<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1997
Registration No. 333-15681
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ALLEGIANT BANCORP, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 43-519382
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7801 Forsyth Boulevard
St. Louis, Missouri 63105
(314) 726-5000
(Address and telephone number of principal executive offices)
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Shaun R. Hayes
President
7801 Forsyth Boulevard
St. Louis, Missouri 63105
(314) 726-5000
(Name, address, and telephone number of agent for service)
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Copy to:
Thomas A. Litz, Esq.
Thompson Coburn
Suite 3400
One Mercantile Center
St. Louis, Missouri 63101
(314) 552-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plans, please check the
following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: /X/
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
Proposed maximum Amount of
Title of each class of Amount to be offering price Proposed maximum registration
securities to be registered registered per unit aggregate offering price fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value... 567,750 shares $9.375 $5,322,656 $1,612.93<F1>
====================================================================================================================================
<FN>
<F1>The Company paid a registration fee of $1,550.33 on November 6, 1996.
Since November 6, 1996, the proposed aggregate offering price increased
from $5,116,083 to $5,322,656 and the registration fee increased from
$1,550.33 to $1,612.93 due to issuance of additional shares. The Company
is paying an additional $62.60 with the filing of this Amendment No. 2.
</TABLE>
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE *
* SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR *
* MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT *
* BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR *
* THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE *
* SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE *
* UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS *
* OF ANY SUCH STATE. *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PRELIMINARY PROSPECTUS DATED JANUARY __, 1997
PROSPECTUS
567,750 Shares
ALLEGIANT BANCORP, INC.
COMMON STOCK
Allegiant Bancorp, Inc., a Missouri corporation (the "Company"), is
offering for sale, on a "best efforts" basis, up to 567,750 shares of its
common stock, $0.01 par value ("Common Stock"), to its shareholders of record
at the close of business on January 15, 1997 (the "Record Date"). The offering
consists of the issuance of a nontransferable right to subscribe ("Subscription
Right") for the purchase of 0.25 additional shares of Common Stock, at $9.375
per share (the "Subscription Price"), for every one share held on the Record
Date. Fractional shares will not be issued. Shareholders who exercise their
Subscription Rights in full may purchase additional shares of Common Stock, at
the Subscription Price pursuant to a nontransferable oversubscription privilege
("Oversubscription Privilege"). See "The Offering." On the Record Date, there
were 2,271,000 shares of Common Stock outstanding. The Subscription Rights give
each shareholder of the Company the opportunity to at least maintain his or her
proportionate interest in the equity of the Company.
All subscriptions are irrevocable. No minimum sale of shares of Common
Stock by the Company is required. If at the Offering Termination Date (as
defined below) fewer than all of the shares of Common Stock offered hereby
shall have been subscribed for, subscriptions which have been accepted by the
Company shall remain effective, and this offering shall terminate with
respect to the unsubscribed shares of Common Stock.
The officers and directors of the Company and members of their immediate
families or entities which they control have indicated their intention to
purchase in the offering an aggregate of at least 218,932 shares of Common
Stock or shares of Common Stock having an aggregate purchase price of at
least $2,052,487, subject to proration to the extent of any oversubscription.
See "Security Ownership by Management."
The Common Stock is traded on the Nasdaq National Market under the symbol
"ALLE." On January 21, 1997, the last sale price of the Common Stock as
reported on the Nasdaq National Market was $13.50 per share. See "Price
Range of Common Stock and Dividends." See "The Offering" for factors which
were considered in determining the Subscription Price.
THE SUBSCRIPTION RIGHTS AND THIS OFFERING EXPIRE AT 5:00 P.M.,
ST. LOUIS TIME, ON FEBRUARY 24, 1997, UNLESS FURTHER EXTENDED OR EARLIER
TERMINATED BY THE COMPANY, IN ITS SOLE DISCRETION, WITHOUT NOTICE TO
SHAREHOLDERS ("OFFERING TERMINATION DATE").
SEE "RISK FACTORS" ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF COMMON
STOCK OFFERED HEREBY.
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
ADMINISTRATION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
ADMINISTRATION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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(Cover page continued on next page)
<PAGE> 3
<TABLE>
<CAPTION>
=====================================================================================================
Underwriting Discounts
Subscription Price and Commissions<F1> Proceeds to Company<F2>
- -----------------------------------------------------------------------------------------------------
<S> <C>
Per Share $9.375 None $9.375
- -----------------------------------------------------------------------------------------------------
Total<F3> $5,322,656 None $5,322,656
=====================================================================================================
<FN>
<F1> The Common Stock will be sold by the Company and no underwriting
discounts or commissions will be paid in connection with such sales. No
special or other compensation will be paid to directors, officers and
employees of the Company in connection with this offering. See "The
Offering."
<F2> Before deducting expenses payable by the Company estimated at $100,000.
<F3> Assumes the purchase of all 567,750 shares of Common Stock offered
hereby.
</TABLE>
--------------------
Funds received upon exercise of Subscription Rights will not be held in
escrow pending conclusion of the offering. Funds received upon exercise of
Oversubscription Privileges will be held in escrow until the Offering
Termination Date. See "The Offering." Payments for subscriptions that are
not accepted will be returned without interest. Delivery of stock
certificates will be made as soon as practicable after the Offering
Termination Date.
--------------------
The date of this Prospectus is January, 1997.
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<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed a Registration Statement (the "Registration
Statement") with the Commission under the Securities Act, with respect to the
securities covered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement. The Registration
Statement may be inspected without charge at the office of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 or obtained from such office
upon payment of the fees prescribed by the Commission. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants (including the Company) that file
electronically with the Commission. The address of the Commission's Web site
is http://www.sec.gov.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT.
When used in this Prospectus, the words "estimate," "project," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in
such forward-looking statements. For a discussion of such risks, see "Risk
Factors." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Documents relating to the Company, excluding
exhibits unless specifically incorporated therein, are available, without
charge, upon written or oral request to Christy Siburt, Investor Relations,
Allegiant Bancorp, Inc., 7801 Forsyth Boulevard, St. Louis, Missouri 63105;
telephone number (314) 726-5000.
The following documents filed with the Commission by the Company under the
Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995.
(b) The Company's Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996.
(c) The description of the Common Stock set forth in Item 11 of the
Company's Registration Statement on Form 10-SB (Reg. No. 0-26350),
filed with the Commission on June 30, 1995 and any amendment or report
filed for the purpose of updating such description.
- 3 -
<PAGE> 5
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and through the Offering
Termination Date shall be deemed to be incorporated by reference herein and
made a part hereof from the date any such document is filed. The information
relating to the Company contained in this Prospectus does not purport to be
complete and should be read together with the information in the documents
incorporated by reference herein. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
- 4 -
<PAGE> 6
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus. This summary is provided for convenience and is qualified in its
entirety by the detailed information and financial statements, including the
notes hereto, appearing elsewhere in this Prospectus. All share and per
share information in this Prospectus has been adjusted to reflect: a
six-for-five stock split (in the form of a stock dividend) paid January 1994;
a two-for-three stock split (in the form of a stock dividend) paid January 1995;
a 10% stock dividend paid January 1996; and a 10% stock dividend paid
January 1997. See "Price Range of Common Stock and Dividends."
THE COMPANY
Allegiant Bancorp, Inc. (the "Company") is a bank holding company which
owns all of the capital stock of Allegiant Bank, a Missouri state-chartered
bank (the "Bank"). The Bank provides personal and commercial banking and
related financial services from six locations in the St. Louis Standard
Metropolitan Statistical Area ("St. Louis SMSA"), the 16th largest
metropolitan area in the United States, and two locations in Northeast
Missouri. Allegiant Mortgage Company (the "Mortgage Company"), a wholly-owned
subsidiary of the Bank, offers residential loans primarily to customers
in the St. Louis market.
The Company was organized in May 1989 and acquired Allegiant State Bank at
that time. The Company acquired Allegiant Bank in 1990. Effective January
1995, Allegiant State Bank merged into Allegiant Bank. Unless the context
indicates otherwise, references herein to the "Company" or "Allegiant" refer
to Allegiant Bancorp, Inc. and its subsidiaries. The address of the
Company's principal executive offices is 7801 Forsyth Boulevard, St. Louis,
Missouri 63105; telephone: (314) 726-5000.
As of September 30, 1996, the Company reported, on a consolidated basis,
total assets of $351.2 million, net loans of $271.5 million, deposits of
$267.9 million and shareholders' equity of $15.3 million.
RECENT DEVELOPMENT
The Company reported that net income for the year ended December 31,
1996 increased 42% to $1.8 million or $.76 per share, from $1.3 million,
or $.62 per share, in 1995. For the fourth quarter of 1996, the Company's
reported net income was $405,000, or $.17 per share, compared to net
income of $268,000, or $.11 per share, in the fourth quarter of 1995.
The Company also reported as of December 31, 1996, total assets
increased 35% to $377.6 million from $280.4 million at year-end 1995.
Total deposits as of December 31, 1996 increased 33% to $308.7 million
from $231.3 million at the end of 1995, while loans outstanding
increased 61% to $291.9 million from $181.5 million at December 31, 1995.
<TABLE>
THE OFFERING
<C> <S>
Securities Offered 567,750 shares of Common Stock. As of the Record
Date, there were 2,271,000 shares of Common Stock
outstanding.<F1>
Subscription Right For every one share of Common Stock held of record as
of the Record Date, a shareholder will have the
nontransferable Subscription Right to subscribe for
0.25 of a share of Common Stock. No fractional
shares will be issued.
<FN>
- ----------------
<F1> Does not include: (i) 481,524 shares of Common Stock
reserved for issuance upon exercise of outstanding
stock options; and (ii) 115,852 shares of Common Stock
reserved for issuance upon exercise of outstanding
warrants.
- 5 -
<PAGE> 7
<C> <S>
Subscription Price $9.375 per share.
Oversubscription
Privilege Any shareholder who has exercised his or her Subscription Rights
in full may also subscribe, at the Subscription Price, for shares
not purchased through the exercise of Subscription Rights of
others, subject to allotment of available shares.
Offering
Termination Date 5:00 p.m., St. Louis time, on February 24, 1997, unless further
extended or earlier terminated by the Company in its sole
discretion without notice to shareholders.
Conditions Consummation of the sale of shares of Common Stock
pursuant to this offering is not conditioned upon the
sale of any minimum number of shares. Therefore, if
at the Offering Termination Date fewer than all
shares offered hereby shall have been subscribed for,
subscriptions which shall have been accepted by the
Company shall remain effective, and this offering
shall terminate with respect to the unsubscribed
shares. All subscriptions in this offering are
irrevocable by subscribers.
Release of Funds and
Share Certificates All funds received by the Company upon exercise of
the Subscription Rights will not be held in escrow
and will be immediately available for use by the
Company. All funds received by the Company in
connection with the Oversubscription Privilege will
be deposited at the Bank in a special, segregated
account. The subscription funds deposited in the
special segregated account will be released: (i) to
any subscriber, without interest, at the time his or
her oversubscription is rejected by the Company (or a
portion of such funds, if any oversubscription is
rejected in part by the Company); or (ii) to the
Company after the Offering Termination Date.
Certificates for shares subscribed for and accepted
by the Offering Termination Date will be delivered as
soon as practicable thereafter, which the Company
expects will be within 15 days after such date.
Risk Factors Investment in the shares involves certain risks.
Investors are advised to review carefully this
Prospectus in its entirety, especially the section
entitled "Risk Factors."
Dividends The Company's current policy is to pay cash dividends
on the Common Stock at the rate of $0.025 per share
quarterly in January, April, July and October of each
year. In October 1996, the Company's
- 6 -
<PAGE> 8
Board of Directors announced an increase in the
dividend policy to a rate of $0.03 per share
beginning with the regular quarterly dividend
scheduled for April 1997. Since 1993, the Board of
Directors has declared stock dividends each year
in varying amounts. Although the Board of
Directors anticipates paying cash and/or
stock dividends in the future, no assurance can be
given that such dividends will be paid. The
Company's dividend policy will be reviewed
periodically. See "Price Range of Common Stock and
Dividends."
Use of Proceeds For working capital and general corporate purposes,
including contributing all or a substantial portion
of such proceeds to the Bank to support continued
growth of the Bank. See "Use Of Proceeds."
</TABLE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- -------------------------
1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income $ 4,203 $ 5,585 $ 9,994 $ 19,252 $ 14,034 $ 18,347
Interest expense (2,133) (2,675) (4,584) (11,206) (7,950) (10,639)
-------- ---------- ---------- ---------- ---------- ----------
Net interest income 2,070 2,910 5,410 8,046 6,084 7,708
Other income 247 282 513 654 497 732
Other expenses (2,011) (2,546) (3,764) (5,625) (4,194) (5,182)
Provision for possible loan losses (108) (233) (849) (977) (717) (950)
-------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 198 413 1,310 2,098 1,670 2,308
-------- ---------- ---------- ---------- ---------- ----------
Provision for income taxes (78) (161) (509) (823) (663) (905)
-------- ---------- ---------- ---------- ---------- ----------
Net income $ 120 $ 252 $ 801 $ 1,275 $ 1,007 $ 1,403
======== ========== ========== ========== ========== ==========
Shares outstanding (at period-end) 846,821 1,500,400 1,566,043 2,187,937 2,185,657 2,196,174
Adjusted average shares outstanding 852,110 1,076,791 1,520,222 2,056,432 1,913,039 2,367,965
PER SHARE DATA:
Period-end book value per
common share $ 4.60 $ 4.99 $ 5.40 $ 6.37 $ 6.30 $ 6.97
Net income per share 0.14 0.23 0.53 0.62 0.53 0.59
Cash dividends declared per share -- 0.02 0.04 0.07 0.05 0.07
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 68,782 $ 104,416 $ 171,927 $ 280,386 $ 240,703 $ 351,204
Investment securities 14,434 23,063 40,888 73,211 55,840 62,308
Total loans 45,600 69,773 121,393 181,544 167,028 274,260
Total deposits 61,624 90,686 134,884 231,309 189,010 267,873
Long-term debt 2,400 2,200 9,804 19,719 22,919 15,580
Shareholders' equity 3,894 7,487 8,453 13,938 13,760 15,310
</TABLE>
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<PAGE> 9
RISK FACTORS
Prospective purchasers of Common Stock offered hereby should consider
carefully the risk factors set forth below, as well as the other information
set forth in this Prospectus, in determining whether to purchase the Common
Stock. This Prospectus contains forward-looking statements which are
inherently subject to risks and uncertainties. Cautionary statements made
herein should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus or the documents
incorporated by reference herein. The Company's actual results could differ
materially from those currently anticipated due to a number of factors,
including, without limitation, the following: possible adverse effects of
federal and state laws and regulations applicable to the Company's financial
services operations; credit risk inherent in the Bank's loan portfolio;
dependence upon economic conditions in the Company's markets; interest rate
risk inherent in the Company's investment and loan portfolios; and risks
associated with the Company's growth strategy, as well as the other factors
discussed in this Prospectus and the documents incorporated by reference
herein.
REGULATORY RISK
The banking industry is heavily regulated. These regulations are intended
to protect depositors, not shareholders. The Bank is subject to regulation
and supervision by the Federal Deposit Insurance Corporation (the "FDIC") and
the Missouri Division of Finance (the "Division of Finance"), while the
Company is subject to regulation and supervision by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). The burden imposed
by Federal and state regulations puts banks at a competitive disadvantage
compared to less regulated competitors such as finance companies, mortgage
banking companies and leasing companies. The banking industry continues to
lose market share to its competitors. In addition, legislative reactions to
the problems of the thrift industry during the 1980s have added to the
regulatory burden on banks.
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was signed into law. FDICIA amended numerous Federal
banking statutes and has required the bank regulatory agencies to adopt
regulations for implementing many provisions of FDICIA. Regulators have been
given substantially more power over banks, including the ability to move
quickly without interference to remove management or directors. FDICIA also
directs regulators to close or transfer troubled institutions before they
become insolvent. FDICIA and the regulations thereunder have increased the
regulatory and supervisory requirements for financial institutions, which
have resulted and will continue to result in increased operating expenses.
See "Supervision and Regulation."
CREDIT RISK
The greatest risk facing lenders generally is credit risk, that is, the
risk of losing principal and interest due to a borrower's failure to perform
according to the terms of the loan agreements. There can be no assurance
that the Company's future results of operations or financial condition will
not be adversely affected by failure of borrowers to pay principal and
interest obligations on loans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Years Ended December 31, 1994
and 1995--Risk Management--Credit Risk."
EXPOSURE TO LOCAL ECONOMIC CONDITIONS
The Bank's concentration of loans in the State of Missouri exposes it to
risks resulting from changes in the local economy. The business of the Bank
could be adversely affected by recessionary and economic conditions in its
markets or by a dramatic decrease in real estate values therein. See
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<PAGE> 10
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Years Ended December 31, 1994 and 1995--Risk Management--Exposure
to Local Economic Conditions."
INTEREST RATE RISK
The Company's earnings depend to a great extent upon the level of net
interest income, which is the difference between interest income earned on
loans and investments and the interest expense paid on deposits and other
borrowings. Although the Company believes that maturities of the Bank's
assets are well balanced in relation to maturities of liabilities (gap
management), gap management is not an exact science. Rather, it involves
estimates as to how changes in the general level of interest rates will
impact the yields earned on assets and the rates paid on liabilities.
Moreover, rate changes can vary depending upon the level of rates and
competitive factors. From time to time, maturities of assets and liabilities
may not be balanced, and a rapid increase or decrease in interest rates could
have an adverse effect on net interest margins and results of operations of
the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Years Ended December 31, 1994 and
1995--Risk Management--Interest Rate Risk."
DEPOSIT MIX
Certificates of deposit accounted for approximately 56% and 58%,
respectively, of the Bank's total deposits as of December 31, 1995 and
September 30, 1996. Many of such certificates of deposit were purchased by
customers in response to promotions offering above-market interest rates.
Payment of premium interest rates by the Bank adversely affects the Bank's
interest rate spread. Moreover, the Bank's concentration of deposits in
certificates of deposit could have a negative impact on the stability of its
deposits as purchasers of certificates of deposit may not redeposit the
proceeds of their certificates of deposit after the certificates of deposit
mature, particularly if the Bank then is not offering promotional rates.
There can be no assurance the concentration of the Bank's deposits in
certificates of deposit will not have a material adverse effect on the Bank's
future results of operation or liquidity.
NO ASSURANCE OF FUTURE GROWTH
There can be no assurance that the Company will continue to achieve growth
in assets and earnings. The Company's ability to achieve such growth will be
dependent upon numerous factors, including the intensity of competition for
deposits and loans with other bank and non-bank financial institutions, the
availability of suitable opportunities to make loans, selection of suitable
branch sites on favorable terms, avoidance of credit losses, hiring and
training of personnel, depth in management and adequate financing.
COMPETITION
The Company encounters substantial competition for deposits and loan
customers in the markets in which it competes. The Company's principal
competitors include other financial institutions such as banks, savings and
loan institutions and credit unions, and a number of other non-bank
competitors such as insurance companies, small loan companies, finance
companies and mortgage companies. Many of the Company's non-bank competitors
are not subject to the same extensive Federal and state regulations which
govern the Company and, as a result, have a competitive advantage over the
Company in providing certain services. Many of the financial institutions with
which the Company competes are larger and have substantially greater financial
resources than the Company.
- 9 -
<PAGE> 11
CONTROL BY MANAGEMENT
The Company's directors and executive officers currently beneficially own
approximately 1,386,360 shares of Common Stock (approximately 60% of the shares
of Common Stock outstanding) including shares of Common Stock subject to
options, warrants and Convertible Debentures that may be acquired upon exercise
or conversion within the next 60 days. This controlling ownership will enable
such persons to continue to possess voting control on corporate matters for the
foreseeable future. The Company's officers and directors or members of their
immediate families or entities which they control have indicated their intention
to purchase 218,932 shares of Common Stock in the offering, which could
materially increase their respective beneficial ownership of Common Stock. See
"Security Ownership by Management."
NO ASSURANCE OF CASH OR STOCK DIVIDENDS
There is no assurance that the Company will have sufficient cash available
to declare cash dividends to its shareholders in the future. The payment of
cash dividends is subject to the discretion of the Company's Board of
Directors and will be dependent upon many factors, including the Company's
earnings and the earnings of the Bank, their capital needs and other
financial considerations. In addition, the Company is presently limited in
its ability to pay cash dividends on the Common Stock without the consent of
its lender. Management anticipates that for the foreseeable future, the
Company will follow a policy of retaining earnings in order to meet capital
and loan loss reserve requirements and to finance the expansion and
development of its business. Although the Company has paid stock dividends
over the past five years, there can be no assurance that it will pay stock
dividends in the future. See "Price Range of Common Stock and Dividends."
RELIANCE ON MANAGEMENT
The success of the Company will depend to a large extent on the quality of
management provided by the senior management of the Company and the Bank, the
loss of certain of whom would adversely affect the Company. Other than a $2
million policy on the life of Shaun R. Hayes, the President of the Company,
the Company does not presently own, or intend to purchase, insurance covering
the lives of the senior management of the Company and the Bank. There can be
no assurance that the services of the senior management of the Company will
continue to be available.
BEST EFFORTS OFFERING
The shares of Common Stock are being offered by the Company on a "best
efforts" basis. Accordingly, there can be no assurance that all of the
shares will be sold. No minimum number of shares is required to be sold
under the terms of this offering. Upon the Company's acceptance of a
subscription other than pursuant to the Oversubscription Privilege, the funds
will be available for use by the Company. All subscriptions will be
irrevocable by subscribers. Those subscriptions accepted by the Company as
of the Offering Termination Date will constitute the shares sold in this
offering.
SHARES ELIGIBLE FOR FUTURE RESALE
Upon consummation of the offering, the Company will have outstanding an
aggregate of 2,838,750 shares of Common Stock (assuming the Subscription
Rights are fully exercised). Future sales of substantial amounts of Common
Stock (including shares issued upon the exercise of stock options and
warrants, and the conversion of debentures) by the Company's current
shareholders after the offering, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock.
- 10 -
<PAGE> 12
One hundred eight thousand nine hundred shares of Common Stock, which were
privately placed in May 1995, will become eligible for resale in May 1997,
subject to compliance with the terms and conditions of Rule 144. No
prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
market price of the Common Stock. See "Shares Eligible for Future Sale."
MARKET FOR COMMON STOCK
Although the Common Stock is listed on the Nasdaq National Market, there
has been only limited trading in the Common Stock. There can be no assurance
that an active market for the Common Stock will develop in the foreseeable
future. Investors in the shares of Common Stock must, therefore, be prepared
to assume the risk of their investment for an indefinite period of time.
STOCK NOT AN INSURED DEPOSIT
Investments in the shares of Common Stock are not deposits insured against
loss by the FDIC or any other entity.
DETERMINATION OF OFFERING PRICE
The Subscription Price of the shares of Common Stock in this offering has
been determined by the Board of Directors of the Company. The Subscription
Price of the Common Stock does not necessarily reflect the price at which the
Common Stock would sell in the market following this offering. See "The
Offering--Determination of Subscription Price."
THE OFFERING
SUBSCRIPTION RIGHTS
The Company, through its officers and directors, is offering to the holders
of its Common Stock of record at the close of business on January 15, 1997
(the "Record Date"), the nontransferable right to subscribe (the
"Subscription Right"), at $9.375 per share (the "Subscription Price"), for
0.25 shares of Common Stock of the Company for every one share held on the
Record Date.
THE DIRECTORS AND OFFICERS OF THE COMPANY AND MEMBERS OF THEIR
IMMEDIATE FAMILIES OR ENTITIES WHICH THEY CONTROL HAVE INDICATED
THEIR INTENTION TO PURCHASE IN THIS OFFERING AN AGGREGATE OF AT
LEAST 218,932 SHARES OR SHARES HAVING AN AGGREGATE PURCHASE PRICE
OF AT LEAST $2,052,487, SUBJECT TO PRORATION TO THE EXTENT OF ANY
OVERSUBSCRIPTION.
No director or officer will be entitled to receive any commissions or other
compensation in connection with selling such shares, but any of them may be
reimbursed by the Company for reasonable expenses, if any, incurred in
connection with the sale of the shares.
OVERSUBSCRIPTION PRIVILEGE
Any shareholder who has exercised his or her Subscription Rights in full will
have the nontransferable right to subscribe ("Oversubscription Privilege"), at
the Subscription Price, for additional shares not purchased through the exercise
of Subscription Rights of others, subject to allotment as more fully described
below.
Oversubscriptions must be accompanied by a cash payment in full for the
number of shares requested thereunder, as more fully described in the
Subscription Certificate. If the shares available are
- 11 -
<PAGE> 13
not sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, the available shares will be allotted pro rata (subject to
eliminating fractional shares) among shareholders who exercise the
Oversubscription Privilege, proportionately based upon the number of shares
subscribed for pursuant to the Oversubscription Privilege. Allegiant Bank, the
"Subscription Agent," will refund, without interest, payments received in
excess of the amount required to pay for the shares allotted for purchase.
SUBSCRIPTION CERTIFICATES
The Subscription Rights and Oversubscription Privilege are represented by a
nontransferable subscription certificate the form of which is included as
Exhibit A to this Prospectus (the "Subscription Certificate") which sets
forth the total number of Subscription Rights to which each shareholder is
entitled. Subscription Rights may be exercised in whole or in part. No
subscriber may subscribe for fractional shares of Common Stock. All
fractional shares will be rounded to the next lowest whole share.
OFFERING EXPIRATION DATE
This offering will expire at 5:00 p.m., St. Louis time, on February 24,
1997 (the "Offering Termination Date"), unless further extended or earlier
terminated by the Company, in its sole discretion, without notice to
shareholders. Any rights to purchase shares of Common Stock evidenced by the
Subscription Certificates will thereafter be void.
SUBSCRIPTION PROCEDURE
To subscribe for shares of Common Stock, a shareholder must complete the
Subscription Certificate and deliver the Subscription Certificate, together
with full payment of the Subscription Price for all shares subscribed for, to
the Subscription Agent, at the following address:
Allegiant Bank
7801 Forsyth Boulevard
Clayton, Missouri 63105
Attention: Rights Offering
When using the United States mail, sufficient time must be allowed for the
Subscription Certificate to be delivered to the Subscription Agent prior to
the Offering Termination Date. Late delivery will not be accepted unless the
Company, in its sole discretion, otherwise determines. The Subscription
Price must be paid in full in United States currency in cash or by check,
bank draft, money order or wire transfer (as provided in the Subscription
Exercise Form) payable to Allegiant Bancorp, Inc. Subscriptions
are irrevocable following receipt by the Subscription Agent. It is
suggested that an exact copy of the completed Subscription Certificate be
retained by each subscriber for his or her records. Stock certificates
representing Common Stock issued in this offering will be delivered as soon
as practicable after the Offering Termination Date, which is expected to be
within 15 days after such date.
All executed Subscription Certificates must be in a form satisfactory to the
Company. Once made, subscriptions are irrevocable, and no alternative,
conditional or contingent subscriptions will be accepted. The Company
reserves the right to waive any irregularities or conditions, and the
Company's interpretations of the terms and conditions of this offering shall
be final and binding. Any irregularities in connection with subscriptions
must be cured within such time as the Company shall determine, unless waived.
