in cash to CCC in immediately-available funds, if
Roosevelt Financial enters into a definitive agreement to merge with or be
acquired by another party and such party requires the termination of this
Agreement as a condition of entering into such definitive agreement; or
27
<PAGE>
(g) by the Board of Directors of Roosevelt Financial or the Board of
Directors of CCC, if the stockholders of CCC do not approve this Agreement
or the Merger at the meeting referred to in Section 5.3 after a third
party proposes or initiates an Acquisition Transaction.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Sections 7.1(a) through 7.1(c) or 7.1(f) hereof, this
Agreement shall forthwith become void and there shall be no liability under this
Agreement on the part of Roosevelt Financial or CCC or their respective officers
or directors except as set forth in the second sentence of Section 5.1, in
Section 5.6. In the event of a termination of this Agreement pursuant to
Section 7.1(d) or (e), or a material breach by a party, the non-breaching party
shall be entitled to such relief and remedies against the breaching party as are
available at law or in equity, including but not limited to, specific
performance, it being agreed by the parties that the remedies of a party for a
material breach by the other party are inadequate at law. A termination by
Roosevelt Financial pursuant to Section 7.1(f) shall not constitute a breach of
any of its representations, warranties, covenants or agreements contained in
this Agreement. In the event of the termination of this Agreement pursuant to
Section 7.1(g), CCC shall, within 5 days after it receives documentation
relating to Roosevelt Financial's third-party expense in connection with this
Agreement and the transactions contemplated herein, make a cash payment to
Roosevelt Financial in immediately-available funds of $800,000.00 plus Roosevelt
Financial's documented third party expenses in an amount up to $200,000.00.
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 CCC; provided, however, that (a) after any such approval by
the stockholders of CCC no such modification shall (i) alter or change the
amount or kind of consideration to be received by holders of CCC Common Stock as
provided in this Agreement or (ii) adversely affect the tax treatment to CCC
stockholders of the Merger Consideration and (b) Roosevelt Financial may make,
and CCC'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 except by an instrument in writing
signed on behalf of each of Roosevelt Financial and CCC.
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. All
28
<PAGE>
representations, warranties, covenants 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, except in the case of
consummation of the Merger, the obligations of Roosevelt Financial which are
specifically contemplated to be performed after the Effective Time shall
survive, and in the case of the termination of this Agreement, the agreements
contained in or referred to in the second sentence of Section 5.1 and in
Sections 5.6 and 7.2 shall survive such termination.
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:
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Attention: Stanley J. Bradshaw
President and Chief
Executive Officer
Telecopy: (314) 532-6292
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: David B. Myatt or Barry P. Taff
Telecopy: (202) 682-0354
29
<PAGE>
(ii) if to CCC:
Community Charter Corporation
300 North Tucker Boulevard
P.O. Box 1488
St. Louis, Missouri 63188-1488
Attention: James Saitz
President and Chief
Executive Officer
Telecopy: (314) 436-5303
Copy to:
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102-2740
Attention: Jeffrey D. Fisher
Telecopy: (314) 621-5065
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.
30
<PAGE>
Roosevelt Financial and CCC have caused this Agreement to be duly
executed by their authorized representatives on the date first above written.
<TABLE>
<CAPTION>
COMMUNITY CHARTER CORPORATION ROOSEVELT FINANCIAL GROUP, INC.
<S> <C>
By: /s/ James A. Saitz By: /s/ Stanley J. Bradshaw
---------------------------------------- ---------------------------------------
Name: James A. Saitz Name: Stanley J. Bradshaw
-------------------------------------- -------------------------------------
Title: President Title: President
------------------------------------- ------------------------------------
Attested by: /s/ Raymond R. Van de Riet, Jr. Attested by: /s/ Gary W. Douglass
------------------------------- ------------------------------
Name: Raymond R. Van de Riet, Jr. Name: Gary W. Douglass
-------------------------------------- -------------------------------------
Title: Vice President Title: Executive Vice President
------------------------------------- ------------------------------------
</TABLE>
31
<PAGE>
APPENDIX II
[LETTERHEAD OF STIFEL, NICOLAUS & COMPANY, INCORPORATED]
April 16, 1996
Board of Directors
Community Charter Corporation
300 North Tucker Boulevard
St. Louis, Missouri 63188-1488
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Community Charter Corporation ("CCC") of the
consideration to be received pursuant to the Agreement and Plan of Merger and
Reorganization dated as of April 16, 1996 (the "Agreement") by and among
Roosevelt Financial Group, Inc. ("Roosevelt Financial") and CCC. As is set forth
in the Agreement, each outstanding share of common stock of CCC will be
exchanged for 1.6 common shares of Roosevelt Financial (the "Merger
Consideration").
