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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1 TO FORM 10-K)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NO. 0-26350
ALLEGIANT BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1519382
(STATE OF INCORPORATION) (IRS EMPLOYER
IDENTIFICATION NO.)
2122 KRATKY ROAD 63114
ST. LOUIS, MISSOURI (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 314-692-8200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
NAME OF EXCHANGE ON WHICH REGISTERED: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF JUNE 24, 1999:
COMMON STOCK, $0.01 PAR VALUE, $56,194,860.
NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF JUNE 24, 1999:
COMMON STOCK, $0.01 PAR VALUE, 6,611,160 SHARES OUTSTANDING
DOCUMENTS INCORPORATED BY REFERENCE
AS PROVIDED HEREIN, PORTIONS OF THE DOCUMENTS BELOW ARE INCORPORATED BY
REFERENCE:
NOT APPLICABLE
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This Amendment to the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 is being provided to amend and
restate Item 7. The terms "Allegiant," "company," "we," "our" and
"corporation" as used in this report refer to Allegiant Bancorp, Inc.
and its subsidiaries as a consolidated entity, except where it is made
clear that it means only Allegiant. Also, sometimes we refer to our
bank subsidiary as the "bank."
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains certain forward-looking statements with
respect to the financial condition, results of operations and business
of Allegiant Bancorp, Inc. and its subsidiaries. These forward-looking
statements involve certain risks and uncertainties. For example, by
accepting deposits fixed rates, at different times and for different
terms, and lending funds at fixed rates for fixed periods, a bank
accepts the risk that the cost of funds may rise and the use of funds
may be at a fixed rate. Similarly, the cost of funds may fall, but a
bank may have committed by virtue of the term of a deposit to pay what
becomes an above-market rate. Investments may decline in value in a
rising interest rate environment. Loans, and the reserve for loan
losses, have the risk that the borrower will not repay all funds in a
timely manner as well as the risk of total loss. Collateral may or may
not have the value attributed to it. The loan loss reserve, while
believed adequate, may prove inadequate if one or more large borrowers,
or numerous mid-range borrowers, or a combination of both experience
financial difficulty for individual, national or international reasons.
Because the business of banking is highly regulated, decisions of
governmental authorities, such as the rate of deposit insurance, can
have a major effect on operating results. Unanticipated events
associated with Year 2000 compliance, relating to work on computer
systems and software, including work performed by suppliers or vendors,
could affect our future financial condition and operating results. All
these uncertainties, as well as others, are present in a banking
operation and shareholders are cautioned that management's view of the
future may prove to be other than anticipated.
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997. We
reported record earnings for 1998. Consolidated net income was $4.53
million, an increase of 87.74% over the 1997 level of $2.42 million.
The 1998 results represented our seventh consecutive year of record
earnings. Net income has increased at a compound rate of 78.24% over
the past five years. Basic earnings per share were $0.72 compared to
$0.54 in 1997, an increase of 33.33%. A similar increase was achieved
in diluted earnings per share with 1998 results of $0.68 increasing
38.78% compared to the $0.49 recorded for 1997. Diluted earnings per
share have grown at a compound rate of 33.56% during the last five
years.
Return on average assets for 1998 was 0.73%, an improvement from
0.52% recorded for 1997. The improvement in return on assets was the
result of lower asset growth, improved net interest income, improved mix
of earning assets and a considerable increase in shareholders' equity.
Return on average shareholders' equity was 10.14% in 1998 compared to
9.55% in 1997. The improvement in 1998 was achieved despite a 76.82%
increase in average equity between 1998 and 1997.
Net Interest Income. Net interest income totaled $21.95 million,
-------------------
an increase of $5.65 million in 1998 compared to an increase of $6.24
million in 1997. The net interest spread increased by 13 basis points
and the net interest margin increased by 11 basis points from the prior
year. All of these increases were the result of a relatively stable rate
environment, the shifting of earning assets into higher yielding loans
and overall growth in average earning assets and interest bearing
liabilities. Partially offsetting these positive factors were the
declines in the prime lending rate which affected our floating rate
loans, the decline in the ratio of earning assets to total assets and a
decline in non-interest bearing demand
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deposits to total deposits. Net interest margin and net interest spread
were fairly stable throughout the year, with only minor quarterly
fluctuations. The increase in net interest spread was due to the yields
on earning assets declining only 2 basis points year-to-year compared to
a decline of 15 basis points on interest bearing liabilities. In 1997,
the spread increased 28 basis points as a result of similar changes on
both sides of the balance sheet, earning assets increasing 14 basis
points and interest bearing liabilities decreasing 14 basis points. In
1998, the yield on loans declined by 16 basis points. However, this
decline was offset by an increase in the ratio of loans to total earning
assets improving to 85.96% in 1998 compared to 83.17% in 1997.
Generally flat or lower rates were paid on all categories of interest
bearing liabilities. Total cost of deposits declined 11 basis points
due to a reduction of rates paid on money market and NOW accounts,
savings deposits and retail certificates of deposit. Further reduction
in the costs of short-term and long-term borrowings also helped lower
the overall costs of funds, despite the substantial increase in long-
term debt.
Average earning assets increased $134.61 million, or 30.62%,
during 1998 compared to an increase of $143.23 million, or 48.33%, in
1997. Average loans increased 35.01%, or $128.00 million, compared to
growth of 57.35%, or $133.30 million, in 1997. The growth in average
loans includes the bulk sale of mortgage loans that occurred during the
second and third quarters of 1998. These sales, which aggregated $77.04
million, decreased average loans outstanding for the year by
approximately $34.32 million. Our securities portfolio (held-to-
maturity and available-for sale) increased 9.25% during 1998 compared to
an increase of 7.41% in 1997. Average investment securities represented
12.46% of earning assets during 1998 compared to 14.91% during 1997.
This decline in the relative amount of investment securities was
directly correlated to the increase in the percentage of loans to
earning assets mentioned above. In essence, strong loan growth
necessitated the reduction in the growth of the securities portfolio.
Earning assets as a percentage of total assets declined again in 1998 to
92.76% from 94.94% in 1997. The increase in non-earning assets was the
result of opening additional branch locations as well as acquisitions,
which increased the number of branches and intangible assets. This
growth was somewhat mitigated by the sale of three branch offices of the
bank located outside the St. Louis metropolitan area, which occurred in
December of 1998. The impact of this change to average balances was
minimal due to the timing of the consummation of our branch sales.