The Company is not under any duty to give notification of defects in
subscriptions and it will not have any liability for failure to give
notifications. Subscriptions will not be deemed to have been
- 12 -
<PAGE> 14
made until such irregularities have been cured or waived. Defective
subscriptions and subscriptions not accepted by the Company will be promptly
returned, without interest, to the subscriber.
SUBSCRIPTION RIGHTS NOT TRANSFERABLE
The Subscription Rights granted to shareholders are not transferable other
than by will or the laws of descent and distribution. Accordingly, there
will be no market for such rights.
Notwithstanding the foregoing, shareholders may exercise Subscription Rights
in respect of shares beneficially owned by them in any form of ownership they
choose, so long as they beneficially own the subscribed for shares. For example,
a shareholder who owns shares through an individual retirement
account may exercise the related Subscription Rights and direct that the shares
subscribed for be registered in that individual's name directly.
DETERMINATION OF SUBSCRIPTION PRICE
The Subscription Price of the shares of Common Stock in this offering has
been determined by the Board of Directors of the Company after taking into
account prevailing market conditions and a number of other factors,
including, but not limited to: (i) the Company's earnings; (ii) the current
financial position of the Company; (iii) the experience of the Company's
management; (iv) the recent trading history of the Common Stock; (v) current
shareholders' equity per share; (vi) the value of similar securities; and
(vii) the Company's position in its industry and its prospects. The
Subscription Price of the Common Stock does not necessarily reflect the price
at which the Common Stock would sell in the market following this offering.
PURCHASE LIMITATIONS
The Company reserves the right not to accept any subscriptions under this
offering, which due to the number of existing shares held by the subscriber
or the number of shares subscribed for, would require prior clearance or
approval by regulatory authorities if, at the Offering Termination Date, such
clearance or approval has not been obtained. If the Company elects not to
issue shares subscribed for in this offering for the above reason, such
shares will become available to satisfy subscriptions pursuant to the
Oversubscription Privilege.
Federal law requires that any person who directly or indirectly, or through
or in concert with one or more persons, acquires "control" of the Company
(defined to include ownership, control or the power to vote 10% or more of a
class of voting securities of the Company if no other person will own a
greater proportion of that class of voting securities) to provide at least 60
days' prior written notice to the Federal Reserve Board. A person is deemed
to have acquired shares which he or she has the right to acquire through the
exercise of options, warrants and rights. See "Supervision and Regulation."
Therefore, any subscriptions pursuant to this offering which would be subject
to such Federal laws may, in the Company's discretion, be deemed void in
their entirety or in part, and not accepted by the Company.
ESCROW OF SUBSCRIPTION FUNDS
Funds received upon exercise of Subscription Rights will not be held in
escrow pending conclusion of this offering and will be immediately available
to the Company. Funds received upon exercise of the Oversubscription
Privilege will be held in a segregated, non-interest bearing, escrow account
at the Bank. The subscription funds deposited in the segregated account will be
released:
- 13 -
<PAGE> 15
(i) to any subscriber, without interest, at the time his or her
oversubscription is rejected by the Company (or a portion of such funds, if
any oversubscription is rejected in part by Company); or (ii) to the Company
after the Offering Termination Date.
Certificates for shares subscribed for and accepted are expected to be
issued within 15 days after the Offering Termination Date.
OFFEREES IN NON-QUALIFIED STATES AND FOREIGN JURISDICTIONS
The Company will make reasonable efforts to comply with the securities laws
of all states in the United States in which persons entitled to subscribe for
shares of Common Stock reside. Notwithstanding the foregoing, no person will
be offered or receive shares of Common Stock if such person resides in a
foreign country or resides in a state of the United States with respect to
which any of the following apply: (i) the granting of Subscription Rights or
the offer or sale of the shares of Common Stock to such persons would require
the Company or its officers or directors, under the securities laws of such
state, to register as a broker, dealer, salesman or selling agent, or to
register or otherwise qualify the shares of Common Stock for sale in such
state; or (ii) such registration or qualification would be impracticable for
reasons of cost or otherwise.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material United
States federal income tax ("federal income tax") consequences of the
distribution (the "Distribution"), receipt, exercise and/or lapse of the
Subscription Rights and Oversubscription Privileges (collectively, the
"Rights") to the Company and to certain Company shareholders. The
discussion does not address all aspects of federal income taxation that may
be applicable to Company shareholders in light of their status or personal
investment circumstances, nor does it address the federal income tax
consequences of the Rights Distribution that may be applicable to Company
shareholders subject to special federal income tax treatment including
(without limitation) foreign persons, insurance companies, tax-exempt
entities, retirement plans, dealers in securities, persons who acquired
their Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation, and persons who hold their Common Stock as part
of a "straddle", "hedge" or "conversion transaction." In addition, the
discussion does not address the effect of any applicable state, local or
foreign tax laws, or the effect of any federal tax laws other than those
pertaining to the federal income tax. As a result each Company shareholder
should consult his or her own tax advisor to determine the specific tax
consequences of the receipt, exercise or lapse of the Rights to such
shareholder. The discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), regulations proposed or promulgated
thereunder, judicial precedent relating thereto, and current administrative
rulings and practice, all of which are subject to change. Any such change,
which may or may not be retroactive, could alter the tax consequences
discussed herein. The discussion assumes that shares of Common Stock are
held as capital assets (within the meaning of Section 1221 of the Code).
Federal Income Tax Consequences to Company. The Company will not recognize
gain or loss upon the Distribution, or upon the receipt, exercise and/or
lapse of the Rights.
Federal Income Tax Consequences to Shareholders. Shareholders who receive
their Rights in the Distribution will have the following federal income tax
consequences:
Receipt of the Rights. No gain or loss will be recognized by
shareholders upon the receipt of Rights in the Distribution.
- 14 -
<PAGE> 16
Basis of the Rights. The basis of Rights received in the Distribution
and subsequently allowed to lapse will be zero. Except as provided in the
following sentence, the basis of the Rights received in the Distribution and
subsequently exercised also will be zero. If, however, either (i) the fair
market value of the Rights on the date of the Distribution is 15% or more of
the fair market value (on the date of the Distribution) of the Common Stock
with respect to which they are received or (ii) the shareholder properly
elects, in accordance with procedures set forth in Treasury Regulation
Section 1.307-2, to allocate part of the basis of such Common Stock to the
Rights (the "Basis Election"), then the shareholder's basis in such Common
Stock will be allocated between the Common Stock and the Rights in
proportion to the fair market values of each on the date of Distribution.
The Company is unsure whether the value of a right on the proposed date of
issuance will be more or less than 15% of the fair market value of the Common
Stock in question.
As a result, shareholders desiring to allocate a portion of their Common Stock
basis to Rights that will be exercised may wish to consider making a Basis
Election.
Exercise of the Rights; basis and holding period of Common Stock. No
gain or loss will be recognized by shareholders upon the exercise of Rights
received in the Distribution. The basis of Common Stock acquired through
exercise of the Rights will be equal to the sum of the Subscription Price
therefor and the shareholder's basis in such Rights (if any). The holding
period for the Common Stock acquired through exercise of the Rights will
begin on the date the Rights are exercised.
Lapse of the Rights. No gain or loss will be recognized by
shareholders upon the lapse of Rights received in the Distribution, and no
adjustment in respect of Rights allowed to lapse will be made to the basis
of Common Stock owned by such shareholders.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE RIGHTS OFFERING TO CERTAIN COMPANY SHAREHOLDERS AND
DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH
COMPANY SHAREHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL
INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY
TO EACH COMPANY SHAREHOLDER. ACCORDINGLY, EACH COMPANY SHAREHOLDER SHOULD
CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE RIGHTS OFFERING, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL AND OTHER TAX LAWS.
USE OF PROCEEDS
The net proceeds from the sale of 567,750 shares of Common Stock offered
hereby, estimated at approximately $5.3 million if all of the shares of
Common Stock offered hereby are purchased, will be added to the Company's
working capital and used for general corporate purposes, including, without
limitation, contributing all or a substantial portion of such proceeds to the
Bank to support continued growth of the Bank. Pending application of the net
proceeds, the Company may invest such net proceeds primarily in short-term
liquid investments.
- 15 -
<PAGE> 17
The following table sets forth the amount of net proceeds from the offering
which would be available to the Company if fewer than all of the shares
offered hereby are sold. If fewer than all of the shares offered hereby are
sold, the net proceeds will also be used as set forth above.
<TABLE>
<CAPTION>
ASSUMED NUMBER NET PROCEEDS TO
OF SHARES SOLD COMPANY
-------------- ---------------
<S> <C>
137,500 shares $1.2 million
275,000 shares $2.5 million
412,500 shares $3.8 million
</TABLE>
Expenses payable by the Company in connection with the offering are
estimated at $100,000 and include printing, mailing, legal, accounting and
other related costs of this offering. See "The Offering."
The following table reflects certain capital ratios of the Company at
September 30, 1996, and as adjusted to give effect to the sale of
approximately 50% and 100% of the shares of Common Stock offered hereby:
<TABLE>
<CAPTION>
ACTUAL AT PRO FORMA AT
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996<F1><F2>
------------------ --------------------------
275,000 567,750
SHARES SOLD SHARES SOLD
----------- -----------
<S> <C> <C> <C>
Shareholders' equity to total assets 4.33% 5.02% 5.79%
Tier 1 capital to risk-weighted assets 6.18 7.23 8.37
Total capital to risk-weighted assets 8.76 9.82 10.96
Leverage capital ratio 4.61 5.38 6.23
<FN>
- -------------------------------------
<F1> For purposes of the pro forma information, it is assumed
that the Company's total assets will increase by the amount of
the estimated net proceeds from the offering.
<F2> Pro forma information assumes a risk-weighting factor of
68% (the average risk-weighting factor for the Company's total
assets at September 30, 1996) for the net proceeds from the
offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Management and
Resources."
</TABLE>
While the additional capital raised by this offering is intended to support
the future growth of the Company, there is no assurance that such additional
capital will result in such growth or profitability.
The Company expects to add branch locations, including a proposed branch in
St. Charles County which is planned for the first half of 1997. It also
intends to be receptive to opportunities to acquire other financial
institutions, or branches of other financial institutions, if such actions
are deemed to be consistent with the Company's objectives. The Company has
no present plans to open additional branches other than in St. Charles, and
it neither has any present understandings or commitments, nor is it currently
engaged in active negotiations, pertaining to the acquisition of branches or
financial institutions; however, a portion of the proceeds of this offering
could be utilized for such purposes.
- 16 -
<PAGE> 18
PRICE RANGE OF COMMON STOCK
AND DIVIDENDS
The Common Stock (symbol: "ALLE") has been traded on the Nasdaq National
Market since May 15, 1996. From September 30, 1995 to such date it was
traded on the Nasdaq Small Cap Market. As of September 30, 1996, the number
of shareholders of the Common Stock was approximately 750. The following
table sets forth the high and low trading prices as well as dividends per
share as reported by the Nasdaq since the third quarter of 1995. Such prices
reflected interdealer prices, without retail mark-up, mark-down or
commission. Prior to the third quarter of 1995, there was no established
public trading market for the Common Stock. Accordingly, for periods prior
to the third quarter of 1995, the sales prices of actual individual trades of
Common Stock have been included in the table below to the extent known to the
Company's management.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS PAID
---- --- --------------
<S> <C> <C> <C>
1995
First Quarter $ 7.027 $ 7.027 $0.017
Second Quarter 7.027 7.027 0.017
Third Quarter 7.855 7.855 0.017
Fourth Quarter 10.227 8.055 0.017
1996
First Quarter $11.023 $11.023 $0.023
Second Quarter 11.023 9.773 0.023
Third Quarter 11.364 9.773 0.023
Fourth Quarter 12.343 12.159 0.023
1997
First Quarter (through
January 21, 1997) $13.284 $12.750 $ -
</TABLE>
The future dividend policy of the Company is subject to the discretion of
the Board of Directors and will depend upon a number of factors, including
future earnings, financial condition, cash needs and general business
conditions. Holders of Common Stock will be entitled to receive dividends as
and when declared by the Board of Directors of the Company out of funds
legally available for that purpose. The Company effected a six-for-five
stock split (in the form of a stock dividend) in January 1994, a two-for-
three stock split (in the form of a stock dividend) in January 1995, a
10% stock dividend in January 1996 and a 10% stock dividend in January 1997.
In October 1996, the Company's Board of Directors announced an increase in
the dividend policy to a rate of $0.03 per share quarterly beginning with the
regular quarterly dividend scheduled for the first quarter of 1997.
Cash available for dividend distribution to the holders of Common Stock
must initially come from dividends paid to the Company by the Bank.
Accordingly, restrictions on the Bank's cash dividend payments directly
affect the payment of cash dividends by the Company. There can be no assurance
that the Board of Directors will declare any stock splits or stock dividends
in the future.
The FDIC and/or the Division of Finance has the authority to prohibit the
payment of cash dividends by the Bank when it determines such payment to be
an "unsafe or unsound banking practice" under the then existing
circumstances. The Federal Deposit Insurance Corporation Act generally
prohibits all payments of dividends by any bank which is in default of any
assessment to the FDIC. The Company's bank loan agreement also restricts the
amount of dividends the Company may pay. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Deposits."
- 17 -
<PAGE> 19
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 30, 1996, and as adjusted to reflect the issuance and sale of
275,000 shares (approximately one-half of those offered hereby) and 567,750
shares (all of those shares offered hereby) at an offering price of $9.375
per share, and the application of the anticipated net proceeds therefrom.
This table should be read in conjunction with the Company's consolidated
financial statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------
ACTUAL AS ADJUSTED
------ -------------------------
275,000 567,750
SHARES<F1> SHARES<F1>
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Note to bank $ 4,800 $ 4,800 $ 4,800
Note to FHLB 7,000 7,000 7,000
10% Convertible Debentures due 9/1/99 504 504 504
Junior debentures 3,276 3,276 3,276
------- ------- -------
Total long-term debt 15,580 15,580 15,580
------- ------- -------
SHAREHOLDERS' EQUITY:
Common Stock, $0.01 par value;
7,800,000 shares authorized; issued
and outstanding actual 2,196,174;
as adjusted 2,471,174 and 2,763,924 shares, respectively 20 23 26
Capital surplus 13,621 16,096 18,838
Retained earnings 1,731 1,731 1,731
Net unrealized depreciation on
securities available for sale (62) (62) (62)
------- ------- -------
Total shareholders' equity 15,310 17,788 20,533
------- ------- -------
Total capitalization $30,890 $33,368 $36,113
======= ======= =======
<FN>
- -----------------------------------------
<F1> Amounts do not include an aggregate of 597,376 shares of
Common Stock issuable: (i) upon exercise of outstanding stock
options; (ii) upon exercise of outstanding warrants; and
(iii) pursuant to options which may be granted under the Company's
stock option plans.
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of December 31,
1992, 1993, 1994 and 1995 for the years then ended are derived from the
consolidated financial statements of the Company, which have been audited by BDO
Seidman, LLP, independent public auditors. The selected consolidated financial
data set forth below as of September 30, 1995 and 1996 and for the nine-month
periods then ended are derived from unaudited financial statements, but in the
opinion of management reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial condition and
results of operations as of such dates and for such interim periods. The results
of operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the entire year. The consolidated
balance sheet as of December 31, 1995 and the consolidated income statements for
the years ended December 31, 1994 and 1995 are included elsewhere in this
Prospectus. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements and notes and thereto and
the other information included in this Prospectus.
- 18 -
<PAGE> 20
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- -------------------------
1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (at period end)
Total assets $ 68,782 $ 104,416 $ 171,927 $ 280,386 $ 240,703 $ 351,204
Investment securities 14,434 23,063 40,888 73,211 55,840 62,308
Total loans 45,600 69,773 121,393 181,544 167,028 274,260
Total deposits 61,624 90,686 134,884 231,309 189,010 267,873
Long-term debt 2,400 2,200 9,804 19,719 22,919 15,580
Shareholders' equity 3,894 7,487 8,453 13,938 13,760 15,310
Average assets 56,925 84,361 133,466 228,130 218,317 291,656
Average Shareholders' equity 3,771 4,611 8,080 11,737 10,678 14,606
Income Statement Data
Interest income $ 4,203 $ 5,585 $ 9,994 $ 19,252 $ 14,034 $ 18,347
Interest expense (2,133) (2,675) (4,584) (11,206) (7,950) (10,639)
--------- ---------- ---------- ---------- ---------- ----------
Net interest income 2,070 2,910 5,410 8,046 6,084 7,708
Provision for possible loan loss (108) (233) (849) (977) (717) (950)
--------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision 1,962 2,677 4,561 7,069 5,367 6,758
--------- ---------- ---------- ---------- ---------- ----------
Other operating income 247 282 513 654 497 732
Other operating expense (2,011) (2,546) (3,764) (5,625) (4,194) (5,182)
--------- ---------- ---------- ---------- ---------- ----------
Income before taxes 198 413 1,310 2,098 1,670 2,308
Provision for Income Taxes (78) (161) (509) (823) (663) (905)
--------- ---------- ---------- ---------- ---------- ----------
Net income $ 120 $ 252 $ 801 $ 1,275 $ 1,007 $ 1,403
========= ========== ========== ========== ========== ==========
Shares outstanding (at period end) 846,821 1,500,400 1,566,043 2,187,937 2,185,657 2,196,174
Adjusted average shares outstanding 852,110 1,076,791 1,520,222 2,056,432 1,913,039 2,367,965
Per Share Data
Book value per Common share $ 4.60 $ 4.99 $ 5.40 $ 6.37 $ 6.30 $ 6.97
Primary Earnings per share 0.14 0.23 0.53 0.62 0.53 0.59
Cash dividends declared per share -- 0.02 0.04 0.07 0.05 0.07
Selected Financial Ratios
Return on average total assets 0.21% 0.30% 0.60% 0.56% 0.62% 0.64%
Return on average Shareholders' equity 3.18% 5.47% 9.91% 10.86% 12.57% 12.81%
Net interest margin 3.64% 3.71% 4.27% 3.71% 3.90% 3.68%
Efficiency ratio 86.79% 79.76% 63.55% 64.66% 63.73% 61.40%
Total operating expense to total
average assets 3.53% 3.02% 2.82% 2.47% 1.92% 1.78%
Average assets per employee $ 1,810 $ 1,917 $ 1,711 $ 2,328 $ 2,568 $ 3,352
Asset Quality Ratios
Loan loss reserve to total average loans 1.38% 1.40% 1.64% 1.34% 1.34% 1.27%
Non-performing loans to total loans 0.05% 0.02% 0.14% 0.17% 0.25% 0.17%
LLR to total non-performing loans 2,391.30% 5,535.71% 841.04% 691.56% 499.76% 584.55%
Net charge-offs to average loans 0.00% 0.01% 0.19% 0.19% 0.07% 0.17%
Company Capital Ratios
Risk-based capital ratio 6.47% 8.91% 13.04% 13.96% 12.41% 8.76%
Tier 1 Capital ratio 5.66% 7.20% 4.88% 4.93% 8.76% 6.18%
Leverage ratio 5.58% 8.07% 8.09% 8.13% 5.70% 4.19%
Bank Capital Ratios
Risk-based capital ratio 10.30% 11.03% 9.96% 14.70% 15.78% 10.90%
Tier 1 Capital ratio 6.30% 8.28% 7.24% 7.81% 14.41% 9.75%
Leverage ratio 8.79% 11.16% 8.08% 8.54% 9.35% 6.53%
</TABLE>
- 19 -
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995
Overview
Net income for 1995 was $1.3 million, an increase of 59% from $801,000 in
1994. On a per share basis, net income increased 18% to $.68 from $.58 a
year earlier. This lower percentage change per share was due to the
increased average number of shares outstanding compared to the previous year
due to the private placement of Common Stock. See "--Capital Management and
Resources."
In 1995, the Bank's total assets increased 63% from $171.9 million to
$280.4 million. This growth continued the favorable trend experienced in
1994 when total assets increased 54%. The growth in 1995 was due to an
increased deposit base in conjunction with increased loan demand, improved
economic conditions and broader market presence. Total deposits grew 72% in
1995. Much of this growth in deposits resulted from deposit promotions held
for grand openings of the Clayton and Des Peres branches.
Loans, the largest component of interest earning assets, increased from
$121.4 million at December 31, 1994, to $181.5 million at December 31, 1995,
an increase of 50%. While the Company traditionally has focused on small to
mid-sized commercial lending, the acquisition of the Mortgage Company has
enabled the Company to increase its earning assets by expanding its mortgage
lending activities. The largest component of the Bank's loan portfolio
consists of real estate mortgage loans which totaled $124.1 million at
December 31, 1995, compared to $78.9 million on December 31, 1994. The
remainder of the loan portfolio consists of consumer, agricultural and
construction loans, generally originated in the Bank's regular trade area.
The large increase in one- to four-family real estate mortgages was
attributable to the first full year of operations of the Mortgage Company,
acquired in 1994. Total originations for the year were $53.0 million. The
Bank is one of the Mortgage Company's regular investors, purchasing
adjustable rate one- to four-family residential mortgages. The Bank benefits
from this relationship in that credit quality can be monitored more
efficiently and the loan structure can be tailored to the Bank's asset mix.
The Bank prefers holding one- to four-family adjustable rate mortgage loans
due to the lower credit risk associated with this type of loan, as well as
the frequent repricing of the loans due to periodic adjustments. However,
these types of loans generate lower yields when compared with commercial
loans and should be considered when analyzing the Company's net interest
margin.
In August 1995, the Bank entered into a mortgage loan swap agreement with
the Federal National Mortgage Association ("FNMA"), securitizing
$12.3 million of adjustable rate mortgages into two mortgage backed
securities. Of this aggregate amount, the Bank had the positive intent and
the ability to hold $10.3 million in adjustable rate mortgages in the Held-to-
Maturity ("HTM") category. The remaining $2.0 million was categorized as
Available-for-Sale ("AFS") to improve the Bank's liquidity position.
Management believes that this type of transaction is a good fit for the
Company because it offers a high yield along with a high level of liquidity.
This also allows the Bank to manage the total aggregate amount of loans
outstanding to adjust to current market conditions. The Company anticipates
that this mortgage loan swapping strategy will become a regular part of its
operating procedures.
- 20 -
<PAGE> 22
Commercial and industrial loans increased 44% in 1995, by $12.3 million from
$28.2 million at December 31, 1994, to $40.5 million at December 31, 1995. The
portfolio is diversified from an industry standpoint and includes businesses
engaged in manufacturing, wholesaling, retailing, agribusiness, financial
services and other service business. Emphasis is upon middle-market and
community businesses with known local management and financial stability.
Consistent with the Bank's strategy and emphasis upon relationship banking,
most borrowing customers also maintain deposit accounts and utilize other
banking services. Real estate is often a material component of collateral for
the commercial and industrial loans even though cash flows are unrelated to
the real estate. This real estate provides the Company with additional
collateral protection. The following table summarizes the composition of the
Bank's loan portfolio for the periods indicated:
<TABLE>
LOAN PORTFOLIO--TYPES OF LOANS
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commercial $ 28,213 $ 40,518
Real estate 78,921 124,055
Real estate construction 5,504 8,777
Installment and other 9,021 8,379
Less unearned income (266) (185)
-------- --------
Total loans 121,393 181,544
Less allowance for possible loan losses (1,455) (2,130)
-------- --------
Total loans less allowance for possible loan losses $119,938 $179,414
======== ========
</TABLE>
The investment portfolio has been principally comprised of U.S. government
securities or U.S government agency securities. Remaining investments include
mostly municipal securities from primarily local issuers. Consequently, there
has been minimal credit risk related to the Company's investment portfolio. The
book value and estimated market value of investment securities for the periods
indicated was as follows:
<TABLE>
INVESTMENT PORTFOLIO--TYPES OF SECURITIES
<CAPTION>
DECEMBER 31,
1995
-------------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------ -------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------ --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury securities $ -- $ -- $ 5,017 $ 5,002
Obligations of United States Government agencies 44,281 44,098 20,416 20,295
Federal Home Loan Bank Stock -- -- 2,703 2,703
States and political subdivisions 930 945 -- --
Other -- -- -- --
------- ------- ------- -------
Total Investment securities $45,211 $45,043 $28,136 $28,000
======= ======= ======= =======
- 21 -
<PAGE> 23
<CAPTION>
DECEMBER 31,
1994
-------------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------ -------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------ --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury securities $ 3,515 $ 3,396 $3,509 $3,360
Obligations of United States Government agencies 31,233 29,197 0 0
Federal Home Loan Bank Stock 0 0 2,278 2,278
States and political subdivisions 503 494 0 0
Other 0 0 0 0
-- -- -- --
------- ------- ------ ------
Total Investment securities $35,251 $33,087 $5,787 $5,638
======= ======= ====== ======
</TABLE>
Investment securities held AFS increased 397% to $28.0 million at
December 31, 1995, from $5.6 million at December 31, 1994. This increase
resulted from two factors. First, the Bank took advantage of a one-time
balance sheet adjustment related to SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," reclassifying securities
designated from HTM to the AFS category. This one-time adjustment will allow
the Bank to manage better the interest rate risk associated with the
investment securities portfolio. The second factor that lead to the increase
in AFS securities was an increase in holdings of shorter final maturity
securities known as discount notes. These short-term debt instruments
typically are held in larger denominations and mature within 90 days from the
date of purchase. The increase in the aggregate amount of discount notes
held was directly related to the Company's assessment of opportunities
available given the shape of the existing yield curve and the yield pick up
associated with this investment strategy at the time of the purchase. HTM
securities increased $10.0 million from $35.3 million to $45.2 million.
In the third quarter of 1995, the Bank implemented an investment strategy
known as a three-year laddered portfolio. The goal of a laddered portfolio
is to minimize reinvestment risk, or the risk of investing large amounts at
the same interest rate. This strategy involves dividing the portfolio into
36 monthly segments or "buckets." Each segment is generally filled with two
investments of $500,000 totaling an amount of up to $1.0 million per segment.
The ladder allows for a uniform portion of the portfolio to mature each month
to be reinvested three years out in million dollar segments. Because the
Bank is not investing the funds all at once, the portfolio generally yields
the normal average market rate, where the high rates match up with the low
rates to arrive at a stable blended average. Another advantage of the
three-year ladder is the relatively low volatility associated with the
purchase of shorter term securities due to the shorter duration. This strategy
has resulted in less unrealized loss that has to be subtracted from
shareholders' equity.
The Bank primarily holds investment securities for three reasons:
(i) first, as a secondary source of liquidity to fund additional loans as
well as managing deposit run-off as such situations arise; (ii) second, as
instruments to pledge against public deposits and repurchase agreements; and
(iii) third, to generate a yield of return that outperforms the yield of
merely holding excess cash in the overnight Fed Funds market. A strategy
implemented in 1995 that allows the Bank to achieve all three of these goals
is the creation of mortgage-backed securities. In August 1995, the
Mortgage Company entered into a swap agreement with FNMA, securitizing
adjustable rate mortgages for two mortgage-backed securities, one classified
HTM and the other AFS, subsequently assigning the securities to the Bank.
This transaction allowed the Bank to move previously booked loans to the
securities section of the balance sheet, achieving an attractive yield for
the Bank's bond portfolio and more importantly, increased the liquidity of
those earning assets while virtually eliminating credit risk in the form of a
guarantee from FNMA. However, the Bank did sustain some cost in yield when
securitizing these assets in the form of a 33 basis point guarantee fee to
FNMA.