Stifel, Nicolaus & Company, Incorporated is an investment banking and
securities firm with membership on all principal U.S. securities exchanges. As
part of our investment banking services, we are regularly engaged in the
independent valuation of businesses and securities in connection with negotiated
underwritings, private placements, merger and acquisition transactions and
recapitalizations. We have also provided certain investment banking services to
Roosevelt Financial from time to time, including acting as a managing
underwriter of a public offering of convertible preferred stock on February 23,
1993 and acting as a managing underwriter of a public offering of subordinated
notes on July 23, 1992, and we may provide investment banking services to
Roosevelt Financial from time to time in the future.
In rendering our opinion, we have reviewed the Agreement as well as financial
and other information that was publicly available or furnished to us by CCC and
Roosevelt Financial including information provided during Stifel's discussions
with their respective management. We have conducted conversations with CCC's
senior management regarding recent developments and management's financial
projections for CCC. In addition, we have spoken to members of CCC's management
and Roosevelt Financial's management regarding factors which affect each
entity's business. We have also compared certain financial and securities data
(as appropriate) of CCC and Roosevelt Financial with various other companies
whose securities are traded in public markets, reviewed the historical stock
prices and trading volumes (as appropriate) of the common stock of CCC and
Roosevelt Financial, reviewed prices and premiums paid in other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
<PAGE>
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information and representations that were made available to us from public
sources, that were provided to us by CCC, Roosevelt Financial, or their
respective representatives, or that were otherwise reviewed by us. With respect
to the financial forecasts of CCC provided to us by CCC's management, we assumed
for purposes of our opinion that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of CCC's
management at the time of preparation as to the future financial performance of
CCC and that they provided a reasonable basis upon which we could form our
opinion. We also assumed that there were no material changes in CCC's or
Roosevelt Financial's assets, financial condition, results of operations,
business or prospects since the date of the last financial statements made
available to us. We relied on advice of counsel to CCC as to all legal matters
with respect to CCC, the Merger, the Merger Agreement and the transactions and
other matters contained or contemplated therein. In addition, we did not make or
obtain an independent evaluation, appraisal or physical inspection of the
assets, individual properties or liabilities of CCC or Roosevelt Financial, nor
were we furnished with any such appraisal.
Our opinion is based on economic, monetary, market and other conditions
existing as of the date hereof. Our opinion is directed to the Board of
Directors of CCC and does not constitute a recommendation to any shareholder as
to how such shareholder should vote on the proposed transaction. No opinion is
expressed as to the prices at which any securities of CCC or Roosevelt Financial
including the CCC Common Stock or Roosevelt Financial Common Stock, might trade
in the future.
Based on the foregoing and our experience as investment bankers, we are of the
opinion that, as of the date hereof, the Merger Consideration to be received by
the stockholders of CCC, as described in the Agreement, is fair to the
stockholders of CCC from a financial point of view.
Sincerely,
/s/ Stifel, Nicolaus & Company Incorporated
STIFEL, NICOLAUS & COMPANY, INCORPORATED
<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>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware empowers Roosevelt
to indemnify, subject to the standards therein prescribed, any person in
connection with any action, suit or proceeding brought or threatened by reason
of the fact that such person is or was a director, officer, employee or agent of
Roosevelt or is or was serving as such with respect to another corporation or
other entity at the request of Roosevelt. Section Ten of Roosevelt's
Certificate of Incorporation provides that each person who was or is made a
party to (or is threatened to be made a party to) or is otherwise involved in
any action, suit or proceeding by reason of the fact that such person is or was
a director, officer, employee or agent of Roosevelt or acting at the request of
Roosevelt as a director, officer, employee or agent of another corporation or
other entity shall be indemnified and held harmless by Roosevelt to the fullest
extent authorized by the General Corporation Law of Delaware against all
expenses, liability and loss (including without limitation attorney's fees,
judgments, fines and amounts paid in settlement) reasonably incurred by such
person in connection therewith. The rights conferred by Section Ten are
contractual rights and include the right to be paid by Roosevelt the expenses
incurred in defending such action, suit or proceeding in advance of the final
disposition thereof.
Section Eleven of Roosevelt's Certificate of Incorporation provides that
Roosevelt's directors will not be personally liable to Roosevelt or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (i) for any breach of the duty of loyalty to Roosevelt
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware (which makes directors
liable for unlawful dividends or unlawful stock repurchases or redemptions) or
(iv) for transactions from which directors derive improper personal benefit.