Average interest bearing liabilities increased 30.61%, or $121.97
million, for 1998 compared to an increase of $127.23 million, or 46.91%,
in 1997. Average deposits increased 29.96% to $475.74 million compared
to $366.07 million in 1997. As was the case in 1997, only moderate
changes occurred in the mix of deposits. During 1998, certificates of
deposit over $100,000 declined as a percent of total deposits while
retail certificates of deposit increased. Non-interest bearing deposits
as a percentage of total deposits declined only 10 basis points to
10.00% from 10.10%. The substantial growth in average deposits and the
relatively stable mix allowed for the average cost of interest bearing
deposits to decline by 11 basis points.
Average short-term borrowings were flat during the year averaging
$52.86 million during 1998 compared to $52.70 million during 1997. The
level of short-term borrowings during 1998 was consistent throughout the
year with only minor fluctuations between quarters.
Average long-term debt for 1998 increased 136.54%, or $22.75
million. The majority of this increase was due to long-term borrowings
from the Federal Home Loan Bank of $26.63 million at December 31, 1998,
a $17.00 million change from December 31, 1997. We use the Federal Home
Loan Bank as a cost-effective source of funding loans. Additionally,
during November 1998, we refinanced a portion of our long-term debt and
our entire issue of subordinated debentures with a $13.65 million, 7.00%
fixed rate, three-year note.
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The following table sets forth the condensed average balance
sheets for the periods reported and the percentage of each principal
category of assets, liabilities and shareholders' equity to total
assets. Also shown is the average yield on each category of interest
earning assets and the average rate paid on interest-bearing liabilities
for each of the periods reported.
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1998 1997
----------------------------------------- -----------------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
BALANCE EARNED/PAID YIELD/RATE BALANCE EARNED/PAID YIELD/RATE
-------- ----------- ---------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
Loans<F1> $493,619 $44,411 9.00% $365,615 $33,473 9.16%
Taxable investment securities 70,079 4,223 6.03 64,384 3,910 6.07
Non-taxable investment securities<F2> 1,494 73 4.89 1,130 56 4.96
Federal funds sold and other
investments 9,036 511 5.66 8,492 326 3.84
-------- ------- -------- -------
Total interest earning assets 574,228 49,218 8.57 439,621 37,765 8.59
Non-interest earning assets:
Cash and due from banks 12,230 9,341
Bank premises and equipment 10,994 6,869
Other assets 27,238 11,065
Allowance for loan losses (5,674) (3,867)
-------- --------
Total assets $619,016 $463,029
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing liabilities:
Money market and NOW accounts $126,829 5,221 4.12% $ 95,431 4,092 4.29%
Savings deposits 16,524 425 2.57 9,665 279 2.89
Certificates of deposit 224,661 12,878 5.73 162,870 9,436 5.79
Certificates of deposit over $100,000 39,581 2,198 5.55 48,358 2,686 5.55
IRA certificates 20,584 1,227 5.96 12,780 760 5.95
-------- ------- -------- -------
Total interest bearing deposits 428,179 21,949 5.13 329,104 17,253 5.24
-------- ------- -------- -------
Federal funds purchased, repurchase
agreements and other short-term
borrowings 52,855 2,624 4.96 52,702 2,895 5.49
Other borrowings 39,403 2,694 6.84 16,658 1,318 7.91
-------- ------- -------- -------
Total interest bearing liabilities 520,437 27,267 5.24 398,464 21,466 5.39
-------- ------- -------- -------
Non-interest bearing liabilities and equity:
Demand deposits 47,560 36,966
Other liabilities 6,298 2,307
Shareholders' equity 44,721 25,292
-------- --------
Total liabilities and shareholders'
equity $619,016 $463,029
======== ========
Net interest income $21,951 $16,299
======= =======
Net interest spread 3.33% 3.20%
Net interest margin 3.82% 3.71%
<FN>
- - -------------
<F1> Average balances include non-accrual loans.
<F2> Presented at actual yield rather than tax-equivalent yield.
</TABLE>
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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. Volume
variances are computed using the change in volume multiplied by the
previous year's rate. Rate variances are computed using the changes in
rate multiplied by the previous year's volume. The change in interest
due to both rate and volume has been allocated between the factors in
proportion to the relationship of the absolute dollar amounts of the
change in each.
<TABLE>
RATE/VOLUME ANALYSIS
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
COMPARED TO THE
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
VOLUME RATE NET CHANGE
------ ---- ----------
INTEREST EARNED ON: (IN THOUSANDS)
<S> <C> <C> <C>
Loans $11,533 $(595) $10,938
Taxable investment securities 340 (27) 313
Non-taxable investment securities 17 -- 17
Federal funds sold and
other investments 24 161 185
------- ----- -------
Total interest income 11,914 (461) 11,453
------- ----- -------
INTEREST PAID ON:
Money market and NOW accounts 1,298 (169) 1,129
Savings deposits 180 (34) 146
Certificates of deposit 3,539 (97) 3,442
Certificates of deposit
over $100,000 (488) -- (488)
IRA certificates 465 2 467
Federal funds purchased, repurchase agreements
and other short-term borrowings 8 (279) (271)
Other borrowings 1,577 (201) 1,376
------- ----- -------
Total interest expense 6,579 (778) 5,801
------- ----- -------
Net interest income $ 5,335 $ 317 $ 5,652
======= ===== =======
</TABLE>
Other Income. Other income increased 182.72% totaling $9.32
------------
million in 1998 compared to $3.30 million in 1997. Included in other
income in 1998 were $3.55 million of non-recurring gains, specifically:
$2.37 million from the sale of branches; $1.11 million from the sale of
mortgage loans; and $0.07 million from securities transactions.
Eliminating all one-time or discretionary gains, 1998 other income was
$5.77 million compared to $3.27 million in 1997. The increase in 1998
was due to substantial growth in mortgage banking revenues, leasing
revenues, deposit service charges and brokerage revenues. Other income,
excluding non-recurring gains, has increased at a compound growth rate
of 82.93% over the last five years.
In December 1998, we completed the sale of three branch offices of
the bank located outside the St. Louis metropolitan area in order to
focus on, and expand our market share in, our market area. This sale
generated a reduction in loans of $13.52 million, a reduction in
deposits of $39.99 million and a pre-tax gain of $2.37 million.
Also during the year, we completed two significant sales of a
large portion of our one- to four-family adjustable rate mortgage loans.