- 22 -
<PAGE> 24
The growth in assets was matched with increases in total deposits and
long-term debt. Total deposits increased $96.4 million from $134.9 million
outstanding on December 31, 1994 to $231.3 million on December 31, 1995.
Significant increases in money market accounts, certificates of deposit and
certificates of deposit of over $100,000 accounted for the majority of the
increase in deposits.
Certificates of deposit accounted for approximately 62% and 56%,
respectively, of the Bank's total deposits as of December 31, 1994 and
December 31, 1995. Many of such certificates of deposit were purchased by
customers in response to promotions offering above-market interest rates.
Payment of premium interest rates by the Bank adversely affects the Bank's
interest rate spread. Moreover, the Bank's concentration of deposits in
certificates of deposit could have a negative impact on the stability of its
deposits as purchasers of certificates of deposit may not redeposit the
proceeds of their certificates of deposit after the certificates of
deposit mature, particularly if the Bank then is not offering promotional
rates. There can be no assurance the concentration of the Bank's deposits
in certificates of deposit will not have a material adverse effect on the
Bank's future results of operation or liquidity.
Money market deposit accounts increased $35.1 million from $18.8 million at
December 31, 1994, to $53.9 million at December 31, 1995, representing a 187%
increase. The majority of this increase was attributable to the deposit
promotion held in conjunction with the grand opening of the Des Peres branch.
Based upon past experience, management anticipates some attrition
of these deposits when the initial rate premiums expire. The next largest
percentage increase was in savings deposits. Savings deposits at
December 31, 1995, were $8.9 million compared to $3.7 million at
December 31, 1994, an increase of 138%. This increase was due to expanded
market coverage and deposits attracted by special promotions. The Bank's
strategy with its deposit promotions is to attract deposits with premium
introductory rates to build initial relationships. To retain these
relationships, the Bank offers superior personalized service with a friendly
neighborhood bank atmosphere.
Certificates of deposit over $100,000 increased 129% from $14.5 million on
December 31, 1994, to $33.1 million on December 31, 1995. The Company
attributes the growth in jumbo CDs to the increasing market coverage
associated with the new branches and the increase in the Bank's relationships
with corresponding public entities. The Company also attributes a
substantial amount of this increase to the Bank's strategy of greatly
reducing matching term jumbo CDs with an identical maturity investment
security, thus greatly reducing both interest rate and liquidity risk. Being
one of the few community banks located in the areas in which the Bank
operates branches, the Bank will continue to offer these products and
services as a way to facilitate community investment.
- 23 -
<PAGE> 25
The following tables set forth the distribution of the Bank's deposit
accounts at the dates indicated and the weighted average nominal interest
rates on each category of deposits at the dates indicated:
<TABLE>
TOTAL DEPOSITS
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1994 1995
-------------------------------------- -------------------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
-------------------------------------- --------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 15,785 11.70% --% $ 21,966 9.50% --%
NOW accounts 8,394 6.22 2.35 9,087 3.93 2.35
Money market accounts 18,771 13.92 3.00 53,905 23.30 4.23
Savings deposits 3,736 2.77 2.49 8,896 3.85 3.88
Certificates of deposit 69,688 51.66 4.39 97,460 42.13 5.91
Certificates of deposit over $100,000 14,453 10.72 4.11 33,140 14.33 5.61
IRA certificates 4,057 3.01 4.79 6,855 2.96 5.78
-------- ------ -------- ------
Total deposits $134,884 100.00% $231,309 100.00%
======== ====== ======== ======
</TABLE>
Long-term debt increased from $9.8 million on December 31, 1994, to
$19.7 million on December 31, 1995. This $9.9 million increase was comprised
of $3.3 million subordinated debt privately placed with the Company's
shareholders and a limited group of other investors and an increase of
$6.0 million in borrowings from the Federal Home Loan Bank of Des Moines
("FHLB"). The Bank obtained these FHLB advances in order to match certain
financing activities and as an alternate source of liquidity. The private
placement of the Common Stock and subordinated debt was the principal factor
in the increase in total shareholders' equity. From December 31, 1994 to
December 31, 1995, total shareholders' equity increased 65% from $8.5 million
to $13.9 million, respectively. See "--Capital Management and Resources."
Results of Operations
Net interest Income. Net interest income totaled $8.1 million for the year
ended December 31, 1995 compared to $5.4 million for 1994. This increase
primarily was attributable to the higher level of outstanding assets which
increased to $280.4 million at year-end 1995 compared to $171.9 million at
year-end 1994, an increase of 63%.
Another factor in the Company's earnings growth in 1995 was the improved
management of the Bank's investment securities portfolio. As previously
discussed, management implemented a new investment strategy for the bond
portfolio. This strategy placed less emphasis on total yield and more
emphasis on stable average market yield. This policy minimizes the
portfolio's exposure to interest rate risk by diluting the effects of a
volatile market, as was experienced in 1995. It is expected this improved
performance in the bond portfolio will be a major advantage to the Company by
offering more stable yields.
Increases in net interest income for the year ended December 31, 1995 were
offset in part by tightening spreads which resulted in a declining net
interest margin. The tightening spreads experienced by the Company are
resultant of three factors: (i) a shift toward the portfolioing of one- to
four-family adjustable rate mortgages; (ii) an extremely competitive market
for retail deposit pricing; and (iii) volatile interest rates. As previously
discussed, the Bank has traded yield for increased security by increasing its
portfolio of one- to four-family adjustable rate mortgages. In July 1995,
the Federal Reserve Board began
- 24 -
<PAGE> 26
lowering interest rates, causing the Company's earning assets to re-adjust
more quickly than interest bearing deposits and both long- and short-term
borrowings. As a result of the increasing growth in deposits and competitive
market pressures, the Company's net interest margin ended the year at 3.71%
for 1995, a decrease of 56 basis points from the net interest margin of 4.27%
achieved in 1994.
Corresponding to the growth in interest earning assets, the Company also
experienced growth in interest bearing liabilities. Interest paid on deposit
accounts constitutes the largest portion of total expense for the Bank. In
1995, total interest expense was $11.2 million. This reflected an increase
of $6.6 million from $4.6 million for 1994.
The largest percentage increase in interest expense resulted from an
increase in long-term debt outstanding. The aggregate amount of long-term
debt totaled $19.7 million at year-end 1995 versus $9.8 million at
December 31, 1994. This 101% increase was attributable to an increase in
FHLB borrowings and subordinated debt issued in a private placement which
included debentures in aggregate principal amount of $3.3 million. The
Company took advantage of attractive long-term financing from the FHLB and
matched a portion of these advances with the acquisition of the Des Peres
branch in October 1995. Another use for advances of these types is to match
a long-term FHLB advance to an equal maturity loan. The Bank's consumer
deposit profile generally does not extend past 18 months. Therefore, the
matching strategy just described would not have been possible without the
availability of the FHLB advances. This type or transaction is said to be
matched or arbitraged because volatile interest rate movements will not
affect the initial spread negotiated at loan closing.
FHLB advances were also utilized when the Bank was running the certificate
of deposit promotions. At the time of origination, FHLB advances were
compared to market rate CDs with similar maturities. The FHLB advance rate
was more attractive versus the market rate CD when the costs of originating
the CD and FDIC insurance were considered. In many cases, the advance rate
alone outperformed the market average rate CD. The Bank realizes that this
strategy is only of limited use because the customer is not involved in the
transaction and thus the opportunity for increased product usage by that
customer is eliminated with the use of a FHLB advance. The recent removal of
virtually all FDIC deposit premiums imposed on the Bank, will cause this type
of transaction to be less attractive in the future. Nevertheless, the FHLB
advances when used in conjunction with deposit promotions and regular retail
operations offer flexibility and an attractive method to increase funding for
loan growth. The Bank expects to utilize FHLB advances in the future, as the
need arises.
Interest paid to depositors in 1995 increased 239%, from $3.8 million in
1994 to $9.1 million in 1995. When compared to the Bank's peers in other
geographical regions, the St. Louis SMSA is substantially more competitive
with respect to consumer deposit pricing. The Company does not foresee a
change in this market condition in the near future. Additionally, the
previously referenced deposit promotions initiated in conjunction with the
opening of the Clayton and Des Peres branches contributed to the increase in
interest expense in 1995.
- 25 -
<PAGE> 27
The following table shows the condensed average balance sheets for the
periods reported and the average yield for each category used to calculate
the net interest margin.
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1994 1995
---------------------------------------- ---------------------------------------
AVERAGE INT EARNED/ YIELD/ AVERAGE INT EARNED/ YIELD/
BALANCE EXPENSE RATE<F1> BALANCE EXPENSE RATE<F1>
---------------------------------------- ---------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS:
Loans<F1> $ 88,654 $8,213 9.26% $158,503 $15,995 10.09%
Taxable investment securities 36,451 1,726 4.74 53,543 2,965 5.54
Federal funds sold 1,503 55 3.66 5,109 292 5.72
-------- ------ -------- ------- 8.87
Total interest earning assets 126,608 9,994 7.89 217,155 19,252
-------- ------ -------- -------
NON-INTEREST EARNING ASSETS:
Cash and due from banks 3,592 5,791
Bank premises and equipment 2,264 3,207
Other assets 2,022 4,021
Reserve for possible loan loss (1,020) (2,044)
-------- --------
Total assets $133,466 $228,130
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Money market accounts $ 16,592 $ 498 3.00 $ 20,095 $ 851 4.23
NOW accounts 8,656 203 2.35 8,257 194 2.35
Savings deposits 3,497 87 2.49 6,751 262 3.88
Certificates of deposit 57,211 2,512 4.39 97,115 5,737 5.91
Certificates of deposit over $100,000 8,749 360 4.11 29,481 1,655 5.61
IRA certificates 3,425 164 4.79 6,022 348 5.78
-------- ------ -------- -------
Total interest bearing deposits 98,130 3,824 3.90 167,721 9,047 5.39
-------- ------ -------- -------
Federal funds purchased, repurchase
agreements and other short term
borrowings 7,534 350 4.65 12,175 703 5.77
L/T borrowings 7,477 410 5.48 18,336 1,456 7.94
-------- ------ -------- -------
Total interest bearing liabilities 113,141 4,584 4.05 198,232 11,206 5.65
-------- ------ -------- -------
NON-INTEREST BEARING LIABILITIES:
Demand deposits 11,240 16,589
Other liabilities 1,005 1,572
Shareholders' equity 8,080 11,737
-------- --------
Total liabilities and
shareholders' equity $133,466 $228,130
======== ========
Net interest income $5,410 $ 8,046
====== =======
Net interest margin 4.27% 3.71%
<FN>
- --------------------
<F1> Interest on non-accruing loans is not included for purposes
of calculating yields.
</TABLE>
- 26 -
<PAGE> 28
The following table sets forth for the periods indicated, the changes in
interest income and interest expense which were attributable to changes in
average volume and changes in average rates:
<TABLE>
CHANGES IN INTEREST INCOME AND EXPENSE--VOLUME AND RATE VARIANCES
<CAPTION>
1994 1995
COMPARED TO 1993 COMPARED TO 1994
---------------------------------------------- ----------------------------------------------
VOLUME<F1> YIELD<F2> VOL*RATE NET CHANGE VOLUME<F1> YIELD<F2> VOL*RATE NET CHANGE
---------------------------------------------- ----------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans $2,802 $449 $268 $3,519 $6,471 $ 733 $ 578 $7,782
Taxable investment securities 715 123 114 952 809 293 137 1,239
Federal funds sold and
other investments (73) 29 (18) (62) 132 31 74 237
------ ---- ---- ------ ------ ------ ------ ------
Total interest income 3,444 601 364 4,409 7,412 1,057 789 9,258
------ ---- ---- ------ ------ ------ ------ ------
INTEREST PAID ON:
Money market accounts 115 10 3 128 105 205 43 353
NOW accounts 32 (6) (1) 27 (9) -- -- (9)
Savings deposits 6 (2) -- 4 81 49 45 175
Certificates of deposit 632 82 34 748 1,753 867 605 3,224
Certificates of deposit
over $100,000 325 14 18 357 853 131 311 1,295
IRA certificates 77 -- -- 77 124 34 26 184
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 264 18 129 411 216 85 52 353
L/T borrowings 301 (49) (95) 157 595 184 267 1,046
------ ---- ---- ------ ------ ------ ------ ------
Total interest expense 1,752 67 90 1,909 3,718 1,554 1,349 6,621
------ ---- ---- ------ ------ ------ ------ ------
Net interest income $1,692 $534 $274 $2,500 $3,694 $ (498) $ (560) $2,636
====== ==== ==== ====== ====== ====== ====== ======
<FN>
- --------------------
<F1> Change in volume multiplied by yield/rate of prior period.
<F2> Change in yield/rate multiplied by volume of prior period.
Note: 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.
</TABLE>
Provision For Loan Losses. Consistent with the Bank's written loan policy,
a reserve is set aside to offset possible future loan losses. This reserve is
provided on a monthly basis at a rate that corresponds to the increase in
loans outstanding, along with the current status of the existing loan
portfolio. The
- 27 -
<PAGE> 29
reserve for loan losses is increased by provisions charged to expense and
reduced by loans charged off, net of recoveries. The reserve is maintained at
a level considered adequate to provide for potential loan losses based on
management's evaluation of the anticipated impact on the loan portfolio of
current economic conditions, changes in the character and size of the
portfolio, past loan loss experience, potential future loan losses on
loans to specific customers and/or industries and other pertinent factors that
management believes require current recognition in estimating possible loan
losses. As an integral part of their examination process, the various
regulatory agencies periodically review the Bank's allowances for possible
loan losses. Such agencies have the authority to require the Bank to recognize
additions to the reserve based upon their judgment. The Company believes that
the allowances for possible loan losses at December 31, 1995 were adequate.
The Bank's total allowance for possible loan loss increased 46% from $1.5
million to $2.1 million on December 31, 1994 and 1995, respectively. The
provision for possible loan losses increased 15% over the amount reported in
the previous year. This represented an increase of $128,000, from $849,000
on December 31, 1994, to $977,000 on December 31, 1995.
Non-interest Income and Expense. Non-interest income for 1995 was
$654,000, an increase of 28% or $141,000, compared to $513,000 in 1994. This
increase was due to the increased number of deposit accounts and the increase
in fee services offered to the Company's customers.
Non-interest expense increased 49% from $3.8 million in 1994 to $5.6
million in 1995. Such increase primarily was attributed to the costs of
opening and operating new branches. This investment in new branches includes
an investment in human resources and technology. During 1995, the Bank
increased to 98 full-time equivalent employees, from 78 at the end of 1994.
These new employees include retail service professionals to work in the new
branches and upper-level management positions. The Bank believes this
investment in human resources will help differentiate the Bank from the other
participants in the St. Louis SMSA by permitting the Bank to offer friendly
service along with an innovative line of consumer products.
New products that the Bank intends to offer in 1996 include: home equity
lines of credit, investment annuities, debit cards, free checking, overdraft
lines of credit, PC home banking and the Bank plans to enhance its "home
page" on the Internet, which began operating in 1995. The Company believes
its commitment to quality customer service, along with offering innovative
consumer products, is vital to the Company's future success as the banking
industry consolidates. Also included in this increase in non-interest
expense is an investment in technology. Management believes that the
investment in technology now will yield future benefits in the form of
increased efficiency and profitability.
The percentage of total operating expenses to total average assets improved
to 2.47% in 1995, from 2.82% for 1994. This ratio is considered a measure of
the Company's leveraging of overhead expenses. The Company's efficiency
ratio increased 1%, from 64% in 1994 to 65% in 1995, reflecting the increased
investment in real estate and personal property associated with the opening
of the Des Peres branch and the new Allegiant Bank Operations Center which
was opened in the summer of 1995. Along with this increase in capital
expenditure on these new properties was an increased investment in human
resources, which resulted in the creation of the Human Resources Department
and the Internal Loan Control Group.
With the Operations Center becoming fully operational in February 1996, the
Company has benefited from a modern working environment along with
consolidation of similar tasks between the Bank and the Mortgage Company.
Throughout 1995, the Company suffered from inefficient logistical placement
of internal departments, with the accounting, loan processing, bookkeeping
and mortgage loan
- 28 -
<PAGE> 30
originations and processing operating at different locations. This configuration
caused inefficiencies and management believes these are the first cost savings
recouped with the completion of the Operations Center. Management expects the
Company's total overhead costs as a percentage of net interest income will
resume the downward trend experienced from 1992 to 1994, once the
above-described investments in technology and human resources begin to show
modest returns. Another overhead management ratio, average assets per full-time
equivalent employee, improved from $1.7 million per employee in 1994 to $2.3
million per employee in 1995.
In 1995, the FDIC announced that deposit insurance premiums would be
reduced to the base amount of $2,000 per year. As a result, the Company's
deposit insurance premiums fell 26% to $158,000 from $213,000 incurred in
1994. The FDIC indicated the premiums would be reinstated should the Bank
Insurance Fund need to be recapitalized. Management expects the reduction of
insurance premiums will help all banks compete with non-bank financial
service providers for retail deposits.
The following table sets forth the Company's non-interest income and
expense for the years indicated:
<TABLE>
NON-INTEREST INCOME AND EXPENSE
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
NON-INTEREST INCOME:
Service charges, commissions and fees $ 513 $ 658
Net losses on investment securities and those held for sale -- (4)
------ ------
Total non-interest income $ 513 $ 654
====== ======
NON-INTEREST EXPENSE:
Salaries and employee benefits $1,655 $2,809
Expense on premises and fixed assets 586 898
Other non-interest expense 1,523 2,895
------ ------
Total non-interest expense $3,764 $6,602
====== ======
</TABLE>
In December 1994, the Company's Board of Directors approved the Phantom Stock
Plan (the "Plan") for the Company's President, under which the Company agreed
to pay a cash award to the President of the Company based upon the increase in
book value of 40,000 shares of Common Stock from December 31, 1994 until the
earlier of: (i) December 31, 1998; or (ii) the end of the year immediately
preceding the year that the President's employment with the Company terminates.
As of December 31, 1995, the Company had accrued approximately $55,000 of the
amount payable under the Plan as non-interest expense for salaries and employee
benefits.
Sensitivity to Changes in Interest Rates. The Company's Asset/Liability
Committee monitors the interest rate sensitivity of the balance sheet on a
monthly basis. The committee reviews asset and liability repricing in the
context of current and possible interest rate scenarios affecting the
economic climate in the Company's market area. The objective of the
committee is to minimize the earnings sensitivity to volatile interest rates
while maintaining a net interest margin in keeping with the Company's
objectives.
Historically, interest on a large amount of the Bank's loans has
floated with the prime rate or other index. Also, a large amount of the
investment securities in the portfolio are floating rate as well, and are
subject to change quarterly or more often. The implications of a positive
gap vary according to trends in short- and long-term interest rates. In a
rising rate environment, assets tend to reprice more quickly than
liabilities, resulting in an increased spread for the Bank. In a falling
rate environment, assets tend to reprice downward faster than liabilities,
causing a tightening of the spread.
- 29 -
<PAGE> 31
The Bank's target gap range is 80% to 135% in the zero to three month
category, and 75% to 125% in the one-year category. The gap as of
December 31, 1995 was within the guidelines of the policy as follows:
<TABLE>
<CAPTION>
0 TO 3 4 TO 12 1 TO 5 OVER
MONTHS MONTHS YEARS 5 YEARS TOTAL
------ ------- ------ ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans $ 98,802 $ 26,580 $35,390 $ 20,772 $181,544
Investment Securities - Taxable -- -- 82 -- 82
Investment Securities - Tax Exempt 53,419 11,827 7,673 210 73,129
Federal Funds 14,200 -- -- -- 14,200
-------- -------- ------- --------- --------
Total earning assets $166,421 $ 38,407 $43,145 $ 20,982 $268,955
======== ======== ======= ========= ========
FUNDING SOURCES:
Money market accounts $ 53,905 $ -- $ -- $ -- $ 53,905
NOW accounts 9,087 -- -- -- 9,087
Savings 8,896 -- -- -- 8,896
Time deposits 17,675 57,088 22,417 280 97,460
Time deposits over $100,000 21,382 8,150 3,608 -- 33,140
IRAs 1,078 2,383 3,362 32 6,855
Repurchase agreements 4,058 -- 50 -- 4,108
Fed Funds Purchased -- -- -- -- --
S/T FHLB Borrowings 5,000 5,000 -- -- 10,000
L/T FHLB Borrowings -- -- 9,600 1,500 11,100
L/T Borrowings - Other 8,619 -- -- -- 8,619
-------- -------- ------- --------- --------
Total funding sources $129,700 $ 72,621 $39,037 $ 1,812 $243,170
======== ======== ======= ========= ========
Interest sensitivity gap - $ $ 36,721 $(34,214) $ 4,108 $ 19,170 $ 25,785
Interest sensitivity gap - % 128.31% 52.89% 110.52% 1,157.95% 110.60%
Cumulative gap - $ $ 36,721 $ 2,507 $ 6,615 $ 25,785 $ 51,570
Cumulative gap - % 128.31% 101.24% 102.74% 110.60% 110.60%
Gap as a percentage of total earning assets 13.65% 0.93% 2.46% 9.59% 19.17%
</TABLE>
Management's strategy toward positioning the Bank for interest rate
movements is three-fold. First, policies of the non-real estate lending,
deposit and investment functions call for all material investments and/or
fundings to be less than five years in maturity. Most of the non-real estate
loans made at the Bank are three years in maturity or less. The real estate
mortgage loans held in the portfolio are made up of one-, two- and three-year
adjustable rate loans which have a reduced exposure to interest rate risk.
Second, management has the flexibility to adapt to a changing interest rate
environment by altering the mix of floating and fixed rate commercial loans
and investment securities, subject to prevailing market conditions. Third,
management offers promotional deposit rates for certain maturity categories
in order to achieve its targeted maturity schedule for time deposits. The
continual renewal of a portion of the deposit base causes interest rate risk
to be lessened. This also has been accomplished in the investment portfolio
by building a "laddered" maturity schedule within a three-year time horizon.
Several tools are used to measure the rate sensitivity of the Bank's
balance sheet. The Bank's mainframe system produces asset and liability
reports, such as a gap analysis and rate and maturity information. A
simulation model also is used to forecast changes to the balance sheet under
four different rate scenarios. The model shows changes to equity and net
income under rising, falling, stable and management's most likely rate
scenarios. The results of these tools are used by the Asset/Liability
Committee, which meets twice monthly, to make decisions regarding the Bank's
positioning.
- 30 -
<PAGE> 32
Risk Management
The Company's objective in structuring the balance sheet is to maximize the
return on shareholders' equity while minimizing the associated risks. The
major risks involved in the banking industry are regulatory, credit, exposure
to local economic conditions and interest rate risks. The following is a
discussion of the Company's management of these risks.
Regulatory Risk. The banking industry is heavily regulated. These
regulations are intended to protect depositors, not shareholders. The Bank
is subject to regulation and supervision by the FDIC and the Division of
Finance, while the Company is subject to regulation and supervision by the
Federal Reserve Board. The burden imposed by Federal and state regulations
puts banks at a competitive disadvantage compared to less regulated
competitors such as finance companies, mortgage banking companies and leasing
companies. In addition, legislative reactions to the problems of the thrift
industry have added to the regulatory burden on banks.
Credit Risk. The greatest risk facing lenders is generally credit risk;
that is, the risk of losing principal and interest due to a borrower's
failure to perform according to the terms of the loan agreements. The Bank
generally has experienced relatively low levels of loan losses. These levels
of losses were due to the Bank's policy of tangible asset lending, generally
securing loans with real estate. Pursuant to its loan monitoring policy, the
Bank reported net loan chargeoffs of $302,000 during 1995, or 0.19% of
average loans outstanding, unchanged as a percentage compared to the level of
charge-offs in 1994. As of December 31, 1995, the ratio of non-performing
loans to total loans was 0.61%, a decrease from 1.18% at December 31, 1994.
As of December 31, 1995, the Bank had 29 customers with outstanding loans and
unfunded commitments exceeding $1.0 million each.
- 31 -
<PAGE> 33
Exposure to Local Economic Conditions. The Bank's concentration of loans
in the St. Louis SMSA exposes it to risks resulting from changes in the local
economy. While the Bank's market area for loans extends throughout most of
Eastern and Northeastern Missouri and Southern Illinois, its lending
operations are concentrated in the St. Louis SMSA. As of December 31, 1995,
29% of the Bank's loans were secured by commercial real estate and 39% of the
Bank's loans were secured by residential real estate. The percentage of
loans secured by St. Louis SMSA real estate is substantial. A dramatic drop
in St. Louis area real estate values would adversely affect the quality of
the loan portfolio. Of the amount of commercial real estate loans, a
majority is to businesses that occupy and use the real estate. The risk of
default with users of the property normally has been lower than with other
segments of the commercial real estate market.
Interest Rate Risk. The Bank's earnings depend to a great extent upon the
level of net interest income, which is the difference between interest income
earned on loans and investments and the interest expense paid on deposits and
other borrowings. Although the Company believes that the maturities of the
Bank's assets are appropriately balanced in relation to maturities of
liabilities ("gap management"), gap management is not an exact science.
Rather, it involves estimating how changes in the general level of interest
rates will impact the yields earned on assets and the rates paid on
liabilities. Moreover, rate changes can vary depending upon the level of rates
and competitive factors. From time to time, maturities of assets and
liabilities are not balanced, and a rapid increase or decrease in
interest rates could have an adverse effect on net interest margins and results
of operations of the Company.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
Financial Condition
At September 30, 1996, the Bank's total assets were $351.2 million, an
increase of $70.8 million or 25% from December 31, 1995. This growth was
primarily attributable to a $92.7 million increase in loans outstanding,
principally the addition of $52.1 million in one- to four-family mortgages.
Fed funds sold decreased 89% during the nine months ended September 30, 1996,
from $14.2 million at December 31, 1995. This decrease was due to the
funding of increased loan production. Investment securities decreased 15%
($10.9 million) from $73.2 million at December 31, 1995 to $62.3 million at
September 30, 1996. This decrease was primarily attributable to the maturity
of short-term securities, purchased to maximize the spread to fed funds. The
proceeds from these maturities were used to fund the limited deposit run-off
resulting from the second quarter repricing of the deposit promotion offered
in the fourth quarter of 1995 and the increased loan growth experienced in
the first nine months of 1996.
For the nine-month period ended September 30, 1996, the Company reported
earnings of $1.4 million, compared to $1.0 million, for the corresponding
period ended September 30, 1995, an increase of $396,000, or 39%. However,
on a per share basis, net income increased only 12%, from $.53 for the
year-to-date period in 1995 to $.59 for the comparable period in 1996, due to
the 24% increase in average adjusted common shares outstanding. This increase
from 1.7 million shares for the nine months ended September 30, 1995 to 2.1
million shares for the corresponding period in 1996, was the result of the
private placement of 561,000 shares of Common Stock in June 1995.