Roosevelt maintains directors and officers liability insurance.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following Exhibits are filed as part of this Registration Statement.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of April 16, 1996 (included as
Appendix I to the Proxy Statement/Prospectus)
4.1 Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to Roosevelt's
Registration Statement No. 33-79308)
4.2 Bylaws of Roosevelt Financial Group, Inc. (incorporated by reference to Exhibit 3.2 to
Roosevelt's Registration Statement No. 33-20337)
4.3 Specimen common stock certificate (incorporated by reference to Exhibit 4 to Roosevelt's
Registration Statement No. 33-20337)
4.4 Certificate of Designation of 6 1/2% Non-Cumulative Convertible Preferred Stock, Series A
(incorporated by reference to Exhibit 4.3 to Roosevelt's Registration Statement No. 33-76738)
4.5 Specimen stock certificate of 6 1/2% Non-Cumulative Convertible Preferred Stock, Series A
(incorporated by reference to Exhibit 4.4 to Roosevelt's Registration Statement No. 33-76738)
4.6 Indenture, dated as of April 15, 1988, with respect to Roosevelt's 10 1/8% Mortgage-Backed
Bonds, due April 15, 2018*
4.7 Indenture, dated as of July 30, 1992, with respect to Roosevelt's 9 1/2% Subordinated Notes,
due August 1, 2002 (incorporated by reference to Exhibit 4.1 to Roosevelt's Registration
Statement No. 33-49108)
4.8 Certificate of Designation of 6 1/2% Non-Cumulative Convertible Preferred Stock, Series F
(incorporated by reference to Exhibit 4.15 to Roosevelt's Registration Statement No. 33-79308)
4.9 Specimen stock certificate of 6 1/2% Non-Cumulative Convertible Preferred Stock, Series F
(incorporated by reference to Exhibit 4.16 to Roosevelt's Registration Statement No. 33-79308)
5 Opinion of Silver, Freedman & Taff, L.L.P. as to legality of the securities being registered
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit 5)
23.4 Consent of Stifel, Nicolaus & Company, Inc.
24 Power of Attorney (contained on signature page)
99 Form of proxy card of Community Charter Corporation
</TABLE>
_______________________
* Registrant hereby agrees to furnish a copy of the instrument to the SEC upon
request.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Roosevelt's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) Roosevelt undertakes that every prospectus (i) that is filed pursuant to
paragraph (c) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities and at that
time shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Roosevelt pursuant to the foregoing provisions, or otherwise, Roosevelt has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
II-3
<PAGE>
against such liabilities (other than the payment by Roosevelt of expenses
incurred or paid by a director, officer or controlling person of Roosevelt in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Roosevelt will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(g) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Chesterfield, State of
Missouri, on June 21, 1996.
ROOSEVELT FINANCIAL GROUP, INC.
By:/s/Stanley J. Bradshaw
----------------------
Stanley J. Bradshaw
President, Chief Executive Officer
and Director
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
We, the undersigned directors and officers of the Registrant, hereby
severally constitute and appoint Stanley J. Bradshaw and Gary W. Douglass, and
either of them, our true and lawful attorneys and agents, to do any and all
things in our names in the capacities indicated below which said Stanley J.
Bradshaw and/or Gary W. Douglass may deem necessary or advisable to enable the
Registrant to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with the registration statement on Form S-4 relating to the offering
of the registrant's common stock, including specifically, but not limited to,
power and authority to sign for us in our names in the capacities indicated
below this registration statement and any and all amendments (including post-
effective amendments) thereto; and, we hereby approve, ratify and confirm all
that said Stanley J. Bradshaw and/or Gary W. Douglass shall do or cause to be
done by virtue thereof.
By: /s/ Stanley J. Bradshaw By: /s/ Gary W. Douglass
----------------------------- -----------------------------
Stanely J. Bradshaw Gary W. Douglass
President, Chief Executive Executive Vice President and
Officer and Director Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
Date: June 21, 1996 Date: June 21, 1996
----------------------------- -----------------------------
By: /s/ Douglas T. Breeden By: /s/ Richard E. Beumer
----------------------------- -----------------------------
Douglas T. Breeden Richard E. Beumer
Chairman of the Board Director
Date: June 21, 1996 Date: June 21, 1996
----------------------------- -----------------------------
<PAGE>
By: /s/ Anat Bird By: /s/ Robert M. Clayton II
----------------------------- -----------------------------
Anat Bird Robert M. Clayton II
Senior Executive Vice President, Director
Chief Operating Officer
and Director
Date: June 21, 1996 Date: June 21, 1996
----------------------------- -----------------------------
By: /s/ Bradbury Dyer III By: /s/ Patricia M. Gammon
----------------------------- -----------------------------
Bradbury Dyer III Patricia M. Gammon
Director Director
Date: June 21, 1996 Date: June 21, 1996
----------------------------- -----------------------------
By: /s/ Hiram S. Liggett, Jr. By: /s/ Clarence M. Turley, Jr.