These sales generated a pre-tax gain of $1.11 million. While we
previously had sold some of our mortgage loans, the 1998 bulk sales
reflect a shift in our strategy from originating and holding mortgage
loans to increasing our lending emphasis on more profitable
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commercial loan relationships. During 1998, we also hired several
experienced commercial loan officers in order to implement our strategy.
Mortgage banking revenues increased 76.85% in 1998 to $2.30
million. This compares to $1.30 million in 1997. The increase was
attributable to a continued favorable economic environment of low
unemployment and stable, low long-term interest rates. We benefited
from these macro economic trends as well as a larger customer base.
Leasing revenues totaled $1.53 million, an increase of 252.66%
compared to 1997's level of $0.44 million. We entered the retail
leasing business during 1997 and the 1998 results reflect a full year of
business operation compared to a partial year in 1997. During the
latter part of 1998, a decision was made to curtail this line of
business because of declining profit margins.
Service charges on deposit accounts increased 51.92% to $1.39
million in 1998 compared to $0.91 million in 1997. The increase in 1998
was due to a larger customer base generating an increased number of
transaction deposits as well as the benefit of a full year of the bank's
revised fee structure.
Brokerage revenues increased 84.62% to $0.31 million compared to
$0.17 million in 1997. Part of this increase reflects a full year of
operation in 1998 compared to nine months of operation in 1997 and
higher transaction volumes.
Other Expenses. Total other expenses increased 62.94%, or $8.23
--------------
million, during 1998, totaling $21.30 million compared to $13.07 million
in 1997. Operating expenses have increased at a 52.93% five year annual
compound growth rate. Our efficiency ratio for 1998 was 68.09%, up
slightly from 66.69% in 1997. The increase in this ratio was the result
of acquisitions, deposit purchases, start-up costs associated with new
lines of business and costs resulting from additional banking locations.
Salaries and employee benefits showed the largest dollar increase
year to year, increasing $3.47 million to $9.66 million compared to
$6.19 million in 1997. The percentage increase for 1998 was 56.06%.
The increase in 1998 was due to additional staffing resulting from
acquisitions and new locations. Also included in this caption was a
payout related to a phantom stock plan for our president. Amounts
expensed under this plan, which has expired, were $0.05 million in 1998
and $0.23 million in 1997. Average full-time equivalent employees for
1998 were 237 compared to 146 in 1997, a 62.33% increase. At December
31, 1998 we had 215 full-time equivalent employees compared to 209 at
year-end 1997.
Furniture and equipment expenses increased $0.81 million to $1.75
million in 1998. The increase in 1998 was the result of acquisitions in
1997 and branch openings in 1998 and 1997. Additionally, investments in
computer resources in both years also contributed to the large increase.
Occupancy expenses totaled $1.52 million, an increase of $0.79 million,
or 106.37%, during 1998. The increase was attributable to acquisitions
and branch openings, as mentioned above. Depreciation of the assets
held for operating leases increased $0.95 million in 1998 compared to
1997. As previously discussed, the retail leasing business was started
in late 1997 so that 1998 reflects a full year of operations.
Expense for the amortization of goodwill increased 154.19% during
1998 or $0.55 million, totaling $0.91 million compared to $0.39 million
in 1997. This increase was the result of acquisitions and deposit
purchases undertaken during 1997 and reflected a full year of
amortization during 1998.
In 1998, operating losses totaled $0.72 million, as compared to
$0.94 million in 1997. Of the amount in 1997, $0.75 million was
considered systemic and non-recurring due to integration of two
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branch acquisitions and difficulties associated with upgrading our
computer systems to an entirely new operating system. Excluding non-
recurring items in 1997, the increase in operating losses in 1998 was
$0.53 million. The 1998 operating losses relate to inconsistent
operating procedures as a result of expanding the number of branches and
number of employees. Throughout 1998, we reengineered several
operational processes in an effort to improve quality and control.
Additionally, training was a focus for 1998 and we believe that these
types of losses will be substantially reduced in 1999.
Other non-interest expense increased $1.82 million in 1998
compared to 1997. This growth in expenses was associated with increases
in the number of employees, deposit and loan accounts and physical
locations as compared to prior years.
The following table sets forth a summary of our other income and
expense for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
OTHER INCOME:
Gain on sale of branches $ 2,370 $ --
Mortgage banking revenues 2,299 1,300
Leasing revenues 1,527 433
Service charges on deposits 1,387 913
Gain on sale of mortgage loans 1,112 27
Brokerage division revenues 312 169
Gain on the sale of securities 68 2
Other non-interest income 249 454
------- -------
Total other income $ 9,324 $ 3,298
======= =======
OTHER EXPENSES:
Salaries and employee benefits $ 9,663 $ 6,192
Furniture and equipment 1,752 943
Occupancy 1,523 738
Depreciation of operating leases 1,340 394
Goodwill amortization 910 358
Operating losses 722 938
Supplies 489 428
Other non-interest expense 4,896 3,078
------- -------
Total other expenses $21,295 $13,069
======= =======
</TABLE>
Securities Portfolio. Our securities portfolio consists of
--------------------
securities classified as held-to-maturity and available-for-sale.
We designate these securities upon purchase into one of these two
categories. At December 31, 1998, held-to-maturity securities amounted
to $12.04 million representing those securities we intended to hold to
maturity. Securities designated as available-for-sale totaled $42.74
million representing securities which we may sell to meet liquidity
needs or in response to significant changes in interest rates or
prepayment patterns.
For purposes of this discussion, held-to-maturity and available-
for-sale securities are described as the securities portfolio. At
December 31, 1998, the securities portfolio totaled $54.78 million, a
decline of 28.74% from the preceding year. The decline in the
securities portfolio occurred in the fourth quarter of 1998, as
maturities were not rolled over in order to fund the previously
mentioned branch sales. While average balances for 1998 were higher
than 1997, the relative percentage of securities to earning assets
declined to 12.46% in 1998 compared to 14.91% in 1997. This decline
reflected management's decision to allow maturing securities to be
reinvested in higher yielding commercial loans. We maintain a
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traditional short-term laddered portfolio investment strategy to insure
adequate liquidity while minimizing interest rate risk.