Net Interest Income
For the nine-month period ended September 30, 1996, net interest income
before provision for loan losses increased 27% to $7.7 million from $6.1
million at September 30, 1995. This growth was attributable to the 31%
increase in total interest income, which advanced from $14.0 million for the
first nine months of 1995 to $18.4 million for the same period in 1996. The
largest segment of this growth
- 32 -
<PAGE> 34
in interest income was due to the $3.9 million increase in interest and fees
earned on loans. For the nine months ended September 30, 1996, interest and
fees earned on loans totaled $15.7 million compared to $11.8 million earned in
the corresponding period in 1995. Another factor leading to the improved
interest income, was the increase in interest earned on investment securities,
which rose 20% from $2.2 million for the nine-month period ended September 30,
1995, to $2.6 million for the corresponding period in 1996. This improved
performance is attributable to the addition of higher yielding securities,
funded by maturing securities which had lower coupons.
Total interest expense for the nine months ended September 30, 1996 was
$10.6 million, a 34% increase over the total interest expense of $8.0 million
for the corresponding period in 1995. Interest paid to depositors increased
35%, from $6.4 million at September 30, 1995 to $8.6 million at September 30,
1996. This increase was a result of greater deposit volume. Total average
interest bearing accounts outstanding for the nine months ended September 30,
1996 was $214.9 million compared to average balances of $160.4 million for the
corresponding period in 1995. Interest paid on short-term borrowings increased
81% from $522,000 to $947,000 for the year-to-date periods of 1995 and 1996,
respectively, and interest paid on long-term borrowings increased 5% from $1.0
million during the first nine months of 1995 to $1.1 million for the same
period in 1996. The increased expense for short-term borrowings was a result
of additional FHLB advances outstanding during the period.
Net Interest Margin
An increase in total interest income for the nine-month period ended
September 30, 1996 was offset in part by tightening spreads and increasing
cost of funds. As a result of these trends, along with the growth in
deposits and competitive market pressures, the Company's net interest margin
for the first nine months of 1996 decreased 22 basis points from 3.90% for
the nine months ended September 30, 1995 to 3.68% for the corresponding
period in 1996. The tightening spreads experienced by the Company resulted
principally from four factors: (i) an increased concentration in the
portfolio of one- to four-family adjustable rate mortgages; (ii) an extremely
competitive market for retail deposits; (iii) a shift in interest rates; and
(iv) increases in total borrowings outstanding.
The largest component of net income is attributable to interest earned on
the Bank's loan portfolio. For the nine months ended September 30, 1996, the
annualized yield on total average loans outstanding was 9.70% compared to
10.20% for the nine-month period ended September 30, 1995. This lower yield
reflected two downward adjustments in the prime lending rate, which has
decreased from 8.75% on September 30, 1995 to 8.25% on September 30, 1996.
The majority of the Bank's commercial loans have repriced in response to this
decrease in interest rates. In addition to lower interest rates, the Bank's
spreads have decreased due to its increased holdings of one- to four-family
mortgage loans, which tend to yield less than commercial or consumer loans.
The Bank has chosen to absorb this decrease in yield to improve its
management of credit risk by increasing its portfolio of one- to four-family
adjustable rate mortgages.
Management prefers to originate one- to four-family adjustable rate
mortgage loans due to the lower credit risk generally associated with this
type of loan, as well as the lower exposure to interest rate risk due to the
frequent periodic adjustments of the mortgage coupon payments. Along with
the reduced credit risk and interest rate protection, the Bank also has
observed a lower level of the non-preforming loans associated with one- to
four-family mortgages compared to the Bank's portfolio of loans as a whole.
Given these attributes of lower risk, the Bank has accepted a lower average
yield compared to loans with a higher level of risk. The Bank anticipates
the continued addition of one- to four-family loans in the Bank's loan
portfolio mix.
- 33 -
<PAGE> 35
Additionally, the origination of one- to four-family adjustable rate
mortgages allows the Bank to establish relationship banking with these new
retail customers by offering a complete line of consumer banking products.
One such product is the Bank's new Home Equity Credit Line ("HECL") which was
introduced in the second quarter of 1996. As of September 30, 1996, the Bank
had exceeded management's expectations in both commitments and balances
outstanding with commitments of $8.0 million in HECLs and $4.7 million in
balances outstanding. These loans are tied to the prime lending rate and
were originated at a special low introductory rate, which will subsequently
reprice in the first quarter of 1997.
The annualized yield paid for interest bearing deposits and both long and
short-term debt was 5.56% for the nine months ended September 30, 1996. This
represented a decrease of 3 basis points when compared to the corresponding
period in 1995, reflecting increased reliance on FHLB borrowings
which were a more cost-effective funding source than retail deposits during the
period. The slight decrease in rates paid on liabilities relative to the larger
22 basis point decrease for total interest earning assets was largely
attributable to the highly competitive market for retail deposits. When
compared to the Bank's peers in other geographical regions, the St. Louis
SMSA is substantially more competitive with respect to consumer deposit
pricing. The Company does not foresee a change in this market condition in
the near future.
In addition to the competitive deposit market, the Bank ran a successful
money market deposit promotion in the fourth quarter of 1995 and the first
half of 1996. From time to time, the Bank has selectively run deposit
promotions, such as the one described above, in order to augment its funding
and liquidity needs. For the nine months ended September 30, 1996 the yield
on money market accounts increased to 4.93%, from 3.75% for the nine months
ended September 30, 1995. This 118 basis point increase resulted from the
higher yield paid in order to attract deposits in the extremely competitive
market. This rate was guaranteed for an initial six-month period and
subsequently, on May 1, 1996, the Bank has lowered the interest rate paid on
the highest tier for the Allegiant Green money market accounts, allowing the
new rate to fall to market averages. This adjustment was intended to help
alleviate the pressures on the net interest margin in the third and fourth
quarters of 1996.
In order to avoid running additional deposit promotions, the Bank increased
its short-term debt as an alternative to paying above market averages for
retail deposits. One bank in the St. Louis SMSA chose to run a one year
certificate of deposit promotion to yield 6.20% in the third quarter of 1996,
whereas the Bank chose to borrow $10 million of shorter-term funds from the
FHLB at a blended cost of 5.80%. The strategy allows the Bank to access
funds, with minimal administrative costs and without increasing the cost of
its existing deposit base, which occurs when lower cost deposits mature and
subsequently reprice at the higher special rate.
The Bank has also utilized these alternative funding sources in
anticipation of the planned opening of an additional branch in first quarter
of 1997, as well as a temporary source of funding until the Bank's two
recently opened branches can attract increased levels of core deposits, which
cost less than promotional monies. The Bank opened its seventh and eighth
branches in November 1995 (West St. Louis County) and in May 1996 (South St.
Louis County), respectively. The Company expects that as these new branches
mature, their core deposit base should fund the planned retirement of a
substantial portion of the short-term debt.
- 34 -
<PAGE> 36
The following tables show the condensed average balance sheets for the
periods reported and the average yield for each category used to calculate
the net interest margin:
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------
1995 1996
---------------------------------------- -----------------------------------------
AVERAGE INT EARNED/ YIELD/ AVERAGE INT EARNED/ YIELD/
BALANCE EXPENSE RATE<F1> BALANCE EXPENSE RATE<F1>
---------------------------------------- -----------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS:
Loans<F1> $153,761 $11,759 10.20% $215,124 $15,646 9.70%
Taxable investment securities 51,586 2,155 5.57 61,011 2,580 5.64
Federal funds sold 2,757 120 5.80 2,924 121 5.52
-------- ------- -------- -------
Total interest earning assets 208,104 14,034 8.99 279,059 18,347 8.77
-------- ------- -------- -------
NON-INTEREST EARNING ASSETS:
Cash and due from banks 5,516 6,287
Bank premises and equipment 2,792 4,691
Other assets 3,660 3,872
Allowance for possible loan losses (1,755) (2,253)
-------- --------
Total assets $218,317 $291,656
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Money market accounts $ 14,690 $ 413 3.75% $ 59,607 $ 2,205 4.93%
NOW accounts 8,184 144 2.35 9,638 174 2.41
Savings deposits 5,994 163 3.63 7,204 178 3.29
Certificates of deposit 96,070 4,199 5.83 98,524 4,379 5.93
Certificates of deposit over $100,000 29,702 1,238 5.56 32,471 1,335 5.48
IRA certificates 5,759 243 5.63 7,435 338 6.06
-------- ------- -------- -------
Total interest bearing deposits 160,399 6,400 5.32 214,879 8,609 5.34
-------- ------- -------- -------
Federal funds purchased, repurchase
agreements, and other short-term
borrowings 12,468 522 5.58 22,322 947 5.66
Long-term borrowings 16,812 1,028 8.15 18,180 1,083 7.94
-------- ------- -------- -------
Total interest bearing liabilities 189,679 7,950 5.59 255,381 10,639 5.56
-------- ------- -------- -------
NON-INTEREST BEARING LIABILITIES:
Demand deposits 16,310 20,161
Other liabilities 1,650 1,508
Shareholders' equity 10,678 14,606
-------- --------
Total liabilities and
shareholders' equity $218,317 $291,656
======== ========
Net interest income $ 6,084 $ 7,708
======= =======
Net interest margin 3.90% 3.68%
<FN>
- --------------------
<F1> Interest on non-accruing loans is not included for purposes
of calculating yields which have been annualized.
</TABLE>
Provision for Loan Losses
Consistent with the Bank's loan policy, an allowance is recognized to
provide for possible future loan losses. This reserve is provided for on a
monthly basis at a rate determined by management based upon its review of the
loan portfolio. For the nine-month period ended September 30, 1996, the
provision for loan losses was $950,000 compared to $717,000 for the nine
months ended September 30, 1995, an increase of 33% or $233,000. This large
percentage increase in the provision for possible loan losses for the
year-to-date period, reflect the large increases in total loans outstanding for
the periods presented. Loans charged off during the first nine months of 1996
were $410,000 compared to $118,000 in the corresponding period of 1995. This
increase includes a $164,000 charge off associated with the one real
- 35 -
<PAGE> 37
estate developer. Total recoveries for the nine months ended September 30,
1996 were $54,000 compared to $10,000 in the corresponding period in 1995.
The following table summarizes, for the periods indicated, activity in the
Bank's allowance for possible loan losses, including amounts of loans charged
off, amounts of recoveries and additions to the allowance charged to
operating expenses:
<TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE AND RELATED INFORMATION
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 2,130 $ 1,455
Loans charged off:
Real estate:
construction (64) --
secured by 1-4 family residential properties (172) --
secured by nonfarm nonresidential properties (105) --
Installment (13) (48)
Credit cards and related plans -- --
Commercial and all other loans (56) (70)
Lease financing receivables -- --
-------- --------
Total loans $ (410) $ (118)
-------- --------
Recoveries of loans previously charged off:
Real estate:
construction -- --
secured by 1-4 family residential properties 3 --
secured by nonfarm nonresidential properties -- --
Installment 7 10
Credit cards and related plans -- --
Commercial and all other loans 44 --
Lease financing receivables -- --
-------- --------
Total loans 54 10
-------- --------
Net loans charged off (356) (108)
-------- --------
Provision for possible loan losses 950 717
-------- --------
Allowance for possible loan losses (end of period) $ 2,724 $ 2,064
======== ========
Loans outstanding:
Average $215,123 $153,979
End of period 274,260 167,028
Ratio of allowance for loan losses to total loans outstanding:
Average 1.27% 1.34%
End of period 1.00% 1.24%
Ratio of net charge-offs to average
loans outstanding 0.17% 0.07%
</TABLE>
- 36 -
<PAGE> 38
Non-interest Income and Expense
Non-interest income for the nine months ended September 30, 1995 and 1996,
was $497,000 and $732,000, respectively. This increase of $235,000, or 47%,
was due to both the increased number of deposit accounts and the expanded
base of service chargeable products offered to the Company's customers. The
Company has engaged in a cost improvement program which includes a revamping
of the Bank's fee structure. The largest improvement attributable to the
cost improvement program involved fees charged on overdrafts, which was
estimated to increase non-interest income by $74,000, on an annual basis for
1996. Other improvements stem from improved cash management, increases in
charges for customer check supplies and an increase in installment loan fees.
Management expects continued growth in non-interest income as new products
are developed and offered to the Bank's customers. Net gains on the sale of
securities contributed $49,000 to the increase in non-interest income for the
nine months ended September 30, 1996.
For the nine-month period ended September 30, 1996, total non-interest
expense was $5.2 million, compared to $4.2 million for nine-month period
ended September 30, 1995, an increase of 24%. This amount included an 27%
increase in other operating expenses and a 20% increase in salaries and
employee benefits. A large portion of the increase in other operating
expenses was directly related to the operation of the West County and South
County branches, as well as increases in the depreciation of bank premises
and equipment. The remainder of the increase was attributable to
expenditures for telephone, supplies, accounting fees and business
development. Management believes that these increases are a result of the
Bank's growth and represent the increase in regular business activities.
The increase in salary and employee benefits resulted from a change in the
employee mix. Full-time support staff positions were reduced while
management level employees were hired to increase efficiency and expand the
Company's market coverage. In addition, experienced customer service
representatives were hired to operate the new West County and South County
branches. This change in the personnel profile was reflected in the
increased costs associated with salaries and employee benefits despite only a
nominal increase in the number of full-time equivalent employees. As of
September 30, 1996, Allegiant Bank employed 87 full-time equivalent employees
compared to 85 full-time equivalent employees at September 30, 1995.
Despite the additional costs associated with the opening of the two new
branches, the Company was able to improve its operating efficiency ratio during
the first nine months of 1996. The efficiency ratio decreased to 61.40% for
the nine months ended September 30, 1996, from 63.73% during the
corresponding period in 1995. The Company attributes a substantial portion
of these efficiency gains to the cost improvement program that it has
undertaken. In addition to the Bank's increased efficiency, in 1995, the
Federal Deposit Insurance Corporation ("FDIC") announced that deposit
insurance premiums would be reduced from $.23 per $100 to the base amount of
$2,000 per year. As a result, the Company's deposit insurance premiums
expense decreased $139,000 in the first nine months of 1996, compared to the
corresponding period of 1995.
Loans
Loans, the largest component of interest earning assets, increased 51%
during the first nine months of 1996. This growth was attributable to a 61%
increase in consumer loans, a 55% increase in commercial loans and a 53%
increase in real estate loans. The growth in consumer loans was attributable
to the improved management of the consumer loan portfolio, along with the
introduction of the new HECL product. In the first year of production, 155
HECL loans have been originated with $8.0 million committed and $4.7 million
in balances outstanding. Performance in this area has exceeded management's
expectations. These loans were offered at a low introductory rate and will
reprice in the first quarter of 1997.
- 37 -
<PAGE> 39
The increase in commercial loans was largely due to marketing efforts of
the Bank's commercial loan team, strengthened by the recent additions of
personnel recruited from competing banks in the area. Many of these loan
officers were able to transfer business relationships with them. Commercial
loans increased $22.5 million, from $40.5 million on December 31, 1996 to
$63.0 million on September 30, 1996. The majority of these loans are tied to
Allegiant's Corporate Market rate (which generally moves with the national
prime lending rate) and tend to be the Bank's most profitable loans.
Real estate loans increased $65.5 million during the first nine months of
1996 ending the quarter at $189.6 million compared to $124.1 million at
December 31, 1995. The majority of this increase was in one- to four-family
mortgages which tend to be lower risk in nature. This increased production
includes approximately $15.0 million in conforming FNMA loans, which could be
used as an additional source of liquidity. The Mortgage Company was the key
contributor to this increase in mortgage loan production, posting a record
nine-month performance with $55.3 million in loans originated.
The composition of the loan portfolio is summarized as follows:
<TABLE>
LENDING AND CREDIT MANAGEMENT<F1>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1995 1996
----------------------- ----------------------- ------------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural
municipal and industrial
development $ 38,459 23.03% $ 40,518 22.32% $ 62,989 22.97%
Real estate construction 9,089 5.44 8,777 4.83 8,414 3.07
Real estate mortgage
one- to four-family 66,545 39.84 71,260 39.25 118,645 43.26
multi-family and commercial 44,555 26.68 52,795 29.08 70,918 25.86
Consumer and other 8,551 5.12 8,379 4.62 13,460 4.91
Less unearned income (171) (0.10) (185) (0.10) (166) (0.06)
-------- ------- -------- ------- -------- ------
Total loans $167,028 100.00% $181,544 100.00% $274,260 100.00%
======== ======= ======== ======= ======== ======
<FN>
- --------------------
<F1> The Bank had no outstanding foreign loans at the dates reported.
</TABLE>
Investments
Investment securities decreased $10.9 million during the first nine months
of 1996, from $73.2 million at December 31, 1995 to $62.3 million at
September 30, 1996. A substantial portion of this decrease was due to the
maturity of short-term investments, the proceeds of which were subsequently
used to fund the increased loan growth. The Bank generally invests in short-term
(less than 90 days) discount notes in order to maximize yield versus simply
investing the funds in the overnight Fed Funds market. Some longer-term
securities were called away from the Bank as well, due to the relative
decrease in interest rates during the first quarter of 1996. The Bank will
continue to target a laddered investment strategy, purchasing a mix of fixed
rate U.S. Treasury and agency issues as well as callable agency securities.
The 15% decrease in investment securities for the first nine months of 1996
occurred despite the addition of $4.6 million in adjustable-rate mortgage-backed
securities. These securities were created as a result of a mortgage loan swap
with FNMA in which the Bank traded $4.6 million in adjustable-rate mortgages for
the same amount in mortgage-backed securities. This type of transaction allows
the Bank greater financial
- 38 -
<PAGE> 40
flexibility, liquidity and reduced risk in exchange for decreased yield in the
form of a guarantee fee paid to FNMA. This is the second time the Bank has
entered into this type of transaction, the first was in August 1995 when the
Bank swapped $12.3 million in adjustable-rate mortgage loans. The Bank plans
to swap mortgages for additional securities in 1996 and anticipates similar
transactions in the future as part of its regular course of operations.
The book value of investment securities as of December 31, 1995 and
September 30, 1996 was as follows:
<TABLE>
INVESTMENT SECURITIES PORTFOLIO
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
United States Treasury securities $ 5,017 $ 7,938
Obligations of United States government agencies 64,697 48,675
Federal Home Loan Bank stock 2,645 4,412
States and political subdivisions 930 1,173
Less unrealized loss on securities held
available for sale (136) (95)
Other 58 205
------- -------
Total investment securities $73,211 $62,308
======= =======
</TABLE>
The maturities and yield information of the investment portfolio as of
September 30, 1996 was as follows:
<TABLE>
INVESTMENT PORTFOLIO-MATURITIES AND YIELDS
(DOLLARS IN THOUSANDS)
<CAPTION>
WEIGHTED OVER ONE WEIGHTED OVER FIVE WEIGHTED WEIGHTED
ONE YEAR AVERAGE THROUGH AVERAGE THROUGH AVERAGE OVER TEN AVERAGE
OR LESS YIELD FIVE YEARS YIELD TEN YEARS YIELD YEARS YIELD
-------- -------- ---------- -------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States Treasury securities $ 1,510 4.93% $ 6,428 6.16% -- --
Obligations of United States
government agencies 12,721 4.71% 22,067 5.72% 500 6.70% 13,387 6.69%
Federal Home Loan Bank stock 4,412 7.00% -- -- --
States and political subdivisions 220 4.50% 553 5.17% 400 5.31% --
Less unrealized loss on securities
held available for sale (95) --
Other 205 --
------- ----
Total investment securities $18,768 5.29% $29,253 5.77% $900 6.08% $13,387<F1> 6.69%
======= ==== ======= ==== ==== ==== ======= ====
Total portfolio $62,308 5.82%
======= ====
<FN>
<F1> Securities are adjustable rate mortgages tied to the one-year Constant
Maturity Treasury Index. Due to principal prepayments, management estimates
these securities will have an estimated life of five to seven years during
normal market conditions.
</TABLE>
Asset Quality
The Bank's allowance for possible loan losses increased 28%, from $2.1
million on December 31, 1995 to $2.7 million on September 30, 1996. The
majority of this increase was due to the provision of $950,000 to the reserve
for possible loan losses during the first nine months of 1996. The reserve
for loan losses is budgeted by using a risk weighting system based upon the
different risk categories of loans. The
- 39 -
<PAGE> 41
allowance for loan losses to total loans decreased to 1.00% at September 30,
1996 from 1.17% at December 30, 1995. This level takes into account the
increased aggregate levels of one- to four-family mortgage loans, which tend
to exhibit lower levels of credit risk. The Company believes that the
allowance for possible loan losses at September 30, 1996 was adequate to
reflect the credit risk in the loan portfolio. See "--Provision for Loan
Losses."
Non-performing assets increased to $466,000 at September 30, 1996, an
increase of $158,000 from $308,000 on December 31, 1995. However, the ratio
of non-performing loans to total loans was unchanged at 0.17% as of December
31, 1995 and September 30, 1996, respectively. The largest component of
this increase in non-performing loans was a $116,000 increase in consumer
auto loans.
When compared to September 31, 1995, non-performing loans to total loans
decreased 8 basis points from 0.25% at September 31, 1995 to 0.17% at
September 30, 1996. This improvement was due to the Bank's aggressive
collection policy and the liquidation in the third quarter of 1996 of problem
assets associated with one real estate developer.
The increase in loans past due 30 to 89 days from December 31, 1995 to
September 30, 1996 was primarily due to one mortgage loan. Although the
borrower had suspended payment, the property is under contract for sale and
the Bank expects to be repaid principal and all accrued interest and charges.
- 40 -
<PAGE> 42
The following table summarizes, for the periods indicated, non-performing
assets by category:
<TABLE>
RISK ELEMENTS -- NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
<CAPTION>
September 30, December 31, September 30,
1995 1995 1996
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Real estate construction loans
Past due 30 to 89 days $115 $60 $390
Past due 90 days or more -- -- --
Nonaccrual -- -- 38
Restructured terms -- -- --
Loans secured by 1-4 family residential properties
Past due 30 to 89 days 395 340 1,098
Past due 90 days or more -- 36 --
Nonaccrual 22 20 86
Restructured terms 3 3 --
Loans secured by nonfarm nonresidential properties
Past due 30 to 89 days -- 167 120
Past due 90 days or more -- -- --
Nonaccrual -- -- --
Restructured terms -- -- --
Installment loans
Past due 30 to 89 days 20 99 102
Past due 90 days or more -- 12 9
Nonaccrual 9 15 131
Restructured terms -- -- --
Commercial and all other loans
Past due 30 to 89 days 515 134 172
Past due 90 days or more 64 113 79
Nonaccrual 312 109 123
Restructured terms -- -- --
Other real estate 25 10 --
Total non-performing assets 438 318 466
Loans, net of unearned discount 174,964 181,544 274,260
Allowance for possible loan losses 2,064 2,130 2,724
Allowance for possible loan losses to total loans 1.25% 1.17% 1.00%
Non-performing loans to total loans 0.25% 0.17% 0.17%
Allowance for possible loan losses to non-performing loans 499.76% 691.56% 584.55%
</TABLE>
Potential problem credits are monitored by the lending staff and senior
management. The Bank continually monitors its loan portfolio and
discontinues the accrual of interest on any loan on which payment of
principal or interest on a timely basis in the normal course of business is
doubtful. The discontinuance of interest accrual on a loan occurs at any
time that a significant problem is detected in the normal payment process.
The Bank's policy is to automatically place a loan on nonaccrual status when
it becomes 90 days past due, unless it is well secured and in the process of
collection. Interest income on a nonaccrual loan is recognized only as
collected.
LIQUIDITY AND CAPITAL RESOURCE MANAGEMENT
Corresponding to the growth in assets for the nine months ended
September 30, 1996, total liabilities increased by $70.8 million. A
substantial portion of this increase was represented by a $37.0 million
increase
- 41 -
<PAGE> 43
in short-term borrowings, of which $20.7 million were from the Federal Home
Loan Bank ("FHLB") and a $10.0 million increase in Fed Funds purchased. A
portion of the increase in short-term FHLB borrowings was due to a
reclassification of longer-term advances which will mature within twelve
months from September 30, 1996 and as such was classified as short term. The
Bank prefers to use these alternative sources of short-term funding in lieu
of higher cost retail deposits gathered with deposit promotions.
Deposits
During the first nine months of 1996, total deposits increased 16% or
$36.6 million to $267.9 million from $231.3 million at December 31, 1995.
This growth was principally attributable to a $14.9 million increase in
certificates of deposit and a $11.4 million increase in certificates of
deposit over $100,000. The Bank also achieved meaningful growth in both
money market and demand deposit accounts, with increases of 13% and 16%,
respectively. Offsetting these increases was a 25% decrease in savings
accounts, most of which was due to the re-pricing of Allegiant Green savings
accounts. The majority of these funds was moved to the higher yielding money
market accounts within the Bank.
The Bank anticipates deposit growth will continue in the fourth quarter
of 1996 and the first quarter of 1997, as the South County branch matures.
In addition to the new branch, the Bank plans to continue offering new
products in its effort to increase core deposits and attract long-term
banking relationships. In 1996, the Bank began offering the following new
products: the Allegiant Bank debit card, the previously discussed HECL and
free checking. The following table summarizes deposit activity:
<TABLE>
DEPOSIT LIABILITY COMPOSITION
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
---- ----
PERCENT PERCENT
OF TOTAL OF TOTAL DOLLAR PERCENT
AMOUNT DEPOSITS AMOUNT DEPOSITS CHANGE CHANGE
------ -------- ------ -------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 21,966 9.50% $ 25,386 9.48% $ 3,420 15.57%
NOW accounts 9,087 3.93 10,206 3.81 1,119 12.31
Money market accounts 53,905 23.30 60,830 22.71 6,925 12.85
Savings deposits 8,896 3.85 6,635 2.48 (2,261) (25.42)
Certificates of deposit 97,460 42.13 112,373 41.95 14,913 15.30
Certificates of deposit
over $100,000 33,140 14.33 44,539 16.63 11,399 34.40
IRA certificates 6,855 2.96 7,904 2.95 1,049 15.30
-------- ------ -------- ------ ------- ------
Total Deposits $231,309 100.00% $267,873 100.00% $36,564 15.81%
======== ====== ======== ====== ======= ======
</TABLE>
The Bank seeks to maintain a level of liquidity which will provide a
readily available source of funds for new loans, allowing it to meet
loan commitments and other obligations on a timely basis. Historically,
the Bank has been loan driven, which means that as loans have increased, the
Bank has taken action to increase the level of core deposits and, depending
on market conditions, access cost effective alternative sources of
short-term funding.
Increasing core deposits generally involves the use of promotions,
paying premium rates coupled with advertising to attract new customers to the
Bank. Where possible, the Bank has timed a deposit promotion to coincide
with the opening of a new branch in order to achieve maximum growth in
deposits. It has been the Bank's experience that the majority of deposits
raised through these promotions have remained at the Bank after the promotion
is over and so have provided a steadily growing base of core deposits at the
Bank. In addition to the above-described sources, the steady flow of
maturing securities provides a source of liquidity.
- 42 -
<PAGE> 44
Certificates of deposit accounted for approximately 56% and 58%,
respectively, of the Bank's total deposits as of December 31, 1995 and
September 30, 1996. Many of such certificates of deposit were purchased by
customers in response to promotions offering above-market interest rates.
Payment of premium interest rates by the Bank adversely affects the Bank's
interest rate spread. Moreover, the Bank's concentration of deposits in
certificates of deposit could have a negative impact on the stability of its
deposits as purchasers of certificates of deposit may not redeposit the
proceeds of their certificates of deposit after the certificates of deposit
mature, particularly if the Bank then is not offering promotional rates.