----------------------------- -----------------------------
Hiram S. Liggett, Jr. Clarence M. Turley, Jr.
Director Director
Date: June 21, 1996 Date: June 21, 1996
----------------------------- -----------------------------
By: /s/ Alvin D. Vitt
-----------------------------
Alvin D. Vitt
Director
Date: June 21, 1996
-----------------------------
<PAGE>
EXHIBIT INDEX
-------------
The following Exhibits are filed in connection with the Registration
Statement of Roosevelt Financial Group, Inc. on Form S-4, pursuant to the
requirements of Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Exhibit Page No.
- ----------- ------- --------
<S> <C> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
April 16, 1996 (included as Appendix I to the Proxy
Statement/Prospectus)
4.1 Certificate of Incorporation (incorporated by reference to Exhibit 4.1
to Roosevelt's Registration Statement No. 33-79308) n/a
4.2 Bylaws of Roosevelt Financial Group, Inc. (incorporated by reference to n/a
Exhibit 3.2 to Roosevelt's Registration Statement No. 33-20337)
4.3 Specimen common stock certificate (incorporated by reference to n/a
Exhibit 4 to Roosevelt's Registration Statement No. 33-20337)
4.4 Certificate of Designation of 6 1/2% Non-Cumulative Convertible n/a
Preferred Stock, Series A (incorporated by reference to Exhibit 4.3 to
Roosevelt's Registration Statement No. 33-76738)
4.5 Specimen stock certificate of 6 1/2% Non-Cumulative Convertible n/a
Preferred Stock, Series A (incorporated by reference to Exhibit 4.4 to
Roosevelt's Registration Statement No. 33-76738)
4.6 Indenture, dated as of April 15, 1988, with respect to Roosevelt's 10 1/8% n/a
Mortgage-Backed Bonds, due April 15, 2018*
4.7 Indenture, dated as of July 30, 1992, with respect to Roosevelt's 9 1/2% n/a
Subordinated Notes, due August 1, 2002 (incorporated by reference to
Exhibit 4.1 to Roosevelt's Registration Statement No. 33-49108)
4.8 Certificate of Designation of 6 1/2% Non-Cumulative Convertible n/a
Preferred Stock, Series F (incorporated by reference to Exhibit 4.15 to
Roosevelt's Registration Statement No. 33-79308)
4.9 Specimen stock certificate of 6 1/2% Non-Cumulative Convertible n/a
Preferred Stock, Series F (incorporated by reference to Exhibit 4.16 to
Roosevelt's Registration Statement No. 33-79308)
5 Opinion of Silver, Freedman & Taff, L.L.P. as to legality of the
securities being registered
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit 5) n/a
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Sequentially
Numbered
Exhibit No. Exhibit Page No.
- ----------- ------- --------
<S> <C> <C>
23.4 Consent of Stifel, Nicolaus & Company, Inc.
24 Power of Attorney (contained on signature page)
99 Form of proxy card of Community Charter Corporation
</TABLE>
_________________________
* Registrant hereby agrees to furnish a copy of the instrument to the SEC
upon request.
n/a Not applicable.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF SILVER, FREEDMAN & TAFF, L.L.P.]
June 19, 1996
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Re: Registration Statement on Form S-4
Members of the Board of Directors:
We have examined (i) the Agreement and Plan of Merger and Reorganization by
and among Roosevelt Financial Group, Inc. (the "Company") and Community Charter
Corporation (the "Merger Agreement"), (ii) the Registration Statement on Form S-
4 (the "Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), and the public offering prospectus (the
"Prospectus"), relating to the issuance by the Company of up to 870,000 shares
of common stock, par value $.01 per share (the "Common Stock"), in the manner
set forth in the Registration Statement and the Prospectus, (iii) the Company's
Certificate of Incorporation and Bylaws and (iv) records of the Company's
corporate proceedings relative to its organization and to the issuance of the
Common Stock.
We have examined originals, or copies identified to our satisfaction, of
such corporate records of the Company and have made such examinations of law as
we have deemed relevant. In our examination, we have assumed and have not
verified (i) the genuineness of all signatures, (ii) the authenticity of all
documents submitted to us as originals, (iii) the conformity with the originals
of all documents supplied to us as copies, and (iv) the accuracy and
completeness of all corporate records and documents and all certificates and
statements of fact, in each case given or made available to us by the Company.