The carrying values of the securities portfolio at the dates
indicated were as follows:
<TABLE>
SECURITIES PORTFOLIO
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
U.S. governmental and agency securities $37,021 $48,354
Mortgage-backed securities 11,930 18,548
Federal Home Loan Bank stock 3,574 7,033
State and municipal securities 1,464 1,563
Other securities 791 1,371
------- -------
Total securities $54,780 $76,869
======= =======
</TABLE>
Maturities and yield information of the securities portfolio as of
December 31, 1998 were as follows:
<TABLE>
SECURITIES--MATURITIES AND YIELDS<F1>
<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
-------- -------- ---------- -------- --------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. governmental and agency
securities $24,549 5.89% $12,472 5.94% $ -- --% $ -- --%
Mortgage-backed securities 6,579 6.42 5,294 5.86 57 9.68
Federal Home Loan Bank stock 3,574 6.55 -- -- -- -- -- --
States and municipal securities 324 4.87 281 5.08 859 4.87 -- --
Other securities -- -- 791 6.21 -- -- -- --
------- ------- ---- -------
Total securities $35,026 6.05% $18,838 5.91% $916 5.17% $ -- --
======= ======= ==== =======
Total securities portfolio $54,780 5.99%
=======
<FN>
- - -----------
<F1> Maturities are shown in this table by expected maturity. Expected
maturities differ from contractual maturities due to the right to
call or prepay obligations. Yields on tax-exempt obligations have
been presented on an actual basis rather than a tax-equivalent
basis.
</TABLE>
Loans. Loans have historically been the primary component of
-----
earning assets. At December 31, 1998 loans totaled $495.67 million, an
increase of 2.23% from year-end 1997. This small increase included the
sale of $78.4 million of mortgage loans. Without this sale, year-end
1998 loans would have increased 18.31% compared to year-end 1997.
Average loans increased 35.01% during 1998 compared to a 57.38% increase
in 1997. Loans have increased at a 48.01% compound average growth rate
over the last five years. Substantially all of these loans were
originated in our primary market areas. At December 31, 1998, we had no
foreign loans and only a minimal amount of participations purchased.
The largest increase in loans involved commercial real estate
loans, which increased $61.09 million, or 45.10%, in 1998. Traditional
commercial loans showed the second largest increase of $16.30 million,
or 14.83%. Growth in both of these categories reflected management's
decision to focus on the more profitable commercial relationships
instead of emphasizing one- to four-family mortgage loans. The growth in
the commercial sectors was accomplished by hiring several additional
commercial lending personnel and directing existing staff toward
developing commercial banking relationships. As a result of this
emphasis, commercial real estate loans comprised 39.65% of the loan
portfolio at December 31, 1998 compared to 27.94% at December 31, 1997.
Traditional commercial loans comprised 25.47% of
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the portfolio at December 31, 1998 versus 22.67% in 1997. Additionally,
construction loans, which can be viewed as commercially oriented,
increased 34.62%, totaling $36.59 million at year-end 1998 compared to
$27.18 million at year-end 1997. Finally, consumer loans increased
$4.09 million, or 24.30%, during 1998, reaching $20.91 million at
December 31, 1998 compared to $16.82 million at December 31, 1997.
Offsetting the substantial loan growth mentioned above was the
decline in one- to four-family residential loans. This category of loans
declined $79.67 million during 1998. This decline was accomplished by
the bulk sale of loans mentioned before as well as normal pay-offs and
amortization. This category represented 23.46% of total loans at year-
end 1998 compared to 40.42% of total loans at year-end 1997.
The following table summarizes the composition of our loan
portfolio at the dates indicated:
<TABLE>
LOAN PORTFOLIO--TYPES OF LOANS
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1998 1997 1996
------------------------ ------------------------ ------------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
-------- ----- -------- ----- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural,
municipal and industrial
development $126,239 25.47% $109,937 22.67% $ 75,129 25.74%
Real estate -- construction 36,590 7.38 27,181 5.61 8,763 3.00
Real estate -- mortgage
One- to four-family residential 116,291 23.46 195,964 40.42 121,386 41.58
Multi-family and commercial 196,545 39.65 135,452 27.94 74,721 25.60
Consumer and other, net of
unearned income 20,004 4.04 16,328 3.36 11,927 4.08
-------- ------ -------- ------ -------- ------
Total loans $495,669 100.00% $484,862 100.00% $291,926 100.00%
======== ====== ======== ====== ======== ======
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1994
----------------------- -----------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial, agricultural,
municipal and industrial
development $ 40,518 22.32% $ 28,212 23.24%
Real estate -- construction 8,777 4.83 5,504 4.53
Real estate -- mortgage
One- to four-family residential 71,260 39.25 47,109 38.81
Multi-family and commercial 52,795 29.08 31,813 26.21
Consumer and other, net of
unearned income 8,194 4.52 8,755 7.21
-------- ------ -------- ------
Total loans $181,544 100.00% $121,393 100.00%
======== ====== ======== ======
</TABLE>
<PAGE>
<TABLE>
LOAN PORTFOLIO - MATURITIES AND SENSITIVITIES OF LOANS
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------------
MATURING AFTER ONE YEAR MATURING AFTER
MATURING IN THROUGH FIVE YEARS FIVE YEARS
ONE YEAR ------------------------- --------------------------
OR LESS FIXED-RATE VARIABLE FIXED-RATE VARIABLE TOTAL
----------- ---------- -------- ---------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural,
Municipal and industrial
development $ 99,942 $ 24,180 $ 500 $ 1,617 $ -- $126,239
Real estate-construction 33,661 2,222 -- 707 36,590
Real estate-mortgage
One- to four-family residential 81,815 29,313 28 5,135 -- 116,291
Multi-family and commercial 92,411 98,141 1,556 4,437 -- 196,545
Consumer and other, net of
unearned income 10,966 8,870 -- 168 -- 20,004
-------- -------- ------ ------- ----- --------
Total loans $318,795 $162,726 $2,084 $12,064 $ -- $495,669
======== ======== ====== ======= ===== ========
</TABLE>
Asset Quality. Non-performing assets consist of the following:
--------------
nonaccrual loans on which the ultimate collectibility of the full amount
of interest is uncertain; loans which have been renegotiated to provide
for a reduction or deferral of interest or principal because of a
deterioration in the financial condition of the borrower; and loans past
due 90 days or more as to principal or interest and other real estate
owned. Non-performing assets increased slightly to $1.78 million at
December 31, 1998 compared to $1.71 million at December 31, 1997. At
December 31, 1998 non-performing assets represented 0.30%
-9-
<PAGE>
<PAGE>
of total assets compared to 0.28% of total assets at December 31, 1997.