There can be no assurance the concentration of the Bank's deposits in
certificates of deposit will not have a material adverse effect on the Bank's
future results of operation or liquidity.
Management anticipates continued loan demand in the Bank's market area
as bank consolidation continues and fewer middle market lenders serve the
area. In order to maintain the flexibility to fund this growth, the Company
intends to strengthen its equity capital position through retained earnings
and the issuance of debt and/or equity securities as deemed advisable. In
addition, the Company has entered into an agreement with the FHLB providing
the Bank a credit facility secured by the Bank's assets with current
availability of $71.7 million of which $37.7 million was outstanding as of
September 30, 1996. These capital resources will provide the Bank the
opportunity to expand further the loan portfolio with the flexibility to
increase deposits when conditions best match the Bank's needs and resources.
The Bank experienced a period of strong loan demand during the third
quarter of 1996, which affected its short-term liquidity. A large portion of
the loan demand was in the form of one- to four-family real estate loans,
some of which were swapped for mortgage-backed securities during the fourth
quarter of 1996. The Bank's Asset/Liability Committee monitors its liquidity
position closely and seeks consistently to guard against an inadequate
liquidity position.
Short-term investments held at December 31, 1995 included a match
funding of an unusually large money market deposit account which was to be
held at the Bank for an undetermined period of time. The investments were
laddered so that a large withdrawal from the account would not threaten the
Bank's liquidity position, as well as to maximize return on the funds while
they were held at the Bank. The customer withdrew the funds in early 1996
and the short-term investments were not replaced as they matured.
The Bank expects to continue to maintain the investment security
portfolio in a three-year maturity ladder. As securities mature, they
generally will be replaced by a new security with a three-year maturity.
Otherwise, the Bank has no plans to purchase additional securities. Instead,
the Bank expects to continue to create its own mortgage-backed securities
through mortgage swaps on a regular basis.
From December 31, 1995 to September 30, 1996, short-term borrowings
increased substantially. The rates paid for these borrowings are
significantly less than those required to increase the deposit base. This
strategy benefited earnings, as well as improved efficiency by bringing in a
large block of funding at one time. The Bank expects that borrowings
maturing in 1997 will be replaced by similar borrowings if the rate advantage
is still in existence. The Bank has approximately $60 million in
availability from several borrowing sources and is now eligible for
additionally discounted funds due to its "Outstanding" CRA rating.
The branches opened by the Bank in the past have been sources, rather
than uses, of funds. The Bank anticipates that the new branch planned for
1997 will be a source of retail and small commercial loans, however, the
projected cash flows from the new branch should result in a positive source
of funds.
From December 31, 1994 to December 31, 1995, the Company's shareholders'
equity increased from $8.5 million to $13.9 million, primarily due to the
private placement of units of common equity and net income of $1.3 million
less dividends paid of $113,000. The private placement of units consisted of
shares
- 43 -
<PAGE> 45
of Common Stock, junior subordinated debentures and warrants to purchase
Common Stock, for an aggregate issuance price of $7.7 million. Over
the years, issuance of Common Stock and net income has provided the majority
of the Company's capital accumulation. At December 31,1995, retained
earnings were $2.6 million, or 19% of total shareholders' equity. At
September 30, 1996, retained earnings were $1.7 million, or 11% of total
shareholders' equity.
The analysis of capital is dependent upon a number of factors including
asset quality, earnings strength, liquidity, economic conditions and
combinations thereof. The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These standards are
designed to provide risk-responsive capital guidelines and to incorporate a
consistent framework for use by financial institutions. At this time, the
two primary criteria used in such analysis are the risk-based capital
guidelines and the minimum capital to total assets or leverage ratio
requirement.
In general the standards require banks and bank holding companies to
maintain capital based on "risk adjusted" assets so that categories of assets
with potentially higher credit risk will require more capital backing than
categories with lower credit risk. In addition, banks and bank holding
companies are required to maintain capital to support off-balance sheet
activities such as loan commitments.
The standards also classify total capital for this risk-based measure into
two tiers referred to as Tier 1 and Tier 2. For the Company, Tier 1 capital
includes total shareholders' equity less goodwill. Tier 2 capital is
comprised of the reserve for loan and lease losses (within certain limits),
perpetual preferred stock not included in Tier 1, hybrid capital instruments,
term subordinated debt and intermediate-term preferred stock.
Bank holding companies are required to meet a minimum ratio of 8% of
qualifying total capital to risk-adjusted assets and a minimum ratio of 4% of
qualifying Tier 1 capital to risk-adjusted assets. Capital that qualifies as
Tier 2 capital is limited in amount to 100% of Tier 1 capital.
As of September 30, 1996, the Company's and Bank's capital ratios were as
follows:
<TABLE>
<CAPTION>
COMPANY BANK
------- ----
<S> <C> <C>
Risk-based capital ratio 8.67% 10.90%
Tier 1 capital ratio 6.18 9.75
Leverage ratio 4.61 6.53
</TABLE>
Management believes that a strong capital position provided by a mix of
equity and qualifying long-term debt is essential to achieving the Company's
long-term objectives. It provides safety and security for depositors, and it
enhances the potential for increases in Company value for shareholders by
providing opportunities for growth with the selective use of leverage.
The Company's capital requirements have been financed through private
offerings of debt and equity securities, retention of earnings after payment
of dividends and borrowings from a commercial bank. The Company's bank loan
is in the principal amount of $4.8 million and matures in January 1997. The
loan agreement contains certain restrictions on the Company's ability to pay
cash dividends. Although there can be no assurance regarding the payment of
future dividends, the Company believes the loan agreement will not inhibit its
ability to pay regular dividends at the current rate. The Company is in the
process of negotiating an extension of the maturity of this debt and believes
that it will be attained on acceptable terms. Additionally, the Company has
$3.3 million of outstanding subordinated debentures due on May 31, 2002. The
Company believes that the above-described resources, together with the
proceeds of this offering, will be sufficient to finance its capital
requirements for planned operations and growth through at least the end
of 1997.
- 44 -
<PAGE> 46
ACCOUNTING CHANGES
In October 1994, the Financial Accounting Standards Board "FASB" issued
Statement of Financial Accounting Standards No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119"). The adoption of SFAS 119 is required for fiscal years
beginning after December 15, 1995. The statement requires disclosures about
derivative financial instruments and other financial instruments with similar
characteristics that are not subject to SFAS 105, "Disclosure of Information
About Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk." The accounting for
derivative financial instruments remains unchanged. The Bank does not hold
financial instruments, other than those comprehended within SFAS 105. There
was no impact of adopting SFAS 119 on the financial statements of the
Company.
In March 1995, the FASB issued its 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"). SFAS 121 requires
that long-lived assets and certain intangibles to be held and used by an
entity be reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be recoverable. In addition, SFAS
121 requires long-lived assets and certain intangibles to be disposed of to
be reported at the lower of carrying amount or fair value less costs to sell.
SFAS 121 is effective for fiscal years beginning after December 15,1995.
Management does not expect the application of this pronouncement to have a
material effect on the financial statements of the Company.
In May 1995, the FASB issued its Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS 122"),
an Amendment of FASB Statement No. 65. SFAS 122 requires entities to
allocate the cost of acquiring or originating mortgage loans between the
mortgage servicing rights and the loans, based on their relative fair values,
if the bank sells or securitizes the loans and retains the mortgage servicing
rights. In addition, SFAS 122 requires entities to assess its capitalized
mortgage servicing rights for impairment based on the fair value of those
rights. SFAS 122 is effective for fiscal years beginning after December 15,
1995. Management does not expect the application of this pronouncement to
have a material effect on the financial statements of the Company.
In October 1995, the FASB issued its Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS No. 123 allows companies to continue to account for their stock option
plans in accordance with APB Opinion 25 but encourages the adoption of a new
accounting method based on the estimated fair value of employee stock
options. Companies electing not to follow the new fair value based method
are required to provide expanded footnote disclosures, including pro forma
net income and earnings per share, determined as if the company had applied
the new method. SFAS No. 123 is required to be adopted prospectively
beginning January 1, 1996. Management does not expect the application of
this pronouncement to have a material effect on the financial statements of
the Company.
BUSINESS
GENERAL
The Company is a bank holding company which owns all of the capital stock
of Allegiant Bank, a Missouri state-chartered bank (the "Bank"). The Bank
provides personal and commercial banking and related financial services from
six locations in the St. Louis Standard Metropolitan Statistical Area ("St.
Louis SMSA"), the 16th largest metropolitan area in the United States, and two
locations in Northeast Missouri. Allegiant Mortgage Company (the "Mortgage
Company"), a wholly-owned subsidiary of the Bank, offers residential loans
primarily to customers in the St. Louis market.
- 45 -
<PAGE> 47
The Company was organized in May 1989 and acquired Allegiant State Bank at
that time. The Company acquired Allegiant Bank in 1990. Effective in
January 1995, Allegiant State Bank merged into Allegiant Bank. As used
herein, the term "Bank" refers to Allegiant Bank for periods subsequent to
such merger and to Allegiant Bank and Allegiant State Bank, collectively,
prior to such time. In November 1994, Allegiant Bank acquired the Mortgage
Company.
THE BANK
The Bank's main office is located in the City of St. Louis, Missouri
at 4323 North Grand Boulevard. The Bank's other five locations in the St. Louis
SMSA are in Hazelwood, Maryland Heights, Clayton, Des Peres and Mehlville. In
addition, the Bank's operations center is located in Maryland Heights. The
Northeast Missouri locations consist of a full-service facility located in
Kahoka, Missouri and a predominantly retail-oriented facility operating from
leased space in a supermarket located in Palmyra, Missouri. The Bank presently
intends to expand its operations into St. Charles County in 1997.
Since acquiring Allegiant State Bank in 1989, the Company has focused on
controlled growth by meeting customers' needs for responsive service. The
Company has sought to operate fewer offices with relatively large deposit
bases, make commercial loans (which tend to be larger in size than retail
loans), employ a capable staff and enhance data processing and operational
systems to increase productivity.
The Bank's core deposit base generally has been enhanced through
advertising and deposit promotions. The Bank has not used brokered deposits
as a source of funds. The Company has sought to increase its earning assets
by expanding its mortgage lending activities. The Company anticipates that
its mortgage lending activities will be a key element in its strategy for
increasing the level of its earning assets.
The Bank's commercial banking activities target high net worth individuals
and their businesses with an emphasis on the middle market. The Bank's
operating strategy is to offer personal service, flexibility and timely
responsiveness to the needs of its customers. Senior management of the Bank
and the Company maintain close personal contact and close working
relationships with the Bank's commercial customers and their businesses. The
Bank's and the Company's Boards of Directors and Advisory Directors primarily
include local business people from the Bank's market area. Most of the
Bank's new commercial banking business consists of referrals from existing
customers.
The Company believes that the growth in loans and profitability achieved by
the Bank is attributable in large measure to its strategy of targeting small
and medium size businesses in the manner described above and the business and
personal relationships and experience of the Bank's and the Company's
management, Directors and Advisory Directors in the St. Louis community,
rather than the result of greater risk-taking or price concessions. In
addition, there have been numerous acquisitions and mergers of banks and
thrifts in the St. Louis market which have made the larger institutions in
the market even larger and left fewer commercial banks in the $100 million to
$1.0 billion asset size category whose primary focus is small and medium size
commercial customers.
MARKET AREA
Metropolitan St. Louis. The Company's primary service area is located in
St. Louis County which has a total population of approximately 1.0 million and
the City of St. Louis which has a population of approximately 400,000. With
the addition of the Des Peres and Mehlville retail banking offices in 1995
and 1996, respectively, and planned new locations in 1997, management
believes that the Bank will have access to the entire St. Louis market. A
key to market coverage is accessibility. The Company believes that after
- 46 -
<PAGE> 48
such expansion its retail banking offices will be strategically placed so
that it will have a retail banking office within a 5-20 minute drive from all
principal sectors of the St. Louis SMSA.
Northeastern Missouri. The market areas for the Kahoka and Palmyra banking
offices are Clark County and Marian County, respectively. The City of Kahoka
has a population of approximately 2,200 and Palmyra has a population of
approximately 3,400. The Company also intends to continue to expand its
Northeastern Missouri operations to locations in addition to existing
locations in Kahoka and Palmyra. It is anticipated that new locations will
be centered along U.S. Highway 61.
PRODUCTS AND SERVICES
Through the Bank, the Company offers complete banking services to the
communities which it serves. In conjunction with the growth of its branch
facilities, the Bank has introduced new products and services to position
itself to compete in its highly competitive market. The Company believes
that the Bank's customers demand not only a wide range of financial products
but also efficient and convenient service. In response to these demands, the
Bank believes it has developed a unique mix of products and services
utilizing newly developed technology available to the banking industry. For
example, the addition of new remote automatic teller machines ("ATMs") and
"Expressline" telephone banking offers customers convenience and promotes the
Bank's products. The Bank also offers a wide range of commercial and retail
banking products and services to its customer. Deposit accounts 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
residential real estate, commercial, financial, municipal and industrial
development, real estate construction and development, installment and
consumer loans.
MARKETING
The Company believes it employs a unique marketing strategy, relying upon
word of mouth or referral business to expand the Bank's core customer base.
This strategy has offered an effective marketing tool as well as helped
assure that quality customers are retained by the Bank. The marketing plan
involves utilizing the Company's and the Bank's Directors, as well as Bank
Advisory Directors. The Company attempts to select Advisory Directors from
the business community surrounding each branch. As of September 30, 1996,
the Bank had 14 Directors and 56 Advisory Directors.
These integral team members, all of whom have a stake in the future of the
Company, bring in business through use of their networks and contacts.
Working principally on referrals and word of mouth, the Bank seeks to
continue targeting the middle market for commercial loans, as well as to be a
neighborhood bank for retail customers. Whether the customer is a mid-size
company or a citizen in the Bank's community, the Bank is committed to
offering the most responsive and efficient service available. Management
believes this approach will allow the Company to position itself to compete
effectively in view of the anticipated continuing consolidation of the
banking industry.
COMPETITION
The Bank encounters substantial competition for but are not limited to,
deposits and loans in its markets. The Bank's principal competitors include,
other financial institutions, such as banks, savings and loan institutions and
credit unions, and a number of other non-bank competitors, such as insurance
companies, small loan companies, finance companies and mortgage companies.
Many of the Bank's non-bank competitors are not subject to the extensive
Federal and state regulations which govern the Company and the Bank
and, as a result, have a competitive advantage over the Bank in providing
certain services. Many of the financial
- 47 -
<PAGE> 49
institutions with which the Bank competes are larger and have substantially
greater financial resources than the Bank.
While the Bank also encounters a great deal of competition in its lending
activities, management believes that there is less competition in the Bank's
specialty-middle market and neighborhood bank niche than there was up to a
few years ago. The Bank believes that its 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. The Bank's strategy, by contrast, is to remain a middle market
lender which maintains close, long-term contacts with its customers.
EMPLOYEES
As of September 30, 1996, the Company and the Bank had approximately 87
full-time equivalent employees. None of these employees of the Company or
the Bank are subject to a collective bargaining agreement. The Company
considers its relationships with its employees and those of the Bank to be
good.
EFFECT OF GOVERNMENTAL POLICY
One of the most significant factors affecting the Bank's earnings is the
difference between the interest rates paid by the Bank on its deposits and
its other borrowings and the interest rates earned by the Bank on loans to
its customers and securities owned by the Bank. The yields of its assets and
the rates paid on its liabilities are sensitive to changes in prevailing
interest rates. Thus, the earnings and growth of the Bank will be influenced
by general economic conditions, the monetary and fiscal policies of the
federal government, and the policies of regulatory agencies, particularly the
Federal Reserve Board, which implements national monetary policy. An important
function of the Federal Reserve System is to regulate the money supply and
credit conditions in order to mitigate recessionary and inflationary
pressures. Among the techniques used to implement these objectives are open
market operations in U.S. government securities and changes in reserve
requirements of banks and in the cost of short-term bank borrowings. These
techniques influence overall growth and distribution of credit, bank loans,
investments and deposits, and may also affect interest rates charged on loans
or paid on deposits. The nature and impact of any future changes in monetary
policies cannot be predicted.
From time to time, legislation has been enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities, or affecting the competitive balance between banks and other
financial institutions. Legislative proposals which could affect the Company
and the banking business in general have been proposed and may be introduced
before the United States Congress and other governmental bodies. These
proposals may alter the Company's structure, regulation, disclosure and
reporting requirements. In addition, various banking regulatory agencies
frequently propose rules and regulations to implement and enforce existing
legislation. It cannot be predicted whether or in what form any such
legislation or regulations will be enacted or the extent to which the
business of the Company would be affected thereby.
LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business,
are pending against the Company and its subsidiaries. In the opinion of
management, after consultation with legal counsel, resolution of these
matters is not expected to have a material effect on the Company's financial
condition.
- 48 -
<PAGE> 50
SUPERVISION AND REGULATION
GENERAL
As a bank holding company, the Company is subject to regulation under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and its
examination and reporting requirements. Under the BHCA, a bank holding
company may not directly or indirectly acquire the ownership or control of
more than 5% of the voting shares or substantially all of the assets of any
company, including a bank or savings and loan association, without the prior
approval of the Federal Reserve Board. In addition, bank holding companies
are generally prohibited under the BHCA from engaging in nonbanking
activities, subject to certain exceptions.
The Company and its subsidiaries are subject to supervision and examination
by applicable federal and state banking agencies. The earnings of the
Company's subsidiaries, and therefore the earnings of the Company, are
affected by general economic conditions, management policies and the
legislative and governmental actions of various regulatory authorities,
including the Federal Reserve Board, the FDIC, the Division of Finance and
various other state financial institution regulatory agencies. In addition,
there are numerous governmental requirements and regulations that affect the
activities of the Company and its subsidiaries.
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company and certain of its nonbank subsidiaries can borrow or otherwise
obtain credit from its bank subsidiaries. In general, these restrictions
require that any such extensions of credit must be on non-preferential terms
and secured by designated amounts of specified collateral and be limited, as
to any one of the holding company or such nonbank subsidiaries, to 10% of the
lending bank's capital stock and surplus, and as to the holding company and
all such nonbank subsidiaries in the aggregate, to 20% of such capital stock
and surplus.
PAYMENT OF DIVIDENDS
The Company is a legal entity separate and distinct from the Bank and the
Mortgage Company. The principal source of the Company's revenues is
dividends from the Bank. Various Federal and state statutory provisions
limit the amount of dividends the Bank can pay to the Company without
regulatory approval. The approval of appropriate Federal or state bank
regulatory agencies is required for any dividend if the total of all
dividends declared by the Bank in any calendar year would exceed the total of
the institution's net profits, as defined by regulatory agencies, for such
year combined with its retained net profits for the preceding two years. The
payment of dividends by the Bank may also be affected by other factors, such
as the maintenance of adequate capital.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for measuring capital
adequacy for bank holding companies. These standards are designed to provide
risk-responsive capital guidelines and to incorporate a consistent framework
for use by financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks that are
similar to, but not identical with, the standards for bank holding companies.
In general, the risk-related standards require financial institutions and
financial institution holding companies to maintain capital levels based on
"risk adjusted" assets, so that categories of assets with potentially higher
credit risk will require more capital backing than categories with lower
credit risk. In
- 49 -
<PAGE> 51
addition, financial institutions and financial institution holding companies
are required to maintain capital to support off-balance sheet activities such
as loan commitments.
FDIC INSURANCE ASSESSMENTS
The subsidiary depository institutions of the Company are subject to FDIC
deposit insurance assessments. The FDIC has adopted a risk-based premium
schedule. Each financial institution is assigned to one of three capital
groups--well capitalized, adequately capitalized or undercapitalized--and
further assigned to one of three subgroups within a capital group, on the
basis of supervisory evaluations by the institution's primary federal and, if
applicable, state supervisors, and on the basis of other information relevant
to the institution's financial condition and the risk posed to the applicable
insurance fund. The actual assessment rate applicable to a particular
institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC. See "--FIRREA and
FDICIA."
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), adopted in August 1989 to provide for the resolution of insolvent
savings associations, required the FDIC to establish separate deposit
insurance funds--the Bank Insurance Fund ("BIF") for banks and the Savings
Association Insurance Fund ("SAIF") for savings associations. FIRREA also
required the FDIC to set deposit insurance assessments at such levels as would
cause BIF and SAIF to reach their "designated reserve ratios" of 1.25 percent
of the deposits insured by them within a reasonable period of time. Due to low
costs of resolving bank insolvencies in the last few years, BIF reached its
designated reserve ratio in May 1995. As a result, effective January 1, 1996,
the FDIC eliminated deposit insurance assessments (except for the minimum
$2,000 payment required by law) for banks that are well capitalized and well
managed and reduced the deposit insurance assessments for all other banks.
SUPPORT OF SUBSIDIARY BANK
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to the Bank and to commit resources to support
the Bank in circumstances where it might not choose to do so absent such a
policy. This support may be required at times when the Company may not find
itself able to provide it. In addition, any capital loans by the Company to
the Bank would also be subordinate in right of payment to deposits and
certain other indebtedness of such subsidiary.
Consistent with this policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common shareholders has been sufficient to fully fund the
dividends and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition.
FIRREA AND FDICIA
FIRREA contains a cross-guarantee provision which could result in insured
depository institutions owned by the Company being assessed for losses
incurred by the FDIC in connection with assistance provided to, or the
failure of, any other insured depository institution owned by the Company.
Under FIRREA, failure to meet the capital guidelines could subject a banking
institution to a variety of enforcement remedies available to federal
regulatory authorities, including the termination of deposit insurance by the
FDIC.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") made extensive changes to the federal banking laws. FDICIA
instituted certain changes to the supervisory process, including
- 50 -
<PAGE> 52
provisions that mandate certain regulatory agency actions against
undercapitalized institutions within specified time limits. FDICIA contains
various other provisions that may affect the operations of banks and savings
institutions.
The prompt corrective action provision of FDICIA requires the federal
banking regulators to assign each insured institution to one of five capital
categories ("well capitalized," "adequately capitalized" or one of three
"undercapitalized" categories) and to take progressively more restrictive
actions based on the capital categorization, as specified below. Under
FDICIA, capital requirements would include a leverage limit, a risk-based
capital requirement and any other measure of capital deemed appropriate by
the federal banking regulators for measuring the capital adequacy of an
insured depository institution. All institutions, regardless of their
capital levels, are restricted from making any capital distribution or paying
any management fees that would cause the institution to fail to satisfy the
minimum levels for any relevant capital measure.
The FDIC and the Federal Reserve Board adopted capital-related regulations
under FDICIA. Under those regulations, a bank will be well capitalized if it:
(i) had a risk-based capital ratio of 10% or greater; (ii) had a ratio of
Tier 1 capital to risk-adjusted assets of 6% or greater; (iii) had a ratio of
Tier 1 capital to adjusted total assets of 5% or greater; and (iv) was not
subject to an order, written agreement, capital directive, or prompt
corrective action directive to meet and maintain a specific capital level for
any capital measure. An association will be adequately capitalized if it was
not "well capitalized" and: (i) had a risk-based capital ratio of 8% or
greater; (ii) had a ratio of Tier 1 capital to risk-adjusted assets of 4% or
greater; and (iii) had a ratio of Tier 1 capital to adjusted total assets of
4% or greater (except that certain associations rated "Composite 1" under the
federal banking agencies' CAMEL rating system may be adequately capitalized
if their ratios of core capital to adjusted total assets were 3% or greater).
FDICIA also makes extensive changes in existing rules regarding audits,
examinations and accounting. It generally requires annual on-site, full
scope examinations by each bank's primary federal regulator. It also imposes
new responsibilities on management, the independent audit committee and
outside accountants to develop or approve reports regarding the effectiveness
of internal controls, legal compliance and off-balance sheet liabilities and
assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a preference for deposits and
certain claims for administrative expenses and employee compensation against
an insured depository institution, in the liquidation or other resolution of
such an institution by any receiver. Such obligations would be afforded
priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, as well as any obligation to
shareholders of such an institution in their capacity as such.
THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION
In September 1994, legislation was enacted that is expected to have a
significant effect in restructuring the banking industry in the United
States. The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Riegle-Neal") facilitates the interstate expansion and consolidation
of banking organizations by permitting (i) bank holding companies that are
adequately capitalized and managed, one year after enactment of the
legislation, to acquire banks located in states outside their home states
regardless of whether such acquisitions are authorized under the law of the
host state, (ii) the interstate merger of banks after June 1, 1997, subject
to the right of individual states to "opt in" or to "opt out" of this
authority before that date, (iii) banks to establish new branches on an
interstate basis provided that such action is specifically authorized by the
law of the host state, (iv) foreign banks to establish, with approval of the
regulators in the United States, branches outside their home states to the
same extent that national or state banks located in the home state
- 51 -
<PAGE> 53
would be authorized to do so, and (v) banks to receive deposits, renew time
deposits, close loans, service loans and receive payments on loans and other
obligations as agent for any bank or thrift affiliate, whether the affiliate
is located in the same state or a different state. One effect of Riegle-Neal
is to permit the Company to acquire banks located in any state and to permit
bank holding companies located in any state to acquire banks and bank holding
companies in Missouri. Overall, Riegle-Neal is likely to have the effects of
increasing competition and promoting geographic diversification in the
banking industry.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Articles of Incorporation of the Company provide that the Board of
Directors is to consist of not less than six and not more than 24 directors,
each holding office for three years and until their respective successor shall
have been duly elected and qualified. The Articles of Incorporation further
provide that the exact number of directors to be elected will be determined from
time to time by the Board of Directors. The Board of Directors has fixed the
number of persons serving on the Company's Board of Directors at nine.
The following individuals currently serve as members of the Board of
Directors and/or executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Marvin S. Wool 68 Chairman, Chief Executive Officer and Director of the Company; Chairman of the Bank
Shaun R. Hayes 37 President and Director of the Company; President and Chief Executive Officer of the Bank
S. Kay Weber 35 Vice President/Chief Financial Officer of the Bank; Assistant Secretary of the Company
Charles E. Polk 37 Director
Leland B. Curtis 53 Director
Leon A. Felman 61 Director
C. Virginia Kirkpatrick 63 Director
Kevin R. Farrell 45 Director and Secretary
John T. Straub 48 Director
Lee S. Wielansky 45 Director
</TABLE>
Marvin S. Wool has served as a Director of the Company since 1990 and as
the Chairman and Chief Executive Officer of the Company and Chairman of
Allegiant Bank since March 1992. From 1973 through the present, Mr. Wool has
served as the President and Chief Executive Officer of Dash Multi-Corp, Inc.,
the holding company for ten subsidiary companies located in Georgia,
Mississippi, Missouri, New Jersey and California which are in the chemical,
cloth coating and carpet industries.
- 52 -
<PAGE> 54
Shaun R. Hayes has served as a Director and as the President of the Company
since 1989. Additionally, Mr. Hayes has served as President and Chief
Executive Officer of Allegiant Bank since May 1992. From 1989 through 1994,
Mr. Hayes served as Secretary of the Company.
S. Kay Weber has served as Assistant Secretary of the Company and Vice
President/Chief Financial Officer of the Bank since March 1992. From
September 1983 to March 1992, Ms. Weber served in various positions at
Mercantile Bank of St. Louis, N.A. including Staff Auditor, Assistant
Controller, Financial Systems Accountant, Personal Banking Officer/Branch
Operations Manager and Mortgage Banking Officer.