We have relied upon certificates and other written documents from public
officials and government agencies and departments and we have assumed the
accuracy and authenticity of such certificates and documents.
Based upon the foregoing, and having a regard for such legal considerations
as we deem relevant, we are of the opinion that the Common Stock will be, upon
issuance, against payment therefor as contemplated in the Merger Agreement,
legally issued, fully paid and non-assessable.
We consent to the use of this opinion, to the incorporation by reference of
such opinion as an exhibit to the Registration Statement and to the reference to
our firm and our opinion under the heading "Legal Matters" in the Registration
Statement filed by the Company, and all amendments thereto. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ Silver, Freedman & Taff, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
-----------------------------
The Board of Directors
Roosevelt Financial Group, Inc:
We consent to incorporation by reference in the registration statement on Form
S-4 of Roosevelt Financial Group, Inc. ("Roosevelt") of our report dated January
16, 1996, relating to the consolidated balance sheets of Roosevelt Financial
Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears in the December 31, 1995 Annual Report on Form 10-K of Roosevelt and to
the reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
Our report refers to a change during 1993 in the method of accounting for
certain investments in debt securities. Additionally, our report states that the
supplemental fair value balance sheets of Roosevelt have been prepared by
management to present relevant financial information that is not provided by the
historical cost balance sheets and is not intended to be a presentation in
conformity with generally accepted accounting principles. The supplemental fair
value balance sheets do not purport to present the net realizable, liquidation,
or market value of Roosevelt as a whole. Furthermore, amounts ultimately
realized by Roosevelt from the disposal of assets may vary significantly from
the fair values presented.
/s/ KPMG Peat Marwick LLP
St Louis, Missouri
June 19, 1996
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
-----------------------------
The Board of Directors
Community Charter Corporation:
We consent to the use in this Registration Statement on Form S-4 of Roosevelt
Financial Group, Inc. of our report dated March 15, 1996 relating to the
consolidated balance sheets of Community Charter Corporation and subsidiary as
of December 31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended included herein.
We also consent to the reference to our firm under the heading "Experts" in the
Proxy Statement/Prospectus, which is a part of this Registration Statement.
/s/ KPMG Pent Marwick LLP
St. Louis, Missouri
June 19, 1996
<PAGE>
EXHIBIT 23.4
500 North Broadway
St. Louis, Missouri 63102
314-342-2000
Stifel, Nicolaus
- -----------------------
& Company, Incorporated
We do hereby consent to the use of our name and to the description of our
opinion letter, dated April 16, 1996, under the caption "The Merger-Opinion of
Financial Advisor" in, and to the inclusion of such opinion letter as Appendix
II to, the Proxy Statement/Prospectus of Roosevelt Financial Group, Inc. and
Community Charter Corporation which Proxy Statement/Prospectus is Part of this
Registration Statement on Form S-4 of Roosevelt Financial Group, Inc. By giving
such consent we do not thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "expert" as
used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By: /s/ Patrick R. Koster
------------------------
Patrick R. Koster
Vice President
St. Louis, Missouri
June 17, 1996
<PAGE>
EXHIBIT 99
REVOCABLE PROXY
COMMUNITY CHARTER CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
, 1996
--------------------
The undersigned hereby appoints the Board of Directors of Community Charter
Corporation ("Community"), and its survivor, with full power of substitution, to
act as attorneys and proxies for the undersigned to vote all shares of common
stock of Community which the undersigned is entitled to vote at the Special
Meeting of Stockholders (the "Meeting"), to be held on __________,
______________, 1996, at ________________________, located at
__________________________, ___________, Missouri at __:__ _.m., local time, as
follows:
The approval of the Agreement and Plan of Merger and Reorganization, dated
as of April 16, 1996, by and among Roosevelt Financial Group, Inc.
("Roosevelt") and Community, and the merger of Community with and into
Roosevelt.
FOR [_] AGAINST [_] ABSTAIN [_]
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting.
The Board of Directors recommends a vote "FOR"
the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY
OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, and
after notification to the Secretary of Community at the Meeting of the
stockholder's decision to terminate this proxy, then the power of such attorneys
and proxies shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from Community, prior to the
execution of this proxy, of Notice of the Meeting and a Proxy
Statement/Prospectus.
Dated: ________________________ ______________________________________________
PRINT NAME OF STOCKHOLDER
______________________________________________
SIGNATURE OF STOCKHOLDER
______________________________________________
PRINT NAME OF STOCKHOLDER
______________________________________________
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
___________________________________________________________________________
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
___________________________________________________________________________