Non-accrual loans were $1.50 million at December 31, 1998 compared to
$0.56 million at December 31, 1997. This increase was offset by
declines in loans delinquent 90 days or more, reflecting migration to
non-accrual status, and by the elimination of other real estate owned.
At December 31, 1998, the bank had one loan relationship, not
included in the past-due, restructured or non-accrual categories, where
known information about possible credit problems caused management to be
uncertain as to the ability of the borrower to comply with the present
loan repayment terms over the next six months. This loan relationship
totaled $2.51 million at December 31, 1998. Principal and interest
payments were current at December 31, 1998.
We continually analyze our loan portfolio to identify potential
risk elements. The loan portfolio is reviewed by lending management and
the bank's internal loan review staff. As an integral part of their
examination process, the various regulatory agencies periodically review
our allowance for loan losses. We believe that our allowance for loan
losses at December 31, 1998 was consistent with applicable regulatory
requirements.
-10-
<PAGE>
<PAGE>
The following table summarizes, at the dates presented, non-
performing assets by category:
<TABLE>
RISK ELEMENTS--NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
COMMERCIAL, FINANCIAL, AGRICULTURAL, MUNICIPAL
AND INDUSTRIAL DEVELOPMENT:
Past due 90 days or more $ -- $ 341 $ 5 $ 113 $ --
Non-accrual 962 360 207 109 40
Restructured terms -- -- -- -- --
REAL ESTATE--CONSTRUCTION:
Past due 90 days or more -- -- 264 36 90
Non-accrual -- 108 84 20 35
Restructured terms -- -- -- 3 --
REAL ESTATE--MORTGAGE:
One- to four-family residential:
Past due 90 days or more 69 456 -- -- --
Non-accrual 378 70 -- -- --
Restructured terms -- -- -- -- --
Multi-family and commercial:
Past due 90 days or more -- -- -- -- --
Non-accrual 307 -- -- -- --
Restructured terms -- -- -- -- --
CONSUMER AND OTHER, NET OF UNEARNED INCOME:
Past due 90 days or more -- 21 23 12 8
Non-accrual 62 21 109 15 --
Restructured terms -- -- -- -- --
------- ------- ------- ------- -------
Total non-performing loans 1,778 1,377 692 308 173
------- ------- ------- ------- -------
Other real estate -- 330 -- 10 25
------- ------- ------- ------- -------
Total non-performing assets $ 1,778 1,707 $ 692 $ 318 $ 198
======= ======= ======= ======= =======
RATIOS:
Non-performing loans to total loans 0.36% 0.28% 0.24% 0.17% 0.14%
Non-performing assets to total assets 0.30 0.28 0.18 0.11 0.12
Non-performing loans to shareholders'
equity 3.70 3.27 4.22 2.21 2.05
Allowance for loan losses to total
loans 1.30 1.07 1.06 1.17 1.20
Allowance for loan losses to non-
performing loans 362.32 377.12 447.98 691.56 841.04
</TABLE>
Interest income that would have been recorded during the year
ended December 31, 1998 had all non-accrual, past due and restructured
loans been current in accordance with their original terms was
immaterial.
Allowance for Loan Losses. Our allowance for loan losses
--------------------------
increased 24.05% from $5.19 million on December 31, 1997 to $6.44
million on December 31, 1998. The provision charged to expense was
$2.42 million in 1998. This level, coupled with the bulk sale of loans
previously mentioned, allowed the level of the allowance to increase to
1.30% of total loans at December 31, 1998 compared to 1.07% at December
31, 1997. As mentioned above in the loan discussion, we shifted our
lending focus in 1998 to higher yielding commercial relationships. This
shift, while providing higher earnings potential, does entail greater
risk than traditional residential mortgage loans. Because of this
shift, the overall level of
-11-
<PAGE>
<PAGE>
the allowance for loan losses was increased. Additionally, as can be
seen from the allocation of the allowance, additional weight was given
to the increased risks associated with the commercial real estate
portfolio that was reflected in the real estate -- mortgage category.
Net charge-offs for 1998 were 24 basis points of average loans
outstanding. Although up from 1997's level of 19 basis points, net
charge-offs in 1998 were low and consistent with our historically low
charge-off ratio. At year-end 1998, our allowance represented 362.32%
of non-performing loans compared to 377.12% at year-end 1997.
The allowance for loan losses is provided at a level considered
adequate to provide for potential loan losses and, among other things,
is 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 loan portfolio, evaluation of potential problem loans
identified based on existing circumstances known to management,
potential future loan losses on loans to specific customers or
industries and recent loan loss experience. We continually monitor the
quality of our loan portfolio to ensure the timely charge-off of problem
loans and to determine the adequacy of the level of the allowance for
loan losses. We presently believe that our asset quality, as measured
by the statistics in the following table, continues to be very high and
that our allowance is adequate to absorb potential losses in the
portfolio at December 31, 1998.