Charles E. Polk has been a Director of the Company since 1994. Mr. Polk
has been a partner of Husch & Eppenberger, a law firm located in St. Louis,
Missouri, since 1991. For more than one year prior to joining Husch &
Eppenberger, he was associated with Peper, Martin, Jensen, Maichel & Hetlage,
a law firm located in St. Louis, Missouri.
Leland B. Curtis has been a director since March 21, 1996. He has also
been a partner in the law firm of Curtis, Oeting, Heinz, Garret & Soule, a
law firm located in St. Louis, Missouri, for more than the past five years.
Leon A. Felman has been a Director of the Company since 1992. Since 1968
Mr. Felman has been associated with Sage Systems, Inc., a restaurant
operator, and currently serves as its President and Chief Executive Officer.
C. Virginia Kirkpatrick has been a Director of the Company since 1990.
Since 1983 Ms. Kirkpatrick has been President of CVK Personal Management &
Training Specialists, a business consulting and human resource management
firm.
Kevin R. Farrell has served as a Director of the Company since 1989 and as
Secretary of the Company since 1994. Mr. Farrell has been President of
St. Louis Steel Products, a steel fabricating company, for more than the past
five years.
John T. Straub has been a Director of the Company since 1990. Since
April 1992, Mr. Straub has been self-employed as a certified public
accountant. From December 1989 to April 1992, Mr. Straub served as Chief
Financial Officer of Group Five, Inc. Prior to such time, Mr. Straub was a
certified public accountant with BDO Seidman, LLP, a public accounting firm.
Lee S. Wielansky has been a Director of the Company since 1990.
Mr. Wielansky has been the President and Chief Executive Officer of Midland
Development Group, a real estate development company, for more than the past
five years.
The Board of Directors has a standing Executive Committee, Audit Committee,
Directors' Responsibility Committee and Personal Committee.
The members of the Executive Committee are Marvin S. Wool, Shaun R. Hayes,
C. Virginia Kirkpatrick, Kevin R. Farrell and Lee S. Wielansky. The
Executive Committee may exercise all powers of the Board of Directors which
may be lawfully delegated when the Board of Directors is not in session.
The members of the Audit Committee are John T. Straub, Lee S. Wielansky and
Charles E. Polk. The duties of the Audit Committee include meeting with the
independent auditors, management, internal auditors and credit review
personnel to periodically review the work of each and ensure that each is
properly discharging its responsibilities.
- 53 -
<PAGE> 55
The members of the Directors' Responsibility Committee are Leon A. Felman,
C. Virginia Kirkpatrick and John T. Straub. The Directors' Responsibility
Committee periodically reviews transactions between directors and the Company
to ensure compliance with various regulatory and other requirements.
The members of the Personnel Committee are C. Virginia Kirkpatrick,
Marvin S. Wool and Shaun R. Hayes. The Personnel Committee reviews the
Company's employee training program and participates in the recruitment and
selection of certain key management employees.
- 54 -
<PAGE> 56
SECURITY OWNERSHIP BY MANAGEMENT
The following table indicates, as of December 31, 1996, the beneficial
ownership of the Company's Common Stock by each person who is an executive
officer, director or known by the Company to own beneficially more than 5% of
the Company's Common Stock, and all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
PROPOSED TO BE
PURCHASED BY AFTER OFFERING<F1>
BEFORE OFFERING<F1> DIRECTORS AND ----------------------------------
NAME OF NUMBER OF SHARES PERCENT EXECUTIVE OFFICERS NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS IN THE OFFERING<F2> BENEFICIALLY OWNED<F3> OF CLASS
- ---------------- ------------------- -------- ------------------- ---------------------- ---------
<S> <C> <C> <C> <C> <C>
Marvin S. Wool 367,542<F4> 15.6% 66,000 433,542 14.8%
Shaun R. Hayes 217,887<F5> 9.2 30,250 248,137 8.5
S. Kay Weber 4,162<F6> <F7> 220 4,382 <F7>
Leon A. Felman 221,167<F8> 9.6 55,000 276,167 9.6
James R. Gibson 145,734<F9> 6.4 -- 145,734 5.1
Kevin R. Farrell 137,090<F10> 5.9 33,000 170,090 5.9
Lee S. Wielansky 118,118<F11> 5.1 22,000 140,118 4.9
C. Virginia Kirkpatrick 84,636<F12> 3.6 6,144 90,780 3.1
John Straub 51,258<F13> 2.2 4,249 55,507 1.9
Charles E. Polk 30,154<F14> 1.3 550 30,704 1.1
Leland B. Curtis 8,612<F15> <F7> 1,519 10,131 <F7>
All directors and executive
officers as a group
(11 persons) 1,386,360<F16> 59.6
<FN>
- --------------------
<F1> Except as otherwise indicated, each individual has sole
voting and investment power over the shares listed beside his or
her name. The percentage calculations for beneficial ownership
are based upon 2,271,000 shares of the Company's Common Stock
that were issued and outstanding as of December 31, 1996, plus,
with respect to each individual and for all directors and
executive officers as a group, the number of shares subject to
options, Convertible Debentures and warrants that may be acquired
upon exercise or conversion within 60 days.
<F2> Based upon number of shares of Common Stock which such
individual and group has indicated an intention to purchase
pursuant to this offering, subject to proration in the event of
oversubscription.
<F3> Amounts include the number of shares beneficially owned by
each individual before the offering and the number of shares as
to which each individual has given a preliminary indication of
interest in purchasing in the offering.
<F4> Total includes: 35,670 shares held by the Dash Industries
Pension Plan; 29,040 shares held in trusts for the benefit of
Mr. Wool's children; 72,967 shares subject to presently exercisable
stock options; and 9,909 shares subject to issuance upon exercise of
warrants.
<F5> Total includes: 2,420 shares held of record by Mr. Hayes' spouse,
as to which shares Mr. Hayes has shared voting and investment power;
84,168 shares subject to presently exercisable stock options; and
- 55 -
<PAGE> 57
4,247 shares issuable upon exercise of warrants.
<F6> Total includes: 3,813 shares subject to presently exercisable stock
options.
<F7> Less than one percent.
<F8> Total includes: 26,400 shares subject to presently exercisable stock
options; and 7,078 shares issuable upon exercise of warrants.
<F9> Total includes: 12,100 shares issuable upon exercise of stock
options. Mr. Gibson no longer serves as a director of the Company
and has not advised the Company of any amount of shares, if any,
he proposes to purchase in this offering.
<F10> Total includes: 33,675 shares held of record by Pentastar
Family Holdings, Inc.; 23,265 shares held by Mr. Farrell as
custodian for his four children; 1,210 shares held by United
Missouri Bank of Kansas City as Trustee for the IRA of Mr.
Farrell's spouse; 46,567 shares subject to presently exercisable
stock options; and 1,887 shares issuable upon exercise
of warrants.
<F11> Total includes: 14,486 shares held by Mr. Wielansky as
custodian for his three children; 38,276 shares held jointly with
Mr. Wielansky's spouse; 2,299 shares held by Shearson Lehman
Brothers for the IRA of Mr. Wielansky's spouse; 38,500 shares
issuable upon exercise of stock options; and
1,415 shares issuable upon exercise of warrants.
<F12> Total includes: 12,827 shares held jointly with
Ms. Kirkpatrick's spouse; 16,735 shares held by Paine Webber
as Trustee for the IRA of Ms. Kirkpatrick's spouse; 1,819 shares
held jointly with Ms. Kirkpatrick's son; 48,987 shares issuable
upon exercise of stock options; and 471 shares issuable upon exercise
of warrants.
<F13> Total includes: 3,406 shares held by Mr. Straub's spouse's
Trust Agreement; 26,400 shares issuable upon exercise of stock
options; and 471 shares issuable upon exercise of warrants.
<F14> Total includes: 26,400 shares issuable upon exercise of stock
options.
<F15> Total includes: 2,200 shares issuable upon exercise of stock
options.
<F16> Includes: 388,502 shares issuable upon exercise of stock options
and 24,535 shares issuable upon exercise of warrants.
</TABLE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the offering, the Company will have outstanding an
aggregate of 2,838,750 shares of Common Stock (assuming the Subscription
Rights are fully exercised). Substantially all of the shares outstanding
prior to the offering were originally issued in private placements in
reliance upon exemptions from the registration requirements of the Securities
Act. All of the shares sold in this offering will be freely tradable by
persons other than affiliates of the Company who will be subject to the
resale limitations of Rule 144 adopted under the Securities Act.
- 56 -
<PAGE> 58
In general, Rule 144, provides that a person (or persons whose sales are
aggregated) who is an affiliate of the Company or who has beneficially owned
shares which are issued and sold in reliance upon exemptions from
registration under the Securities Act ("Restricted Shares") for at least two
years is entitled to sell within any three-month period a number of shares
that does not exceed the greater of one percent (1%) of the then outstanding
shares of Common Stock of the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the filing of a notice of
intent to sell. Sales under Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the Company. However, a person who is not deemed to be an
"affiliate" of the Company at any time during the three months preceding a
sale, and who has beneficially owned Restricted Shares for at least three
years, would be entitled to sell such shares under Rule 144(k) without regard
to volume limitations, manner-of-sale provisions, notice requirement or the
availability of public information about the Company.
In May 1997, the two-year holding period for 108,900 shares issued in a
private placement will expire and such shares will become eligible for resale
under Rule 144.
No prediction can be made as to the effect, if any, that sales of Common
Stock under Rule 144, pursuant to a registration statement or otherwise, or
the availability of shares of Common Stock for sale, will have on the market
price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock (including shares issued upon the exercise of stock
options and warrants, and the conversion of debentures) in the public market,
or the perception that such sales could occur, could adversely affect the
prevailing market price and could impair the Company's future ability to
raise capital through an offering of its equity securities.
DESCRIPTION OF COMMON STOCK
GENERAL
The Company has authorized 7,800,000 shares of Common Stock, $0.01 par
value. At September 30, 1996, 2,196,174 shares of Common Stock were
outstanding. Under Missouri law, the Company's Board of Directors may
generally approve the issuance of authorized shares of Common Stock without
shareholder approval.
The following summary of the terms of the Company's Common Stock does not
purport to be complete and is qualified in its entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and By-Laws
and Missouri law.
DIVIDENDS
The holders of Common Stock are entitled to share ratably in dividends
when, as and if declared by the Board of Directors from funds legally
available therefor.
The Board of Directors of the Company intends to maintain its present
policy of paying quarterly cash dividends on Common Stock, when justified by
the financial condition of the Company. The declaration and amount of future
dividends will depend on circumstances existing at the time, including the
Company's earnings, financial condition and capital requirements as well as
regulatory limitations, note and indenture provisions and such other factors
as the Board of Directors may deem relevant. The payment of dividends to the
Company by subsidiary banks is subject to extensive regulation by various
state and Federal regulatory agencies. See "Supervision and Regulation."
- 57 -
<PAGE> 59
VOTING RIGHTS
Each holder of Common Stock has one vote for each share held on matters
presented for consideration by the shareholders.
PREEMPTIVE RIGHTS
The holders of Common Stock have no preemptive or preferential right to
subscribe for, purchase or receive any additional shares of Common Stock or
rights or options to purchase additional shares of Common Stock or securities
convertible into or carrying rights or options to purchase additional shares
of Common Stock.
ASSESSMENT AND REDEMPTION
Shares of Common Stock are and will be, when issued, fully paid and
nonassessable. Such shares do not have any redemption provisions.
CLASSIFICATION OF BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes, and
the directors are elected by classes to three-year terms, so that one of the
three classes of the directors of the Company will be elected at each annual
meeting of the shareholders. While this provision promotes stability and
continuity of the Board of Directors, classification of the Board of
Directors may also have the effect of decreasing the number of directors that
could otherwise be elected at each annual meeting of shareholders by a person
who obtains a controlling interest in the Common Stock and thereby could
impede a change in control of the Company. Because fewer directors will be
elected at each annual meeting, such classification also will reduce the
effectiveness of cumulative voting as a means of establishing or increasing
minority representation on the Board of Directors.
TRANSFER AGENT
The transfer agent and registrar of the Common Stock is Boatmen's Trust
Company, St. Louis, Missouri.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon by Thompson Coburn, St. Louis, Missouri.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995, and for each of the years in the two-year period ended December 31,
1995 included in this Prospectus have been so included in reliance on the
report of BDO Seidman, LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
- 58 -
<PAGE> 60
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 1995
and September 30, 1995 (unaudited) and
1996 (unaudited) F-2
Consolidated Statements of Income for the Years
Ended December 31, 1994 and 1995
and for the Nine Months Ended September 30,
1995 (unaudited) and 1996 (unaudited) F-3
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1994 and 1995
and for the Nine Months Ended September 30,
1996 (unaudited) F-4
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994 and 1995
and for the Nine Months Ended September 30,
1995 (unaudited) and 1996 (unaudited) F-5
Summary of Accounting Policies F-6 to F-9
Notes to Consolidated Financial Statements F-10 to F-23
</TABLE>
- 59 -
<PAGE> 61
[Letterhead of BDO Seidman, LLP]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Allegiant Bancorp, Inc.
St. Louis, Missouri
We have audited the accompanying consolidated balance sheet of Allegiant
Bancorp, Inc. (a Missouri corporation) and subsidiaries as of December 31,
1995, and the related consolidated statements of income, shareholders' equity
and cash flows for the years ended December 31, 1994 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Allegiant Bancorp, Inc. and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the years ended December 31, 1994 and 1995, in conformity
with generally accepted accounting principles.
/s/ BDO Seidman LLP
St. Louis, Missouri
February 23, 1996
F-1
<PAGE> 62
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
------------ -------------
1995 1996
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
ASSETS:
- ------
Cash and due from banks $ 5,483 $ 6,528
Federal funds sold and other overnight investments 14,200 1,550
Investment securities (Notes 1, 5 and 6)
Available for sale (at estimated market value) 28,000 22,605
Held to maturity (approximate market value of
$45,042 and 39,397, respectively) 45,211 39,703
Loans (Notes 2, 6 and 8) 181,544 274,260
Less allowance for possible loan losses (2,130) (2,724)
-------- --------
Net loans 179,414 271,536
Bank premises and equipment (Note 3) 4,603 4,691
Accrued interest and other assets (Note 4) 2,906 4,084
Cost in excess of fair value of net assets acquired 569 507
-------- --------
Total assets $280,386 $351,204
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- ------------------------------------
Deposits:
Non-interest bearing $21,966 $25,386
Interest bearing 176,203 197,948
Certificates of deposit of $100,000 or more 33,140 44,539
-------- --------
Total deposits 231,309 267,873
-------- --------
Short-term borrowings (Note 5) 14,108 51,060
Long-term debt (Note 6) 19,719 15,580
Accrued expenses and other liabilities 1,312 1,381
-------- --------
Total liabilities $266,448 $335,894
-------- --------
Commitments and contingencies (Notes 9, 10, 11, 12 and 13)
Shareholders' equity (Notes 6, 7 and 10):
Common Stock, $.01 par value - shares
authorized, 7,800; issued and outstanding
2,188 and 2,196, respectively 18 20
Capital surplus 11,369 13,621
Retained earnings 2,642 1,731
Net unrealized depreciation on securities available for sale (91) (62)
-------- --------
Total shareholders' equity 13,938 15,310
-------- --------
Total liabilities and shareholders' equity $280,386 $351,204
======== ========
See accompanying summary of accounting policies and notes to consolidated financial statements.
</TABLE>
F-2
<PAGE> 63
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
------------------- -------------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 8,213 $ 15,995 $ 11,759 $ 15,646
Investment securities 1,726 2,965 2,155 2,580
Federal funds sold and overnight investments 55 292 120 121
---------- ---------- ---------- ----------
Total interest income 9,994 19,252 14,034 18,347
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits 3,824 9,047 6,400 8,609
Interest on short-term borrowings 550 703 522 947
Interest on long-term debt 210 1,456 1,028 1,083
---------- ---------- ---------- ----------
Total interest expense 4,584 11,206 7,950 10,639
---------- ---------- ---------- ----------
Net interest income 5,410 8,046 6,084 7,708
Provision for possible loan losses (Note 2) 849 977 717 950
---------- ---------- ---------- ----------
Net interest income after provision for possible
loan losses 4,561 7,069 5,367 6,758
---------- ---------- ---------- ----------
Other income:
Service charges and other fees 513 658 497 683
Net loss on sale of securities (Note 1) -- (4) -- 49
---------- ---------- ---------- ----------
Total other income 513 654 497 732
---------- ---------- ---------- ----------
Other expenses:
Salaries and employee benefits (Note 9) 1,655 2,809 2,004 2,399
Operating expenses 2,109 2,816 2,190 2,783
---------- ---------- ---------- ----------
Total other expenses 3,764 5,625 4,194 5,182
---------- ---------- ---------- ----------
Income before income taxes 1,310 2,098 1,670 2,308
Provision for income taxes (Note 4) 509 823 663 905
---------- ---------- ---------- ----------
Net income $ 801 $ 1,275 $ 1,007 $ 1,403
========== ========== ========== ==========
Per share data:
Primary:
Average adjusted Common Shares outstanding 1,520,222 2,056,432 1,913,039 2,367,965
Net income $ .53 $ .62 $ .53 $ .59
Fully diluted:
Average adjusted Common Shares outstanding 1,521,000 2,152,869 1,913,039 2,367,965
Net income $ .53 $ .61 $ .53 $ .59
See accompanying summary of accounting policies and notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 64
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Net
unnrealized
depreciation
on available- Total
Common Capital Retained for-sale shareholders'
stock surplus earnings securities equity
------ ------- -------- ---------- ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $ 6 $ 6,744 $ 737 $ -- $ 7,487
Net income -- -- 801 -- 801
Cash dividends declared -- -- (58) -- (58)
Issuance of Common Stock coinciding with:
Acquisition of Mortgage Company (Note 15) 1 321 -- -- 322
Five-for-six stock split (Note 7) 1 (1) -- -- --
Change in net unrealized gains (losses)
on securities held available for sale (Note 1) -- -- (99)
------ ------- ------ ---------- -------
Balance, December 31, 1994 8 7,064 1,480 (99) 8,453
Net income -- -- 1,275 -- 1,275
Cash dividends declared -- -- (113) -- (113)
Issuance of Common Stock coinciding with:
Two-for-three stock split (Note 7) 5 (5) -- -- --
Exercise of Common Stock warrants -- 8 -- -- 8
Private placement 5 4,256 -- -- 4,261
Various stock issuance plans -- 46 -- -- 46
Change in net unrealized gains (losses)
on securities held available for sale (Note 1) -- -- 8 8
------ ------- ------ ---------- -------
Balance, December 31, 1995 $ 18 $11,369 $2,642 $ (91) $13,938
------ ------- ------ ---------- -------
Net income -- -- 1,403 -- 1,403
Cash dividends declared -- -- (144) -- (144)
Issuance of Common Stock coinciding with:
10 percent stock dividend (Note 17) 2 2,168 (2,170) -- --
Exercise of Common Stock warrants -- 4 -- -- 4
Various stock issuance plans -- 80 -- -- 80
Change in net unrealized gains (losses)
on securities held available for sale (Note 1) -- -- -- 29 29
------ ------- ------ ---------- -------
Balance, September 30, 1996 (unaudited) $ 20 $13,621 $1,731 $ (62) $15,310
====== ======= ====== ========== =======
See accompanying summary of accounting policies and notes to consolidated financial statements.
</TABLE>
F-4
<PAGE> 65
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended Nine Months Ended
December 31, September
------------------- -------------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 801 $ 1,275 $ 1,007 $ 1,403
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 362 520 244 513
Provision for loan losses 849 977 717 950
Loan recoveries 37 8 10 54
Loss on sale of securities -- (4) 4 (49)
(Gain) on sale of fixed assets -- (6) -- --
Deferred tax provision (287) (176) -- --
Changes in assets and liabilities:
Accrued interest and other assets (783) (727) (1,180) (1,178)
Accrued expenses and other liabilities 934 (22) (29) 130
-------- -------- -------- --------
Cash provided by operating activities 1,913 1,845 773 1,823
-------- -------- -------- --------
INVESTING ACTIVITIES:
- --------------------
Proceeds from maturities of securities held to maturity 1,839 57,705 41,519 36,923
Purchase of investment securities held to maturity (14,386) (67,667) (54,970) (31,415)
Proceeds from maturities of securities available for sale -- 79 -- 42,415
Proceeds from sales of securities available for sale -- 996 988 2,085
Purchase of investments securities available for sale (5,427) (23,420) (2,428) (39,014)
Loans made to customers, net of repayments (51,826) (60,461) (45,753) (93,126)
Additions to premises and equipment (822) (2,382) (755) (539)
Proceeds from sale of fixed assets -- 12 -- --
-------- -------- -------- --------
Cash used in investing activities (70,622) (95,138) (61,399) (82,671)
-------- -------- -------- --------
FINANCING ACTIVITIES:
- --------------------
Net increase in deposits 44,198 96,425 54,126 36,564
Net proceeds from repurchase agreements 15,313 (3,298) (8,767) 32,852
Proceeds from issuance of long-term debt 6,104 19,315 (1,200) --
Repayments of long-term debt -- (9,400) 19,315 (39)
Proceeds from issuance of Common Stock -- 4,269 4,337 4
Payment of dividends (58) (113) (78) (138)
-------- -------- -------- --------
Cash provided by financing activities 65,557 107,198 67,733 69,243
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents (3,152) 13,905 7,107 (11,605)
Cash and cash equivalents, beginning of year 8,930 5,778 5,778 19,683
-------- -------- -------- --------
Cash and cash equivalents, end of year $ 5,778 $ 19,683 $ 12,885 $ 8,078
======== ======== ======== ========
See accompanying summary of accounting policies and notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 66
ALLEGIANT BANCORP, INC.
SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting. The accompanying consolidated financial statements
include the accounts of Allegiant Bancorp, Inc. (the "Company") and its
subsidiaries, Allegiant Bank, (as used herein the "Bank" refers to Allegiant
Bank for periods subsequent to such merger and to Allegiant Bank and
Allegiant State Bank, collectively, prior to such time) and Allegiant
Mortgage Company (see Note 15). The financial statements have been prepared
in conformity with generally accepted accounting principles and reporting
practices applicable to the banking industry. Significant intercompany
transactions and amounts have been eliminated.
Business. The Bank provides a full range of banking services to individual
and corporate customers in the St. Louis, Missouri metropolitan area as well
as Northeast Missouri. The Bank is subject to intense competition from other
financial institutions. The Bank is also subject to the regulations of
certain federal and state agencies and undergoes periodic examination by
those regulatory authorities.
Investment Securities. The Company categorizes each security within its
portfolio into one of three permitted classifications at the time of purchase
and reevaluates such designation as of each balance sheet date.
Held-to-maturity securities are securities which the Company has the
ability and positive intent to hold to maturity. Such securities are carried
at cost, adjusted for amortization of premiums and accretion of discounts.
The adjusted cost of specific securities is used to compute gains and losses
on sales and redemptions.
Trading securities, including options used in trading activities, are
purchased with the intent for resale within a short period of time in
anticipation of short-term market movements, and are stated at estimated
market value. Gains and losses, both realized and unrealized, on trading
securities are included in other non-interest income.
Available-for-sale securities include all debt securities not classified as
held-to-maturity or trading and marketable equity securities not classified
as trading. Available-for-sale securities are stated at estimated market
value. Unrealized holding gains and losses are reported net of taxes as a
separate component of stockholders' equity until realized. Realized gains
and losses are computed based on cost adjusted for amortization of premiums
and accretion of discounts and included in other non-interest income.
Dividends and interest income on all securities are included in interest
income.
Allowance for Possible Loan Losses. The allowance for loan losses is
increased by provisions charged to expense and reduced by loans charged off,
net of recoveries. The reserve is maintained at a level considered adequate
to provide for potential loan losses based on management's evaluation of the
anticipated impact on the loan portfolio of current economic conditions,
changes in the character and size of the portfolio, past loan loss
experience, potential future loan losses on loans to specific customers
and/or industries, and other pertinent factors that management believes
require current recognition in estimating possible loan losses.
F-6
<PAGE> 67
ALLEGIANT BANCORP, INC.
SUMMARY OF ACCOUNTING POLICIES
Real Estate Owned. Real estate acquired in settlement of loans is
initially recorded at the lower of fair market value less estimated selling
costs, of the assets received or the recorded investment in the loan at date
of foreclosure. Any adjustment to fair market value is charged against the
allowance for real estate. Subsequent write-downs are charged against
operating expense including charges relating to operating, holding or
disposing of the property. Real estate owned was approximately $9,000 at
December 31, 1995.
Bank Premises and Equipment. Premises and equipment are stated at cost
less accumulated depreciation. The provision for depreciation is computed
using the straight-line method over the estimated useful lives of the
individual assets for book purposes and accelerated methods for tax purposes.
Ordinary maintenance and repairs are charged to operations as incurred.
Loans. Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest income generally is
discontinued when, in the opinion of management, the collection of interest
is unlikely. When interest accruals are discontinued, unpaid interest
credited to income in the current year is reversed, and interest accrued in
prior years is charged to the reserve for loan losses. Interest income on
these loans is reported on the cash basis as it is collected. Loan fees and
direct costs of loan originations are deferred and amortized over the life of
the loans under methods approximating the interest method.
Cost in Excess of Fair Value of Net Assets Acquired. Goodwill, which
represents the excess of the cost of purchased assets over the fair value of
their net assets at date of acquisition, is being amortized on the straight-line
method over 15 years.
Income Taxes. Income taxes are accounted for under the asset and liability
method in which deferred income taxes are recognized as a result of temporary
differences between the financial reporting basis and the tax basis of the
assets and liabilities of the Company.
Off-Balance Sheet Financial Instruments. In the ordinary course of
business, the Bank has entered into off-balance sheet financial instruments
consisting of commitments to extend credit, commercial letters of credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
Cash and Cash Equivalents. For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and federal
funds sold.
Purchased Mortgage Servicing Rights. The cost of loan servicing rights
purchased is amortized in proportion to, and over the period of, estimated
net servicing revenues. The cost of loan servicing rights and the
amortization thereof is periodically evaluated in relation to estimated
future net servicing revenues. The Bank evaluates the carrying value of the
servicing portfolio by estimating the future net servicing income of the
purchased portfolio based on management's best estimate of remaining loan
lives.
F-7
<PAGE> 68
ALLEGIANT BANCORP, INC.
SUMMARY OF ACCOUNTING POLICIES
Earnings Per Share. Primary per share information is determined using the
weighted average number of common and dilutive common equivalent shares
outstanding. Fully diluted per share information assumes full conversion of
all dilutive convertible securities into Common Stock at the later of the
beginning of the year or the date of issuance of the dilutive convertible
securities.
Reclassifications. Certain reclassifications have been made to the 1994
financial statements to conform to the 1995 presentation. These
reclassifications had no effect on net income.
Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
estimates.
Accounting Changes. In October 1994, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 119,
Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments ("SFAS 119"). The adoption of SFAS 119 is required for fiscal
years beginning after December 15, 1995. The statement requires disclosures
about derivative financial instruments and other financial instruments with
similar characteristics that are not subject to SFAS 105, Disclosure of
Information About Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk. The accounting for
derivative financial instruments remains unchanged. The Bank does not hold
financial instruments, other than those comprehended within SFAS 105.