The following table summarizes the allocation of the allowance for
loan losses by major category and identifies the percentage of each loan
category to the total loan portfolio balance:
<TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996
----------------------- ----------------------- ----------------------
PERCENT PERCENT PERCENT
ALLOCATED OF ALLOCATED OF ALLOCATED OF
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
--------- ----- --------- ----- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural,
municipal and industrial
development $1,327 25.47% $1,352 22.67% $ 833 25.74%
Real estate -- construction 347 7.38 303 5.61 124 3.00
Real estate -- mortgage
One- to four-family residential 1,222 23.46 637 40.42 440 41.58
Multi-family and commercial 2,849 39.65 1,573 27.94 715 25.60
Consumer and others 196 4.04 180 3.36 142 4.08
Unallocated 501 -- 1,151 -- 848 --
------ ------ ------ ------ ------ ------
Total $6,442 100.00% $5,193 100.00% $3,100 100.00%
====== ====== ====== ====== ====== ======
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1994
----------------------- -----------------------
PERCENT PERCENT
ALLOCATED OF ALLOCATED OF
ALLOWANCE LOANS ALLOWANCE LOANS
--------- ----- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial, agricultural,
municipal and industrial
development $ 467 22.32% $ 315 23.24%
Real estate -- construction 281 4.83 74 4.53
Real estate -- mortgage
One- to four-family residential 305 39.25 128 38.81
Multi-family and commercial 513 29.08 343 26.21
Consumer and others 90 4.52 93 7.21
Unallocated 474 -- 502 --
------ ------ ------ ------
Total $2,130 100.00% $1,455 100.00%
====== ====== ====== ======
</TABLE>
-12-
<PAGE>
<PAGE>
The following table summarizes, for the periods indicated,
activity in the allowance for 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>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES (BEGINNING OF YEAR) $ 5,193 $ 3,100 $ 2,130 $ 1,455 $ 775
Loans charged off:
Commercial, financial, agricultural,
municipal and industrial development (632) (536) (113) (183) (165)
Real estate--construction (7) (22) (252) (82) --
Real estate--mortgage
One- to four-family residential (307) (88) (37) -- (31)
Multi-family and commercial (133) -- (75) -- --
Consumer and other (147) (113) (68) (58) (10)
-------- -------- -------- -------- --------
Total loans charged off (1,226) (759) (545) (323) (206)
-------- -------- -------- -------- --------
Recoveries of loans previously charged off:
Commercial, financial, agricultural,
municipal and industrial
development 4 12 54 11 35
Real estate--construction 6 -- -- -- --
Real estate--mortgage
One- to four-family residential 14 10 3 -- --
Multi-family and commercial 20 -- -- -- --
Installment and consumer 11 30 10 10 2
-------- -------- -------- -------- --------
Total recoveries 55 52 67 21 37
-------- -------- -------- -------- --------
Net loans charged off (1,171) (707) (478) (302) (169)
-------- -------- -------- -------- --------
Acquired subsidiary balance -- 403 -- -- --
Provision for loan losses 2,420 2,397 1,448 977 849
-------- -------- -------- -------- --------
Allowance for loan losses (end of year) $ 6,442 $ 5,193 $ 3,100 $ 2,130 $ 1,455
======== ======== ======== ======== ========
LOANS OUTSTANDING:
Average $493,619 $365,615 $232,314 $158,503 $ 88,654
End of year 495,669 484,862 291,926 181,544 121,393
RATIOS:
Net charge-offs to average loans 0.24% 0.19% 0.21% 0.19% 0.19%
Net charge-offs to provision for loan
losses 48.39 29.50 33.01 30.91 19.91
Provision for loan losses to average
loans 0.49 0.66 0.62 0.62 0.96
Allowance for loan losses to total
loans 1.30 1.07 1.06 1.17 1.20
</TABLE>
Deposits. Total deposits declined $33.88 million, or 6.99%, in
--------
1998 compared to 1997. As previously mentioned, this decline in year-
end numbers was the result of the sale of three branch offices of the
bank. This sale reduced total deposits at December 31, 1998 by $39.99
million. The majority of deposits sold were in the certificate of
deposit category, hence the decline in certificates of deposit as a
percent of total deposits to 41.55% at December 31, 1998 from 47.79% at
December 31, 1997. Absent the sale, deposits would have increased
slightly during 1998.
-13-
<PAGE>
<PAGE>
Average deposits for 1998 were $475.74 million compared to $366.07
million in 1997. The increase in average deposits was the result of
acquisitions and deposit purchases that occurred during the third
quarter of 1997. The effect of these 1997 acquisitions increased
averages for the full year of 1998. Changes in the mix of average
deposits were concentrated in both categories of certificates of
deposit. On average, retail certificates of deposit increased as a
percentage of total deposits to 47.22% in 1998 from 44.49% in 1997.
Certificates of deposit over $100,000 declined to 8.32% of total
deposits in 1998 from 13.21% of total deposits in 1997. The reduction
in large certificates of deposit was the result of management's efforts
to replace these rate sensitive funds with core deposits.
The following tables summarize deposits as of the dates indicated:
<TABLE>
DEPOSIT LIABILITY COMPOSITION
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997
-------------------------------------- --------------------------------------
PERCENT AVG. PERCENT AVG.
AMOUNT OF TOTAL RATE AMOUNT OF TOTAL RATE
-------- -------- ---- -------- -------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 55,417 12.29% --% $ 50,060 10.33% --%
Money market and NOW accounts 142,902 31.70 4.12 115,856 23.91 4.29
Savings deposits 14,917 3.31 2.57 16,157 3.33 2.89
Certificates of deposit 187,886 41.68 5.73 231,601 47.79 5.79
Certificates of deposit over $100,000 31,173 6.92 5.55 52,211 10.77 5.55
IRA certificates 18,471 4.10 5.96 18,756 3.87 5.95
-------- ------ -------- ------
Total deposits $450,766 100.00% 5.13 $484,641 100.00% 5.24
======== ====== ======== ======
</TABLE>
<TABLE>
AMOUNTS AND MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
<CAPTION>
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Three months or less $14,387
Over three months through six months 5,658
Over six through twelve months 5,905
Over twelve months 5,223
-------
Total $31,173
=======
</TABLE>
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996. We
reported then-record earnings for 1997 with consolidated net income of
$2.42 million, an increase of 33.70% over 1996 earnings of $1.81
million. Basic earnings per share were $0.65 compared to $0.66 in 1996.
Diluted earnings per share were $0.49, a 2.08% increase over the $0.48
earned in 1996. Average shares outstanding increased substantially in
1997 as we continued to increase our equity base to keep pace with asset
growth.
Return on average assets for 1997 was 0.52%, compared to 0.59% in
1996. Return on average shareholders' equity was 9.55% for the year
compared to 12.17% for 1996. The decline in the return on average
shareholders' equity was attributable to our issuance of shares of
common stock in connection with the acquisition of Reliance Financial,
Inc. in August 1997 and two rights offerings during 1997.
Net Interest Income. Net interest income increased $6.24 million,
-------------------
or 62.07%, in 1997 compared to an increase of 24.99% in 1996. Net
interest margin was 3.71% in 1997 compared to 3.39% in 1996. The
increase in net interest income and net interest margin was due to a
relatively stable rate environment, significant increases in loans and
deposits, substantial shifting of earning assets into higher
-14-
<PAGE>
<PAGE>
yielding loans and proportionately greater non-interest bearing
deposits. These improvement factors were partially offset by a decrease
in the ratio of earning assets to total assets.
Our net interest spread increased by 30 basis points from 2.92% in
1996 to 3.22% in 1997. This followed a decrease of 30 basis points in
1996. The increase in 1997 occurred as a result of an increase on the
yields on earning assets of 14 basis points and a 16 basis point decline
in rates paid on interest bearing liabilities. The increase of the
yields on earning assets of 14 basis points followed a decrease of 42
basis points in 1996. The increase in 1997 was due in large part to
average loans comprising 83.17% of earning assets. Despite a 10 basis
point decline in loan yields, the increased volume of loans helped raise
overall yield on earning assets. Yields on taxable securities also
improved 35 basis points as a result of reinvestment opportunities and
the additional investment opportunities and the additional investment of
$5.0 million resulting from cash received in the third quarter from the
acquisition of the branches in Union and Warrenton, Missouri. The lower
rates paid on interest bearing liabilities was the result of generally
lower rates in all categories with the exception of certificates of
deposit over $100,000. The decline in rates on certificates of deposits
under $100,000 of 11 basis points had the most impact.
-15-
<PAGE>
<PAGE>
The following table sets forth the condensed average balance
sheets for the periods reported and the percentage of each principal
category of assets, liabilities and shareholders' equity to total
assets. Also shown is the average yield on each category of interest
earning assets and the average rate paid on interest-bearing liabilities
for each of the periods reported.
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1997 1996
----------------------------------------- ----------------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
BALANCE EARNED/PAID YIELD/RATE BALANCE EARNED/PAID YIELD/RATE
-------- ----------- ---------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans<F1> $365,615 $33,473 9.16% $232,314 $21,428 9.22%
Taxable investment securities 64,384 3,910 6.07 59,882 3,428 5.72
Non-taxable investment securities<F2> 1,130 56 4.96 1,115 49 4.39
Federal funds sold and other investments 8,492 326 3.84 3,079 151 4.90
-------- ------- ---- -------- ------- ----
Total interest earning assets 439,621 37,765 8.59 296,390 25,056 8.45
Non-interest earning assets:
Cash and due from banks $ 9,341 $ 6,382
Bank premises and equipment 6,869 4,698
Other assets 11,065 3,915
Allowance for loan losses (3,867) (2,401)
-------- --------
Total assets $463,029 $308,984
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing liabilities:
Money market and NOW accounts $ 95,431 $ 4,092 4.29% $ 70,948 $ 3,218 4.54%
Savings deposits 9,665 279 2.89 6,985 227 3.25
Certificates of deposit 162,870 9,436 5.79 104,283 6,149 5.90
Certificates of deposit over $100,000 48,358 2,686 5.55 36,387 2,001 5.50
IRA certificates 12,780 760 5.95 7,673 465 6.06
-------- ------- -------- -------
Total interest bearing deposits 329,104 17,253 5.24 226,276 12,060 5.33
-------- ------- -------- -------
Federal funds purchased, repurchase
agreements and other short-term
borrowings 52,702 2,895 5.49 27,481 1,542 5.61
Other borrowings 16,658 1,318 7.91 17,482 1,397 7.99
-------- ------- -------- -------
Total interest bearing liabilities $398,464 $21,466 5.39 $271,239 $14,999 5.53
-------- ------- -------- -------
Non-interest bearing liabilities and
equity:
Demand deposits $ 36,966 $ 21,312
Other liabilities 2,307 1,582
Shareholders' equity 25,292 14,851
-------- --------
Total liabilities and
shareholders' equity $463,029 $308,984
======== ========
Net interest income $16,299 $10,057
======= =======
Net interest spread 3.20% 2.92%
Net interest margin 3.71% 3.39%
<FN>
- - -----------
<F1> Average balances include non-accrual loans.
<F2> Presented at actual yield rather than tax-equivalent yield.
</TABLE>
-16-
<PAGE>
<PAGE>
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>
RATE/VOLUME ANALYSIS
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
COMPARED TO THE
YEAR ENDED DECEMBER 31, 1996
--------------------------------------
VOLUME RATE NET CHANGE
------ ---- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST EARNED ON:
Loans $12,186 $(141) $12,045
Taxable investment securities 267 216 483
Non-taxable investment securities 1 6 7
Federal funds sold and
other investments 213 (39) 174
------- ----- -------
Total interest income 12,667 42 12,709
------- ----- -------
INTEREST PAID ON:
Money market and NOW accounts 1,047 (173) 874
Savings deposits 79 (27) 52
Certificates of deposit 3,404 (117) 3,287
Certificates of deposit over $100,000 666 19 685
IRA certificates 303 (8) 295
Federal funds purchased, repurchase agreements
and other short-term borrowings 1,386 (33) 1,353
Other borrowings (65) (14) (79)
------- ----- -------
Total interest expense 6,820 (353) 6,467
------- ----- -------
Net interest income $ 5,847 $ 395 $ 6,242
======= ===== =======
</TABLE>
Other Income. Other income increased 136.76% for 1997 compared to
------------
1996, and totaled $3.30 million for 1997. Other income, excluding
securities gains and mortgage banking revenues, increased $0.96 million,
or 93.41%, in 1997 compared to the prior year. The increase in other
income in 1997 resulted primarily from an increase of $0.99 million in
mortgage banking gross revenues generated by Allegiant Mortgage Company
and the newly formed Edge Mortgage Services. In addition, service
charges on deposits grew by $0.30 million due to the increased number of
deposit accounts and an expanded base of service chargeable products.
Other Expense. Total operating expenses increased $6.05 million,
-------------
or 86.19%, to $13.07 million during 1997, compared to an increase of
$1.39 million, or 24.78%, to $7.02 million in 1996. A majority of the
increase was due to the expansion of our business lines, our two
mortgage subsidiaries and an increase in the number of our banking
locations. The additions resulted in increased salary and benefit
expense, furniture and equipment costs and occupancy expenses. Our
efficiency ratio, determined by dividing the total operating expenses by
the total tax-equivalent revenue, was 67.69% in 1997 as compared to
61.30% in 1996.
-17-
<PAGE>
<PAGE>
The following table sets forth a summary of our other income and
expense for the years indicated:
<TABLE>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
OTHER INCOME:
Mortgage banking revenues $ 1,300 $ 312
Leasing revenues 433 --
Service charges on deposits 913 612
Gain on the sale of mortgage loans 27 --
Brokerage division revenues 169 6
Gain on the sale of securities 2 49
Other non-interest income 454 414
------- ------
Total other income $ 3,298 $1,393
======= ======
OTHER EXPENSES:
Salaries and employee benefits $ 6,192 $3,455
Furniture and equipment 943 689
Occupancy 738 448
Depreciation of operating leases 394 --
Goodwill amortization 358 67
Operating losses 938 144
Supplies 428 202
Other non-interest expense 3,078 2,014
------- ------
Total other expenses $13,069 $7,019
======= ======
</TABLE>
Securities Portfolios. At December 31, 1997, held-to-maturity
---------------------
securities amounted to $31.95 million and securities designated as
available-for-sale totaled $44.92 million.