There was no impact of adopting SFAS 119 on the financial statements of the
Company.
In March 1995, the FASB issued its 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"). SFAS 121 requires that
long-lived assets and certain intangibles to be held and used by an entity be
reviewed for impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable. In addition, SFAS 121 requires
long-lived assets and certain intangibles to be disposed of to be reported at
the lower of carrying amount or fair value less costs to sell. SFAS 121 is
effective for fiscal years beginning after December 15, 1995. Management
does not expect the application of this pronouncement to have a material
effect on the financial statements of the Company.
In May 1995, the FASB issued its Statement of Financial Accounting
Standards No. 122, Accounting for Mortgage Servicing Rights (SFAS 122"), an
Amendment of FASB Statement No. 65. SFAS 122 requires entities to allocate
the cost of acquiring or originating mortgage loans between the mortgage
servicing rights and the loans, based on their relative fair values, if the
bank sells or securitizes the loans and retains the mortgage servicing
rights. In addition, SFAS 122 requires entities to assess its capitalized
mortgage servicing rights for impairment based on the fair value of those
rights. SFAS 122 is effective for fiscal years beginning after December 15,
1995. Management does not expect the application of this pronouncement to
have a material effect on the financial statements of the Company.
F-8
<PAGE> 69
ALLEGIANT BANCORP, INC.
SUMMARY OF ACCOUNTING POLICIES
In October 1995, the FASB issued its Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123").
SFAS No. 123 allows companies to continue to account for their stock option
plans in accordance with APB Opinion 25 but encourages the adoption of a new
accounting method based on the estimated fair value of employee stock
options. Companies electing not to follow the new fair value based method
are required to provide expanded footnote disclosures, including pro forma
net income and earnings per share, determined as if the company had applied
the new method. SFAS No. 123 is required to be adopted prospectively
beginning January 1, 1996. Management does not expect the application of
this pronouncement to have a material effect on the financial statements of
the Company.
Interim Financial Information. The interim financial information at
September 30, 1996 and for the nine-month periods ended September 30, 1995
and 1996 is unaudited. However, in the opinion of management, such
information has been prepared on the same basis as the audited financial
statements and includes all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for the periods presented. The interim
results are not necessarily indicative of results for any future period.
F-9
<PAGE> 70
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INVESTMENT SECURITIES:
The book value and estimated market value of investment securities are as
follows:
<TABLE>
<CAPTION>
Securities Available for Sale
December 31,
-----------------------------------------------------
1995
-----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Profits Losses Value
-------- ---------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C>
Equity securities $ 2,703 $ -- $ -- $ 2,703
U.S. government and
agency securities 23,456 -- (188) 23,268
Mortgage backed securities 1,997 52 -- 2,029
------- ---- ----- -------
Total $28,136 $ 52 ($188) $28,000
======= ==== ===== =======
<CAPTION>
Securities Held-to-Maturity
December 31,
-----------------------------------------------------
1995
-----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Profits Losses Value
-------- ---------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C>
U.S. government and
agency securities $33,527 $ 47 ($496) $33,078
State and municipal
securities 930 15 -- 945
Mortgage backed securities 10,754 265 -- 11,019
------- ---- ----- -------
Total $45,211 $327 ($496) $45,042
======= ==== ===== =======
</TABLE>
Investment securities with a carrying value of approximately $24,518,000 at
December 31, 1995 were pledged to secure public deposits, securities sold
under the agreements to repurchase and for other purposes as required by law.
In accordance with the transition provisions of A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities, issued by the Financial Accounting Standards Board in November
1995, the Bank transferred securities with an amortized cost of approximately
$7,707,000 from the held-to-maturity to the available-for-sale category on
December 28, 1995. The net unrealized loss on the securities transferred
amounted to approximately $157,000.
The book value and estimated market value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because issuers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
F-10
<PAGE> 71
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------------
Securities to be held Securities
to maturity available-for-sale
----------------------- -----------------------
Amortized Fair Amortized Fair
cost value cost value
----------------------- -----------------------
(In thousands)
<S> <C> <C> <C> <C>
Due in one year or less $24,645 $24,204 $21,389 $21,213
Due from one year to five years 9,603 9,604 4,770 4,758
Due from five years to ten years 184 190 -- --
Due after ten years 25 25 -- --
------- ------- ------- -------
Subtotal 34,457 34,023 26,159 25,971
Mortgage backed securities 10,754 11,019 1,977 2,029
------- ------- ------- -------
Total $45,211 $45,042 $28,136 $28,000
======= ======= ======= =======
</TABLE>
Gross realized losses on sales of securities available for sale were as
follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Gross realized losses:
U.S. government and agency securities $ (4)
------
Total $ (4)
======
</TABLE>
NOTE 2. LOANS:
The components of loans in the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Commercial $ 40,518
Real estate 124,055
Real estate construction 8,777
Installment and other 8,379
Less unearned income (185)
--------
Total loans 181,544
Less allowance for possible loan losses (2,130)
--------
Total loans less allowance for possible loan losses $179,414
========
</TABLE>
F-11
<PAGE> 72
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Transactions in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Balance, beginning of period $1,455
Loans charged off (310)
Recoveries 8
------
Net loans charged off (302)
Provision for possible loan losses 977
------
Balance, end of year $2,130
======
</TABLE>
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) Nos. 114 and 118, Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures. The adoption of
these new accounting standards had no effect on the operating results of the
Company for the year ended December 31, 1995. Prior financial statements
have not been restated to apply the provisions of these new accounting
standards.
Under the new accounting standards, a loan is considered to be impaired
when it is probable that the Company will be unable to collect all principal
and interest amounts accounting to the contractual terms of the loan
agreement excluding smaller balance homogenous loans such as consumer
installment loans and residential mortgages. The allowance for loans losses
("ALL") and corresponding charge to bad debt expense is related to loans
identified as impaired and is primarily based on the excess of the loan's
current outstanding principal balance over the estimated fair market value of
the related collateral. For impaired loans that are not collateral-dependent,
the ALL is based upon the excess of the loan's current outstanding principal
balance over the current estimate of the future cash flows on the loan,
discounted at the loan's effective interest rate. Prior to 1995, the ALL for
loans which would have qualified as impaired under the new accounting standard
was primarily based upon the estimated fair market value of the related
collateral.
For impaired loans that are on non-accrual status, cash payments received
are generally applied to reduce the outstanding principal balance. However,
all or a portion of a cash payment received on a non-accrual loan may be
recognized as interest income to the extent allowed by the loan contract,
assuming management expects to collect in full, the remaining principal
balance of the loan.
F-12
<PAGE> 73
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table relates to the Company's impaired loans as of and for
the year ended December 31, 1995:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Impaired loans with a specific ALL $ --
Impaired loans with no specific ALL --
------
Total Impaired Loans $ --
======
Interest income on impaired loans for the period:
Recorded on an accrual basis $ --
======
Recorded on a cash basis $ --
======
</TABLE>
Additionally, there is no specific allowance for loan losses for impaired
loans.
NOTE 3. BANK PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Land $1,171
Bank premises 2,106
Furniture, equipment and automobiles 2,584
------
Total premises and equipment 5,861
Less accumulated depreciation (1,258)
------
Total premises and equipment less accumulated depreciation $4,603
======
</TABLE>
F-13
<PAGE> 74
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. INCOME TAXES:
The Company's results include income tax expense as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Current $999
Deferred (176)
----
Total $823
====
</TABLE>
The tax effects of temporary differences that gave rise to the deferred tax
assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Deferred Tax Assets:
Reserve for possible loan losses $594
Deferred loan fees 60
Deferred compensation 19
Foreclosed property --
Other, net 53
----
Total deferred tax assets 726
----
Deferred Tax Liabilities:
Depreciation (241)
----
Mark-to-market securities adjustments (46)
Other (3)
----
Total deferred tax liabilities (290)
----
Net deferred tax assets $436
====
</TABLE>
No deferred tax asset valuation allowance was considered necessary at
December 31, 1995.
F-14
<PAGE> 75
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense as reported differs from the amounts computed by
applying the statutory federal income tax rate to pre-tax income as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Computed "expected" tax expense $713
Tax-exempt income (24)
State and local income taxes, net of federal tax benefits 104
Goodwill amortization 23
Other, net (7)
----
Total tax expense $823
====
</TABLE>
NOTE 5. SHORT-TERM BORROWINGS:
Short-term borrowings were as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Federal funds purchased $ --
Repurchase agreements 4,108
Federal Home Loan Bank advances 10,000
-------
Total short-term borrowings $14,108
=======
</TABLE>
As of December 31, 1995, $4.1 million of short-term borrowings were secured
by investment securities classified as HTM.
F-15
<PAGE> 76
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------
1995
------------
(In thousands)
<S> <C>
Note payable to financial institution, interest
payable at prime (8.5% on December 31, 1995),
payable in principal payments of $400,000
on November 30, 1996 and the
remaining balance on January 31, 1997.
The note is secured by Bank stock $ 4,800
Notes payable to FHLB, various interest rates from
5.62% to 7.87% principal balance due from
March 28, 1997 to September 12, 2000.
Secured by stock in FHLB and certain loans 11,100
Convertible subordinated debentures with certain
stockholders, interest payable at prime plus 2%
(with a minimum floor of 10%), maturing on
September 30, 1999 504
Subordinated debentures with certain stockholders,
interest payable at prime plus 3% (with a minimum
floor of 10%), maturing on May 31, 2002 3,315
-------
Total long-term debt $19,719
=======
</TABLE>
Under the terms of the note payable to the financial institution, the
Company or its subsidiaries are required to maintain certain financial ratios
and are limited with respect to cash dividends, capital expenditures and the
incurrence of additional indebtedness without prior approval.
F-16
<PAGE> 77
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Convertible Debentures are convertible into shares of the Company's
Common Stock at a conversion price of $ 8.73 per share, subject to adjustment
in certain circumstances. The prime plus 2% and the prime plus 3% Debentures
are redeemable, in whole or in part, at the option of the Company, subject to
certain conditions, and are subordinate to all senior debt of the Company. The
Prime plus 2% Debentures, if redeemed by the Company, will be redeemed at
declining premiums. A summary of annual principal reductions of long-term debt
is as follows:
<TABLE>
<CAPTION>
Year Ending Annual principal reductions
----------- ---------------------------
(In thousands)
<S> <C>
1996 $ 400
1997 8,500
1998 3,000
1999 1,004
2000 2,000
Thereafter 4,815
-------
Total $19,719
=======
</TABLE>
NOTE 7. STOCK DIVIDEND:
On November 18, 1993, the Board of Directors approved a six-for-five stock
split of the Company's Common Stock in the form of a 20% stock dividend for
shareholders of record as of December 1, 1993, subsequently paid on January
15, 1994.
On October 20, 1994, the Company's Board of Directors approved a two-for-
three stock split, in the form of a stock dividend for shareholders of record
as of December 15, 1994, subsequently paid on January 15, 1995.
In connection with both stock splits, Common Stock was credited and capital
surplus was charged for the aggregate par value of the shares that were
issued. The stated par value of each share was not changed from $.01. All
share and earnings per share disclosures have been restated to retroactively
reflect the aforementioned stock splits.
NOTE 8. RELATED PARTIES:
The Company and the Bank have entered into transactions with its directors,
significant stockholders and their affiliates (related parties). Such
transactions were made in the ordinary course of business on substantially
the same terms and conditions, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
customers, and did not, in the opinion of management, involve more than
normal credit risk or present other unfavorable features. The aggregate
amount of loans to such related parties at December 31, 1994 and 1995 was
$7,214,000 and $7,107,000, respectively.
F-17
<PAGE> 78
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additionally, the Company issued subordinated debentures to certain
stockholders in aggregate principal amount of $504,000 and $3,315,000 in 1994
and 1995, respectively. See Note 6 for terms of the agreements.
During 1995, the Company borrowed $1,200,000 from an affiliate of a company
director and stockholder. The loan plus $12,000 in interest was repaid after
one month.
NOTE 9. EMPLOYEE BENEFITS:
The Company has a defined contribution pension plan in effect for
substantially all full-time employees. Salaries and employee benefits
expense include in $12,192 in 1994 and $27,663 in 1995, for such plans.
Contributions under the defined contribution plan are made at the discretion
of Company management.
NOTE 10. INCENTIVE PLANS:
Incentive Stock Options. The Company had stock options outstanding under
various plans at December 31, 1995. The status of stock options is
summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1995
---------------------------------
Shares Price Per Share
------ ---------------
<S> <C> <C>
Options:
Granted -- --
Exercised -- --
Canceled 7,058 $5.95-$6.45
Outstanding 339,957 $4.14-$6.45
Exercisable 308,497 $4.14-$6.45
</TABLE>
Phantom Stock Plan. In December 1994, the Company's Board of Directors
approved a Phantom Stock Plan for the President, under which the Company
agreed to pay a cash award to the President of the Company based on the
increase in book value on 48,400 shares of Common Stock, from December 31,
1994 until the earlier of December 31, 1998 or the year immediately preceding
the year the President's employment terminates. The annual provision under
this plan for the year ended December 31, 1995, was approximately $55,000.
This amount is included in other liabilities in the accompanying balance
sheet.
F-18
<PAGE> 79
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENCIES:
Leases. The Bank leases various banking facilities under operating leases
expiring at various dates through December 31, 2005. These operating leases
have options to renew. Future minimum lease payments required under
operating leases which have initial or remaining non-cancelable terms in
excess of one year as of December 31, 1995, are approximately as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, (In thousands)
- ------------ --------------
<S> <C>
1996 $139
1997 143
1998 139
1999 128
2000 28
Thereafter 186
----
Total minimum lease payments $763
====
</TABLE>
Total rent expense amounted to approximately $121,000 in 1995.
NOTE 12. CONCENTRATIONS OF CREDIT:
Substantially all of the Bank's loans, commitments and commercial and
standby letters of credit have been granted to customers in the Bank's market
area. All such customers are depositors of the Bank. Investments in state
and municipal securities also involve governmental entities within the Bank's
market area. The concentrations of credit by type of loan are set forth in
Note 2. The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Commercial and standby letters of credit
were granted primarily to commercial borrowers.
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
FAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable
to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instruments. Intangible
values assigned to customer relationships are not included in reported fair
values. Accordingly, the aggregate fair value amounts presented may not
necessarily represent the underlying value of the Company.
F-19
<PAGE> 80
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments, which are
held for purposes other than trading:
Cash and Cash Equivalents: The carrying amounts reported in the balance
sheet for cash and due from banks and federal funds sold approximate those
assets' fair values.
Securities: Fair values for held-to-maturity and available-for-sale
securities are based on quoted market prices or dealer quotes, where
available. If quoted market prices are not available for a specific
security, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for fixed-rate loans are estimated using discounted cash flow
analyses, applying interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. The fair values for
non-performing loans are estimated using assumptions regarding current
assessments of collectibility and historical loss experience.
Deposits: The fair values disclosed for deposits generally payable on
demand, such as non-interest bearing checking accounts, savings accounts, NOW
accounts and market rate deposit accounts, are by definition, equal to the
amount payable on demand at the reporting date. The carrying amounts for
variable-rate, fixed-term market rate deposit accounts and certificates of
deposit approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates of similar remaining maturities to a schedule of aggregated
monthly maturities on time deposits.
Short-Term Borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values at the reporting date.
Long-Term Debt: The fair value of the Company's long-term debt is based on
quoted market prices for similar issues or estimates using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of debt instruments.
Off-Balance Sheet Financial Instruments: The fair values of loan
commitments and letters of credit are determined using estimated fees
currently charged to enter into similar agreements. The fair values of these
instruments were not significant to the Company's consolidated financial
position.
F-20
<PAGE> 81
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying amount and estimated fair values of the values of the
Company's remaining financial instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1995
------------------------
Fair
Carrying Amount Value
--------------- -----
(In thousands)
<S> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks and short-term investments $ 19,683 $ 19,683
Held-to-maturity securities 45,211 45,042
Available-for-sale securities 28,136 28,000
Net loans 179,414 179,733
FINANCIAL LIABILITIES:
Deposits $231,309 $231,227
Short-term borrowings 14,108 14,108
Long-term debt 19,719 18,691
</TABLE>
NOTE 14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
In the normal course of business, the Company offers a variety of financial
products to its customers to aid them in meeting their requirements for
liquidity, credit enhancement and interest rate protection. Generally
accepted accounting principles recognize these transactions as contingent
liabilities and, accordingly, they are not reflected in the accompanying
financial statements. Following is a discussion of these transactions.
Letters of Credit: These transactions are used by the Company's customers
as a means of improving their credit standing in transactions with
unaffiliated third parties. Under these agreements, the Company agrees to
honor certain financial commitments in the event that its customers are
unable to do so. Net outstanding standby letters of credit amounted to
$1,246,000 at December 31, 1995. There were no commercial letters of credit
outstanding as of December 31, 1995.
Management conducts regular reviews of these instruments on an individual
customer basis, and the results are considered in assessing the adequacy of
the Company's reserve for loan losses. Management does not anticipate any
material losses as a result of the letters of credit.
Loan Commitments: At December 31, 1995, the Company had commitments
outstanding to extend credit totaling approximately $51,953,000. These
commitments generally require the customers to maintain certain credit
standards. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counter party and generally
consists of certificates of deposit, marketable securities or deeds of trust,
in addition to various other forms of collateral such as accounts receivable,
inventory and fixed assets.
F-21
<PAGE> 82
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SUBSIDIARIES:
Acquisitions: Effective November 15, 1994, the Company purchased certain
assets of Georgetown Mortgage Corporation. The acquisition was accounted for
as a purchase and, accordingly, the results of operations, which were not
material, were included in the consolidated financial statements from the
acquisition date. The total cost of the acquisition of $322,000 was funded
by the issuance of shares of the Company's Common Stock.
Subsidiary Merger: Effective January 27, 1995, Allegiant State Bank was
merged into Allegiant Bank.
NOTE 16. REGULATORY MATTERS:
The Bank is subject to dividend restrictions set forth by federal and state
banking laws and regulations. Under such restrictions, the Bank may not,
without prior approval, declare dividends in excess of retained earnings
subject to restrictions under existing debt covenants as disclosed in Note 6.
Under these statutes, as of December 31, 1995, the Bank had a maximum of
approximately $2.8 million available for dividend payments to the Company.
The Bank is required to meet a minimum ratio of 8% of qualifying total
capital to risk-adjusted assets, a minimum ratio of 4% of qualifying Tier 1
capital to risk-adjusted assets and a minimum of 4% for the leverage ratio.
As of December 31, 1995 the Bank's capital ratios were as follows:
<TABLE>
<CAPTION>
Bank
----
<S> <C>
Risk-based capital ratio 14.70%
Tier 1 capital ratio 7.81%
Leverage ratio 8.54%
</TABLE>
NOTE 17. SUBSEQUENT EVENTS:
Stock Dividend: On October 19, 1995, the Board of Directors declared a
10% stock dividend to shareholders of record on January 2, 1996, paid
on January 15, 1996. The transaction was valued based on the closing market
price of the Company's stock on January 2, 1996. Retained earnings were
charged $2,170,000 as a result of the increase of 180,821 shares of the
Company's Common Stock. Accordingly, all shares and per share data have been
restated to reflect the split.
Cash Dividend: On February 15, 1996, the Board of Directors declared a cash
dividend of 2.5 cents per share to shareholders of record on March 29, 1996,
payable on April 15, 1996.
F-22
<PAGE> 83
ALLEGIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION:
The Company paid income taxes of $1,392,000 during the year ended December
31, 1995. The Company also paid interest in the amount of $10,346,000 during
the year ended December 31, 1995.
Non-cash investing activities, were as follows:
<TABLE>
<CAPTION>
December 31,
1995
------------
(In thousands)
<S> <C>
Loans transferred to foreclosed property $12
</TABLE>
F-23
<PAGE> 84
ALLEGIANT BANCORP, INC.
SUBSCRIPTION RIGHTS CERTIFICATE
SUBSCRIPTION NUMBER OF
NUMBER RIGHTS
- ------ ------
SUBSCRIPTION RIGHT FOR SHARES OF COMMON STOCK
This Certifies that
Is the Owner of
EXPIRATION DATE: February 24, 1997, unless extended
SUBSCRIPTION PRICE: $9.375
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN
THE PROSPECTUS (THE "PROSPECTUS"), DATED JANUARY ____, 1997, OF
ALLEGIANT BANCORP, INC. (THE "COMPANY") AND ARE INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE
UPON REQUEST FROM THE COMPANY AT 7801 FORSYTH BOULEVARD,
ST. LOUIS, MISSOURI 63105 (314-726-5000). CAPITALIZED TERMS
USED HEREIN AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE
MEANINGS ASCRIBED TO SUCH TERMS IN THE PROSPECTUS.
THIS SUBSCRIPTION CERTIFICATE (THE "SUBSCRIPTION CERTIFICATE") OR
A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY ALLEGIANT
BANK (THE "SUBSCRIPTION AGENT") WITH PAYMENT, IN FULL, BY 5:00 P.M.,
ST. LOUIS TIME, ON FEBRUARY 24, 1997, UNLESS EXTENDED BY THE
COMPANY (THE "EXPIRATION DATE").
THE RIGHTS PRESENTED BY THIS SUBSCRIPTION CERTIFICATE, IN WHOLE
OR IN PART, MAY BE EXERCISED BY DULY COMPLETING AND SIGNING THE
EXERCISE FORM. RIGHTS HOLDERS ARE URGED TO READ CAREFULLY AND IN
THEIR ENTIRETY THE PROSPECTUS AND INSTRUCTIONS FOR COMPLETING
SUBSCRIPTION CERTIFICATES, ADDITIONAL COPIES OF WHICH ARE
AVAILABLE FROM THE COMPANY. AN EXERCISE OF RIGHTS EVIDENCED
HEREBY IS IRREVOCABLE.
A-1
<PAGE> 85
This nontransferable Subscription Certificate represents the
number of Rights set forth above. The registered holder whose
name is inscribed hereon (the "Holder") is entitled to subscribe
for and purchase from the Company at the Subscription Price, 0.25
shares of common stock, $0.01 par value (the "Common Stock"), of
the Company for each whole Right evidenced hereby upon the terms
and subject to the conditions set forth in the Prospectus and the
Instructions for Completing Subscription Certificates. Common
Stock subscribed for pursuant to exercise of the Subscription
Right shall be delivered as soon as practicable after the
subscriptions have been accepted by the Subscription Agent. This
Subscription Certificate also evidences the right of the Holder
to subscribe for additional shares of Common Stock, subject to
proration and to the conditions set forth herein and in the
Prospectus. Common Stock, subscribed for pursuant to the
Oversubscription Privilege shall be delivered as soon as
practicable after the Expiration Time and after all prorations
have been effected.
Dated: January ____, 1997.
ALLEGIANT BANCORP, INC.
[SEAL]
BY:_______________________________ BY:____________________________
Kevin R. Farrell, Secretary Marvin S. Wool, Chairman and
Chief Executive Officer
A-2
<PAGE> 86
FORM OF INSTRUCTIONS FOR COMPLETING SUBSCRIPTION CERTIFICATES
IMPORTANT: PLEASE READ ALL INSTRUCTIONS CAREFULLY.
EXERCISE FORM
The undersigned hereby irrevocably exercises one or more
Rights to subscribe for shares of Common Stock of Allegiant
Bancorp, Inc., as indicated below, on the terms and subject to
the conditions specified in the Prospectus, receipt of which is
hereby acknowledged.
(a) Number of shares subscribed for pursuant to the Subscription Right:
---------------------------------------------------------------------.
(b) Number of shares subscribed for pursuant to the Oversubscription
Privilege:
---------------------------------------------------------------------.
(c) Total shares (sum of lines (a) and (b)):
---------------------------------------------------------------------.
(d) Total subscription price (total number of shares subscribed for
pursuant to both the Subscription Right and the Oversubscription
Privilege multiplied by the Subscription Price of $9.375):
----------------------------------------------------------------------
(e) Method of Payment (check and complete appropriate box(es)):
-------- Uncertified, certified or cashier's check, bank draft or
money order in the amount of $------------- payable to
Allegiant Bancorp, Inc.
-------- Wire transfer in the amount of $------------ directed to
Allegiant Bank, Subscription Agent, ABA No. 081000728,
Allegiant Bancorp, Inc., Rights Offering DDA
No. 100010061, Attention: Kay Weber. Indicate name of
institution wire transferring funds and name of registered
owner.
(f) Name in which shares subscribed for are to be registered if
a name other than the name of the record owner. (Note:
Rights are non-transferable, but may be exercised by the
beneficial owner of the shares in any form of ownership
pursuant to which such person has beneficial ownership):
---------------------------------------------------------------------.
Address:--------------------------------------------------------------
Taxpayer Identification Number (Note: For most individual taxpayers,
the Taxpayer Identification Number is such person's Social Security
Number):--------------------------------------------------------------
CERTIFICATION - Under penalties of perjury, the undersigned
certifies that (i) the number provided on the line above is my
correct taxpayer identification number and (ii) I am not subject
to backup withholding.
IMPORTANT: RIGHTS HOLDERS SIGN BELOW. THE EXERCISE OF YOUR
RIGHTS WILL NOT BE VALID UNLESS YOU SIGN BELOW.
Dated:------------------- --------------------------------------------
(Signature(s) of Registered Holders(s))
A-3
<PAGE> 87
This Subscription Certificate must be signed by the registered holder(s) as
name(s) appear(s) on this Subscription Certificate. If signature is by
trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact,
agent(s), officer(s) of a corporation or another acting in a fiduciary or
representative capacity, please provide the following information. See
Instructions for Completing Subscription Certificates. Please Print.
Name:-------------------------------------------------------------------------
Capacity (full title):--------------------------------------------------------
Address (including zip code):-------------------------------------------------
Home Telephone Number Business Telephone Number
(including area code):---------------- (including area code):----------------
Tax Identification Number or Social Security Number:--------------------
1. To exercise the Oversubscription Privilege, the undersigned
must fully exercise the Subscription Right.
2. If the aggregate Subscription Price paid by an exercising
Rights holder is insufficient to purchase the number of
shares of Common Stock that such holder indicates are being
subscribed for, or if any exercising Rights holder does not
specify the number of shares of Common Stock to be
purchased, then such Rights holder will be deemed to have
exercised first the Subscription Right in full and second
the Oversubscription Privilege to purchase shares of Common
Stock to the full extent of the payment rendered (subject to
the limitation on the maximum number of shares permitted and
to proration under certain circumstances as described in the
Prospectus). If the aggregate Subscription Price paid by an
exercising Rights holder exceeds the amount necessary to
purchase the number of shares of Common Stock for which the
Rights holder has indicated an intention to subscribe, then
the Rights holder will be deemed to have exercised first the
Subscription Right (if not already fully exercised) and
second the Oversubscription Privilege to the full extent of
the excess payment tendered (subject to the restrictions
described above). Any excess funds received in payment of
the Subscription Price for shares that are subscribed for by
a Rights holder but not allocated to such Rights holder
pursuant to the Oversubscription Privilege will be mailed by
the Subscription Agent as soon as practicable after the
Expiration Time and after all prorations and adjustments as
described in the Prospectus have been effected.
A-4
<PAGE> 88
======================================================================
No person has been authorized to give any information or make any
representation not contained in this Prospectus in connection with
the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having
been authorized by Allegiant Bancorp, Inc. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to
buy, the Common Stock in any jurisdiction where, or to any person
to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication
that there has not been any change in the facts set forth in this
Prospectus or in the affairs of Allegiant Bancorp, Inc. since the
date hereof.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Preliminary Prospectus 1
Available Information 3
Incorporation of Certain Information by Reference 3
Prospectus Summary 5
Risk Factors 9
The Offering 12
Use of Proceeds 17
Price Range of Common Stock and Dividends 18
Capitalization 19
Selected Consolidated Financial Data 20
Management's Discussion and Analysis of Financial Condition and Results of Operations 22
Business 47
Supervision and Regulation 51
Management 54
Security Ownership by Management 57
Shares Eligible for Future Sale 58
Description of Common Stock 59
Legal Matters 60
Experts 60
Index to Consolidated Financial Statements 61
Form of Subscription Rights Certificate A-1
</TABLE>
======================================================================
======================================================================
Allegiant
[LOGO] Bancorp, Inc.
567,750 SHARES
ALLEGIANT
BANCORP, INC.
COMMON STOCK
- ----------------------------------------------------------------------
PROSPECTUS
- ----------------------------------------------------------------------
THE OFFERING COVERED BY THIS PROSPECTUS WILL EXPIRE ON FEBRUARY 24,
1997 UNLESS ALLEGIANT BANCORP, INC., IN ITS SOLE DISCRETION, SHALL
EXTEND THIS OFFER.
======================================================================
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
- ----------------------------------------------------
It is expected that the following expenses, all of which will be paid by
the Company, will be incurred in connection with the registration and
distribution of the securities being offered (all such fees except the
Securities and Exchange Commission filing fee are estimated):
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee $ 1,613
Nasdaq Listing Fee 11,400
Legal fees and expenses 50,000
Accounting fees and expenses 25,000
Printing and engraving 3,000
Miscellaneous 8,987
--------
Total $100,000
========
</TABLE>
Item 15. Indemnification of Officers and Directors
- --------------------------------------------------
Sections 351.355(1) and (2) of The General and Business Corporation Law of
the State of Missouri provide that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, except that, in the
case of an action or suit by or in the right of the corporation, the
corporation may not indemnify such persons against judgments and fines and no
person shall be indemnified as to any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation, unless and only to the extent
that the court in which the action or suit was brought determines upon
application that such person is fairly and reasonably entitled to indemnity
for proper expenses. Section 351.355(3) provides that, to the extent that a
director, officer, employee or agent of the corporation has been successful
in the defense of any such action, suit or proceeding or any claim, issue or
matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred in connection with such
action, suit or proceeding. Section 351.355(7) provides that a corporation
may provide additional indemnification to any person indemnifiable under
subsection (1) or (2), provided such additional indemnification is authorized
by the corporation's articles of incorporation or an amendment thereto or by
a shareholder-approved bylaw or agreement, and provided further that no
person shall thereby be indemnified against conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct or which involved an accounting for profits pursuant to Section
16(b) of the Securities Exchange Act of 1934.
Article XII of the By-Laws of the Company provides that the Company shall
extend to its directors and officers the indemnification specified in
subsections (1) and (2) and the additional indemnification authorized in
subsection (7).
<PAGE> 90
Pursuant to directors' and officers' liability insurance policies, with
total annual limits of $2,000,000, the Company's directors and officers are
insured, subject to the limits, retention, exceptions and other terms and
conditions of such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect or breach of
duty by the directors or officers of the Company, individually or
collectively, or any matter claimed against them solely by reason of their
being directors or officers of the Company.
Item 16. Exhibits
- -----------------
See Exhibit Index.
Item 17. Undertakings
- ----------------------
(1) The undersigned Company hereby undertakes:
(a) 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;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
has been sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(5) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form prospectus filed as a part of
this registration statement in reliance upon Rule 430A and contain in the
form prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form prospectus 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.
II-2
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Clayton, State of Missouri, on
January 21, 1997.
ALLEGIANT BANCORP, INC.
By: /s/ Shaun R. Hayes
----------------------------------
Shaun R. Hayes, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marvin S. Wool Chairman of the Board, January 21, 1997
- -------------------------------------- Chief Executive Officer
Marvin S. Wool and Director
Principal Executive Officer
/s/ Shaun R. Hayes President and Director January 21, 1997
- --------------------------------------
Shaun R. Hayes
Principal Financial Officer
II-3
<PAGE> 92
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ S. Kay Weber Assistant Secretary January 21, 1997
- --------------------------------------
S. Kay Weber
Principal Accounting Officer
<F*> Director January 21, 1997
- --------------------------------------
Kevin R. Farrell
<F*> Director January 21, 1997
- --------------------------------------
C. Virginia Kirkpatrick
<F*> Director January 21, 1997
- --------------------------------------
Lee S. Wielansky
<F*> Director January 21, 1997
- --------------------------------------
Leon A. Felman
<F*> Director January 21, 1997
- --------------------------------------
Charles E. Polk, Jr.
<F*> Director January 21, 1997
- --------------------------------------
John T. Straub
<F*> Director January 21, 1997
- --------------------------------------
Leland B. Curtis
By: /s/ Shaun R. Hayes
-----------------------------------
Shaun R. Hayes, Attorney-in-fact
<FN>
<F*>Shaun R. Hayes, by signing his name hereto, does sign this document on
behalf of the persons named above pursuant to a power of attorney duly executed
by such persons.
</TABLE>
II-4
<PAGE> 93
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
4.1 Form of Subordinated Convertible Debenture, filed as
Exhibit 4.1 to the Company's Registration Statement
on Form 10-SB (Reg. No. 0-26350) is hereby
incorporated by reference.
4.2 Form of Stock Certificate for Common Stock, filed as
Exhibit 4.2 to the Company's Registration Statement
on Form 10-SB (Reg. No. 0-26350) is hereby
incorporated by reference.
4.3 Form of Warrant Agreement, filed as Exhibit 4.3 to
the Company's Registration Statement on Form 10-SB
(Reg. No. 0-26350) is hereby incorporated by
reference.
4.4 Form of Junior Subordinated Debenture, filed as
Exhibit 4.4 to the Company's Registration Statement
on Form 10-SB (Reg. No. 0-26350) is hereby
incorporated by reference.
5.1 Legal Opinion of Thompson Coburn.<F1>
12.1 Statements re: Computation of Ratios.
23.1 Consent of BDO Seidman, L.L.P.
24.1 Power of Attorney (included on signature page
hereto).
<FN>
<F1> Previously filed.
</TABLE>
II-5
<PAGE> 1
EXHIBIT NO. 12.1
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1996
<CAPTION>
# OPTIONS/ STRIKE PROCEEDS
WARRANTS PRICE
--------------------------------------------
<S> <C> <C> <C>
1989 Employee Plan 32,174 $ 4.14 $ 133,083
1989 Employee Plan 29,282 $ 4.95 145,079
1994 Employee Plan 35,292 $ 5.95 210,150
1994 Director's Plan 211,748 $ 5.95 1,260,862
1994 Director's Plan 16,136 $ 6.20 100,043
1994 Director's Plan 10,083 $ 6.45 64,987
1995 Stock Option Plan 0 $12.00 0
--------------------------------------------
334,715 $1,914,204
======== ==========
<CAPTION>
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
<S> <C> <C> <C>
Stock warrants 118,919 $8.26 $ 982,702
======== ==========
<CAPTION>
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
<S> <C> <C> <C>
Subordinate debt conversion 63,525 $7.93 $ 504,000
======== ==========
</TABLE>
II-6
<PAGE> 2
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (continued)
<CAPTION>
PRIMARY FULLY DILUTED
W/SUB DEBT
------------------------------------
<S> <C> <C> <C>
Net Income $1,403,000 $1,403,000
Common shares outstanding at period-end 2,196,174 2,196,174
Average shares outstanding during the period 2,191,168 2,191,168
Average shares adjusted 2,367,965 2,383,023
Outstanding Options &
Warrants (in the money) 453,633 517,158
Limitation on repurchase (20% of outstanding shares) 439,235 439,235
Maximum shares repurchased 278,792 325,304
Market price of common stock:
Average $ 10.39
==========
Closing $ 10.45
==========
COMPILATION OF AVERAGE SHARES OUTSTANDING USING
TREASURY STOCK METHOD
- -----------------------------------------------
Stock Options
Proceeds upon exercise of options $1,914,204
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 183,098
==========
Additional shares to be issued
to cover contracted amount
under option agreements 151,617
==========
Stock Warrants N/A USE
Proceeds upon exercise of stock warrants INCREMENTAL $ 982,702
SHARES AS ==========
Treasury shares that could be COMPUTED ON THE
repurchased with proceeds QUARTERLY
Using average market price EARNINGS PER SHARE
Using closing market price CALCULATIONS 93,998
==========
Additional shares to be issued
to cover contracted amount
under warrant agreements 24,921
==========
Conversion of Subordinate Debt
Proceeds upon exercise of convertible debt $ 504,000
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 48,209
==========
Excess of shares under option over
treasury shares that could be
repurchased 15,316
==========
Average number of common shares
outstanding 2,367,965 2,383,023
========== ==========
Adjustment of net income
Actual net income $1,403,000 $1,403,000
interest deduction (9.75%) 0
less 34% tax effect 0
interest deduction (10.25%) 51,660
less 34% tax effect (1,800)
---------- ------------
Adjusted net income $1,403,000 $1,454,660
========== ==========
Earnings per share
Simple EPS 0.64
====
Primary 0.59
==========
Fully diluted 0.61
==========
As a percentage of Simple EPS 92.53% 95.33%
========== ==========
</TABLE>
II-7
<PAGE> 3
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (continued)
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - PRIMARY EPS
--------------------------------------------------
ACTUAL 10% DIVD OPTIONS WARRANTS TOTAL
=================================================================================
<S> <C> <C> <C> <C> <C>
Jan 1,989,034 2,187,937 157,636 26,861 2,372,434
Feb 1,989,034 2,187,937 157,636 26,861 2,372,434
Mar 1,989,034 2,187,937 157,636 26,861 2,372,434
April 1,989,034 2,187,937 156,122 26,093 2,370,152
May 1,989,034 2,187,937 156,122 26,093 2,370,152
June 1,995,792 2,195,371 156,122 26,093 2,377,586
July 1,995,129 2,194,642 143,120 20,559 2,358,321
Aug 1,995,129 2,194,642 143,120 20,559 2,358,321
Sept 1,996,522 2,196,174 143,120 20,559 2,359,853
Oct
Nov
Dec ---------------------------------------------------------------------------------
1,991,971 2,191,168 152,292 24,504 2,367,965
=================================================================================
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - FULLY DILUTED EPS
--------------------------------------------------------
ACTUAL 10% DIVD OPTIONS WARRANTS CONV DEBT TOTAL
=================================================================================
<S> <C> <C> <C> <C> <C> <C>
Jan 1,989,034 2,187,937 151,617 24,921 15,316 2,379,792
Feb 1,989,034 2,187,937 151,617 24,921 15,316 2,379,792
Mar 1,989,034 2,187,937 151,617 24,921 15,316 2,379,792
April 1,989,034 2,187,937 151,617 24,921 15,316 2,379,792
May 1,989,034 2,187,937 151,617 24,921 15,316 2,379,792
June 1,995,792 2,195,371 151,617 24,921 15,316 2,387,226
July 1,995,129 2,194,642 151,617 24,921 15,316 2,386,496
Aug 1,995,129 2,194,642 151,617 24,921 15,316 2,386,496
Sept 1,996,522 2,196,174 151,617 24,921 15,316 2,388,029
Oct
Nov
Dec ---------------------------------------------------------------------------------
1,991,971 2,191,168 151,617 24,921 15,316 2,383,023
=================================================================================
</TABLE>
II-8
<PAGE> 4
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1995
<CAPTION>
# OPTIONS/ STRIKE PROCEEDS
WARRANTS PRICE
---------------------------------------------
<S> <C> <C> <C>
32,174 $4.14 $ 133,083
30,492 $4.95 151,074
251,073 $5.95 1,495,024
16,136 $6.20 100,043
10,083 $6.45 64,987
---------------------------------------------
339,957 $1,944,211
========== ==========
<CAPTION>
# SHARES STRIKE PROCEEDS
PRICE
---------------------------------------------
Stock warrants 119,391 $8.26 $ 986,700
========== ==========
<CAPTION>
# SHARES STRIKE PROCEEDS
PRICE
---------------------------------------------
Subordinate debt conversion 63,525 $7.93 $ 504,000
========== ==========
</TABLE>
II-9
<PAGE> 5
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (continued)
<CAPTION>
PRIMARY FULLY DILUTED
W/SUB DEBT
------------------------------------
<S> <C> <C> <C>
Net Income $1,007,000 $1,007,000
Common shares outstanding at period-end 2,185,657 2,185,657
Average shares outstanding during the period 1,891,975 1,891,975
Average shares adjusted 1,913,039 1,977,717
Outstanding Options &
Warrants (in the money) 459,348 522,873
Limitation on repurchase (20% of outstanding shares) 437,131 437,131
Maximum shares repurchased 417,077 437,499
Market price of common stock:
Average $ 7.03
==========
Closing $ 7.85
==========
COMPILATION OF AVERAGE SHARES OUTSTANDING USING
TREASURY STOCK METHOD
- -----------------------------------------------
Stock Options
Proceeds upon exercise of options $1,944,211
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 254,215
==========
Additional shares to be issued
to cover contracted amount
under option agreements 85,742
==========
Stock Warrants N/A USE
Proceeds upon exercise of stock warrants INCREMENTAL $ 986,700
SHARES AS ==========
Treasury shares that could be COMPUTED ON THE
repurchased with proceeds QUARTERLY
Using average market price EARNINGS PER SHARE
Using closing market price CALCULATIONS 119,391
==========
Additional shares to be issued
to cover contracted amount
under warrant agreements $ (0)
==========
Conversion of Subordinate Debt
Proceeds upon exercise of convertible debt $ 504,000
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 63,525
==========
Excess of shares under option over
treasury shares that could be
repurchased 0
==========
Average number of common shares
outstanding 1,913,039 1,977,717
========== ==========
Adjustment of net income
Actual net income $1,007,000 $1,007,000
interest deduction (9.75%)
less 34% tax effect
interest deduction (10.50%) 54,180
less 34% tax effect (18,421)
---------- ----------
Adjusted net income $1,007,000 $1,061,180
========== ==========
Earnings per share
Simple EPS 0.53
====
Primary 0.53
==========
Fully diluted 0.54
==========
As a percentage of Simple EPS 98.90% 100.81%
========== ==========
</TABLE>
II-10
<PAGE> 6
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (continued)
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - PRIMARY EPS
--------------------------------------------------
ACTUAL 10% DIVD OPTIONS WARRANTS TOTAL
=================================================================================
<S> <C> <C> <C> <C> <C>
Jan 1,420,783 1,563,861 0 0 1,562,861
Feb 1,420,783 1,562,861 0 0 1,562,861
Mar 1,425,961 1,568,557 0 0 1,568,557
April 1,538,161 1,691,977 0 0 1,691,977
May 1,726,261 1,898,887 0 0 1,898,887
June 1,986,961 2,185,657 0 0 2,185,657
July 1,986,961 2,185,657 63,193 0 2,248,850
Aug 1,986,961 2,185,657 63,193 0 2,248,850
Sept 1,986,961 2,185,657 63,193 0 2,248,850
Oct
Nov
Dec
---------------------------------------------------------------------------------
1,719,977 1,891,975 21,064 0 1,913,039
=================================================================================
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - FULLY DILUTED EPS
--------------------------------------------------------
CONV
ACTUAL 10% DIVD OPTIONS WARRANTS SUBTOTAL DEBT TOTAL
============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Jan 1,420,783 1,562,861 85,742 0 1,648,603 0 1,648,603
Feb 1,420,783 1,562,861 85,742 0 1,648,603 0 1,648,603
Mar 1,425,961 1,568,557 85,742 0 1,654,299 0 1,654,299
April 1,538,161 1,691,977 85,742 0 1,777,719 0 1,777,719
May 1,726,261 1,898,887 85,742 0 1,984,629 0 1,984,629
June 1,986,961 2,185,657 85,742 0 2,271,399 0 2,271,399
July 1,986,961 2,185,657 85,742 0 2,271,399 0 2,271,399
Aug 1,986,961 2,185,657 85,742 0 2,271,399 0 2,271,399
Sept 1,986,961 2,185,657 85,742 0 2,271,399 0 2,271,399
Oct
Nov
Dec
--------------------------------------------------------------------------------------------
1,719,977 1,891,975 85,742 0 1,977,717 0 1,977,717
============================================================================================
</TABLE>
II-11
<PAGE> 7
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
# OPTIONS/ STRIKE PROCEEDS
WARRANTS PRICE
--------------------------------------------
<S> <C> <C> <C>
32,174 $4.14 $ 133,083
30,492 $4.95 151,074
251,073 $5.95 1,495,024
16,136 $6.20 100,043
10,083 $6.45 64,987
--------------------------------------------
339,957 $1,944,211
======== ==========
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
Stock warrants 119,391 $8.26 $986,700
======== ==========
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
Subordinate debt conversion 57,750 $8.73 $504,000
======== ==========
</TABLE>
II-12
<PAGE> 8
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1995 (continued)
<CAPTION>
PRIMARY FULLY DILUTED
W/SUB DEBT
--------------------------------------
<S> <C> <C> <C>
Net Income $1,275,416 $1,275,416
Common shares outstanding at period-end 2,187,937 2,187,937
Average shares outstanding during the period 1,965,585 1,965,585
Average shares adjusted 0 0
Outstanding Options &
Warrants (in the money) 339,957 397,707
Limitation on repurchase (20% of outstanding shares) 437,587 437,587
Max shares repurchased 374,014 314,867
Average market value/share $ 7.84 n/a
Market value at year-end n/a $ 10.91
Market price of common stock:
Average $ 7.84
Closing ========== $ 10.91
==========
COMPILATION OF AVERAGE SHARES OUTSTANDING USING
TREASURY STOCK METHOD
- -----------------------------------------------
Stock Options
Proceeds upon exercise of options $1,944,211
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 178,219
==========
Excess of shares under option over
treasury shares that could be
repurchased 161,738
==========
Stock Warrants N/A USE
Proceeds upon exercise of stock warrants INCREMENTAL $ 986,700
SHARES AS ==========
COMPUTED ON THE
Treasury shares that could be QUARTERLY
repurchased with proceeds EARNINGS PER SHARE
Using average market price CALCULATIONS
Using closing market price 90,448
==========
Excess of shares under option over
treasury shares that could be
repurchased 28,943
==========
Conversion of Subordinate Debt
Proceeds upon exercise of convertible debt $ 504,000
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 46,200
==========
Excess of shares under option over
treasury shares that could be
repurchased 11,550
==========
Average number of common shares
outstanding 2,056,432 2,152,869
========== ==========
Adjustment of net income
Actual net income $1,275,416 $1,275,416
interest deduction (9.75%) 41,576
less 34% tax effect (14,136)
interest deduction (10.50%) 0
less 34% tax effect
---------- ----------
Adjusted net income $1,275,416 $1,302,856
========== ==========
Earnings per share
Simple EPS 0.65
====
Primary 0.62
==========
Fully diluted 0.61
==========
As a percentage of Simple EPS 95.58% 93.27%
========== ==========
II-13
<PAGE> 9
</TABLE>
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1995 (continued)
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - PRIMARY EPS
--------------------------------------------------
ACTUAL 10% DIVD OPTIONS WARRANTS TOTAL
=================================================================================
<S> <C> <C> <C> <C> <C>
Jan 1,420,783 1,562,861 63,193 0 1,626,054
Feb 1,420,783 1,562,861 63,193 0 1,626,054
Mar 1,425,961 1,568,557 63,193 0 1,631,750
April 1,538,161 1,691,977 63,193 0 1,755,170
May 1,726,261 1,898,887 63,193 0 1,962,080
June 1,986,961 2,185,657 63,193 0 2,248,850
July 1,986,961 2,185,657 63,193 0 2,248,850
Aug 1,986,961 2,185,657 63,193 0 2,248,850
Sept 1,986,961 2,185,657 63,193 0 2,248,850
Oct 1,986,961 2,185,657 150,545 23,263 2,359,465
Nov 1,986,961 2,185,657 150,545 23,263 2,359,465
Dec 1,989,034 2,187,937 150,545 23,263 2,361,745
---------------------------------------------------------------------------------
1,786,896 1,965,585 85,031 5,816 2,056,432
=================================================================================
</TABLE>
<TABLE>
AVERAGE NUMBER OF SHARES OUTSTANDING - FULLY DILUTED EPS
--------------------------------------------------------
<CAPTION>
CONV
ACTUAL 10% DIVD OPTIONS WARRANTS SUBTOTAL DEBT TOTAL
=============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Jan 1,420,783 1,562,861 161,738 0 1,724,599 0 1,724,599
Feb 1,420,783 1,562,861 161,738 0 1,724,599 0 1,724,599
Mar 1,425,961 1,568,557 161,738 0 1,730,295 0 1,730,295
April 1,538,161 1,691,977 161,738 0 1,853,715 11,550 1,865,265
May 1,726,261 1,898,887 161,738 0 2,060,625 11,550 2,072,175
June 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
July 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
Aug 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
Sept 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
Oct 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
Nov 1,986,961 2,185,657 161,738 28,943 2,376,338 11,550 2,387,888
Dec 1,989,034 2,187,937 161,738 28,943 2,378,618 11,550 2,390,168
---------------------------------------------------------------------------------------------
1,786,896 1,965,585 161,738 16,884 2,144,207 8,663 2,152,869
=============================================================================================
</TABLE>
II-14
<PAGE> 10
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1994
<CAPTION>
# OPTIONS/ STRIKE PROCEEDS
WARRANTS PRICE
--------------------------------------------
<S> <C> <C> <C>
32,174 $4.14 $ 133,083
30,492 $4.95 151,074
251,073 $5.95 1,495,024
16,136 $6.20 100,043
10,083 $6.45 64,987
--------------------------------------------
339,957 $1,944,211
======== ==========
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
Stock warrants
======== ==========
# SHARES STRIKE PROCEEDS
PRICE
--------------------------------------------
Subordinate debt conversion
======== ==========
</TABLE>
II-15
<PAGE> 11
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1994 (continued)
<CAPTION>
PRIMARY FULLY DILUTED
W/SUB DEBT
--------------------------------------
<S> <C> <C> <C>
Net Income $ 801,148 $ 801,148
Common shares outstanding at period-end 1,566,043 1,566,043
Average shares outstanding during the period 1,511,231 1,511,231
Average shares adjusted 0 0
Outstanding Options &
Warrants (in the money) 339,957 339,957
Limitation on repurchase (20% of c/s shares) 313,209 313,209
Max shares repurchased 367,219 361,922
Average market value/share $ 5.29 n/a
Market value at year-end n/a $ 5.37
Market price of common stock:
Average $ 5.29
==========
Closing $ 5.37
==========
COMPILATION OF AVERAGE SHARES OUTSTANDING USING
TREASURY STOCK METHOD
- -----------------------------------------------
Stock Options
Proceeds upon exercise of options $ 284,157
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 52,897
==========
Excess of shares under option over
treasury shares that could be
repurchased 9,769
==========
Stock Warrants N/A USE
Proceeds upon exercise of stock warrants INCREMENTAL $ 0
SHARES AS ==========
COMPUTED ON THE
Treasury shares that could be QUARTERLY
repurchased with proceeds EARNINGS PER SHARE
Using average market price CALCULATIONS
Using closing market price 0
==========
Excess of shares under option over
treasury shares that could be
repurchased 0
==========
Conversion of Subordinate Debt
Proceeds upon exercise of convertible debt $ 0
==========
Treasury shares that could be
repurchased with proceeds
Using average market price
Using closing market price 0
==========
Excess of shares under option over
treasury shares that could be
repurchased 0
==========
Average number of common shares
outstanding 1,520,222 1,521,000
========== ==========
Adjustment of net income
Actual net income $ 801,148 $ 801,148
interest deduction (9.75%) 0
less 34% tax effect 0
interest deduction (10.50%) 0
less 34% tax effect
---------- ----------
Adjusted net income $ 801,148 $ 801,148
========== ==========
Earnings per share
Simple EPS 0.53
====
Primary 0.53
==========
Fully diluted 0.53
==========
As a percentage of Simple EPS 99.41% 99.36%
========== ==========
</TABLE>
II-16
<PAGE> 12
<TABLE>
ALLEGIANT BANCORP, INC.
CALCULATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1994 (continued)
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING - PRIMARY EPS
--------------------------------------------------
ACTUAL 10% DIVD OPTIONS WARRANTS TOTAL
================================================================================
<S> <C> <C> <C> <C> <C>
Jan 1,366,728 1,503,401 8,732 1,512,133
Feb 1,366,728 1,503,401 8,732 1,512,133
Mar 1,366,728 1,503,401 8,732 1,512,133
April 1,366,728 1,503,401 9,769 1,513,170
May 1,366,728 1,503,401 9,769 1,513,170
June 1,366,728 1,503,401 9,769 1,513,170
July 1,366,728 1,503,401 8,732 1,512,133
Aug 1,366,728 1,503,401 8,732 1,512,133
Sept 1,366,728 1,503,401 8,732 1,512,133
Oct 1,366,728 1,503,401 8,732 1,512,133
Nov 1,395,202 1,534,722 8,732 1,543,454
Dec 1,423,675 1,566,043 8,732 1,574,774
--------------------------------------------------------------------------------
1,373,846 1,511,231 8,991 1,520,222
================================================================================
</TABLE>
<TABLE>
AVERAGE NUMBER OF SHARES OUTSTANDING - FULLY DILUTED EPS
--------------------------------------------------------
<CAPTION>
CONV
ACTUAL 10% DIVD OPTIONS WARRANTS DEBT TOTAL
===========================================================================
<S> <C> <C> <C> <C> <C> <C>
Jan 1,366,728 1,503,401 9,769 0 0 1,513,170
Feb 1,366,728 1,503,401 9,769 0 0 1,513,170
Mar 1,366,728 1,503,401 9,769 0 0 1,513,170
Apr 1,366,728 1,503,401 9,769 0 0 1,513,170
May 1,366,728 1,503,401 9,769 0 0 1,513,170
June 1,366,728 1,503,401 9,769 0 0 1,513,170
July 1,366,728 1,503,401 9,769 0 0 1,513,170
Aug 1,366,728 1,503,401 9,769 0 0 1,513,170
Sept 1,366,728 1,503,401 9,769 0 0 1,513,170
Oct 1,366,728 1,503,401 9,769 0 0 1,513,170
Nov 1,395,202 1,534,722 9,769 0 0 1,544,491
Dec 1,423,675 1,566,043 9,769 0 0 1,575,812
---------------------------------------------------------------------------
1,373,846 1,511,231 9,769 0 0 1,521,000
===========================================================================
</TABLE>
II-17
<PAGE> 1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Allegiant Bancorp, Inc.
St. Louis, Missouri
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated
February 23, 1996, relating to the consolidated financial statements of
Allegiant Bancorp, Inc. appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995.
We also consent to the reference to us under the caption ``Experts'' in
the Prospectus.
/s/ BDO Seidman LLP
St. Louis, Missouri
January 21, 1997