The carrying values of securities portfolio at the dates indicated
were as follows:
<TABLE>
SECURITIES PORTFOLIO
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
U.S. governmental and agency securities $48,354 $36,492
Mortgage-backed securities 18,548 18,202
Federal Home Loan Bank stock 7,033 4,462
State and municipal securities 1,563 1,199
Other securities 1,371 205
------- -------
Total securities $76,869 $60,560
======= =======
</TABLE>
Loans. Loans, the largest component of interest earning assets,
-----
increased 66.09% for the year ended December 31, 1997 which followed an
increase of 60.80% in 1996. Average total loans outstanding for 1997
were $365.62 million, a 57.38% increase over 1996 average outstandings.
Average total loans outstanding for 1996 were $232.31 million, an
increase of 46.57% over average total outstanding loans in 1995. The
loan growth in 1997 consisted of a 46.33% increase in commercial loans,
a 69.00% increase in real estate mortgage loans, a 210.18% increase in
real estate construction loans and a 39.20% increase in consumer loans.
Essentially all of the loans were generated within our primary market
area. We had no foreign credits and an insignificant amount of
participations were purchased.
-18-
<PAGE>
<PAGE>
Commercial loans increased $34.81 million, from $75.13 million on
December 31, 1996 to $109.94 million on December 31, 1997. The increase
in commercial loans was largely due to marketing efforts of the bank's
commercial loan team, strengthened by the additions during 1997 of
experienced personnel. The commercial loan portfolio is diversified
from an industry standpoint and includes businesses engaged in
manufacturing, agribusiness, wholesaling and retailing, financial
services and other service businesses. Emphasis is upon middle market
and community businesses with known 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 repayment on the loans may not be directly related to the real
estate. This real estate provides us with additional collateral
protection.
Asset Quality. Our allowance for loan losses increased 67.52%,
-------------
from $3.10 million on December 31, 1996, to $5.19 million on
December 31, 1997. The majority of this increase was due to the
provision of $2.40 million to the allowance for loan losses during 1997.
The 67.52 % increase in the allowance was directly related to the 66.09%
increase during 1997 in our loan balance. The allowance for loan losses
to total loans increased slightly to 1.07% at December 1997 from 1.06%
at December 31, 1996. The allowance for loan losses represented 377.12%
of non-performing loans at December 31, 1997, compared to 447.98% at
December 31, 1996.
Non-performing assets increased by $0.69 million to $1.38 million
at December 31, 1997, from $0.69 million on December 31, 1996. The
ratio of non-performing loans to total loans was 0.28% at December 31,
1997 compared to 0.24% as of December 31, 1996. The largest component
of this increase in non-performing loans was an increase of $0.04
million in past due commercial loans and $0.46 million in past due real
estate loans.
Allowance for Loan Losses. The allowance for loan losses equaled
-------------------------
1.07% of loans outstanding at December 31, 1997, essentially the same
percentage level as 1996. For the year ended December 31, 1997, the
provision for loan losses was $2.40 million compared to $1.45 million
for the year ended December 31, 1996, an increase of $0.95 million, or
65.54%. The increase in the annual provision for loan losses was
primarily a result of the 66.09% increase in total loans outstanding at
December 31, 1997 compared to December 31, 1996. The provision to
average loans outstanding as 0.71% in 1997 compared to 0.62% in 1996.
Net loans charged off during 1997 was $0.71 million, compared to $0.48
million for the year ended December 31, 1996 representing an increase of
47.91%. Net loans charged off as a percentage of average loans
outstanding was 0.19% and 0.21% in 1997 and 1996, respectively. Non-
performing loans to total loans remained low at 0.28% at December 31,
1997 compared to 0.24% at year-end 1996. Total recoveries for the
twelve months ended December 31, 1997 were $0.05 million compared to
$0.07 million in 1996.
Deposits. Average deposits increased $118.48 million, or 47.85%,
--------
1997 following an increase of $63.28 million, or 34.33%, in 1996. The
increase in 1997 was due to internal growth of approximately $67.5
million primarily from additional branch openings in 1996 and 1997 and
growth of approximately $51.0 million due to acquisitions. As shown in
the table below, total deposits at year-end 1997 increased by $175.97
million, or 57.01%. This growth rate, which is higher than the average
growth rate, was due to the aforementioned acquisitions taking place in
the third quarter of 1997, which therefore impacted average balances for
the year to a lesser degree.
The mix of average deposits changed moderately during the year
with non-interest bearing deposits comprising 10.10% of total deposits
compared to 8.61% in 1996. This increase also was the result of the
previously mentioned deposit acquisition having proportionately more
non-interest bearing
-19-
<PAGE>
<PAGE>
accounts. Certificates of deposit under $100,000 comprised 44.49% of
average deposits compared to 42.12% in 1996. The increase in 1997 was a
result of the thrift acquisition having proportionately more of these
deposits.
The following tables summarize deposits as of the dates indicated:
<TABLE>
DEPOSIT LIABILITY COMPOSITION
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996
-------------------------------------- -------------------------------------
PERCENT AVG. PERCENT AVG.
AMOUNT OF TOTAL RATE AMOUNT OF TOTAL RATE
------ -------- ---- ------ -------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 50,060 10.33% --% $ 29,406 9.53% --%
Money market and NOW accounts 115,856 23.91 4.29 85,201 27.60 4.54
Savings deposits 16,157 3.33 2.89 6,083 1.97 3.25
Certificates of deposit 231,601 47.79 5.79 128,407 41.60 5.90
Certificates of deposit over $100,000 52,211 10.77 5.55 50,825 16.47 5.50
IRA certificates 18,756 3.87 5.95 8,748 2.83 6.06
-------- ------ -------- ------
Total deposits $484,641 100.00% 5.24 $308,670 100.00% 5.33
======== ====== ======== ======
</TABLE>
<TABLE>
AMOUNTS AND MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
<CAPTION>
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Three months or less $26,694
Over three months through six months 5,604
Over six through twelve months 11,098
Over twelve months 8,815
-------
Total $52,211
=======
</TABLE>
INTEREST RATE SENSITIVITY
Our asset/liability strategy is to minimize the sensitivity of
earnings to changes in interest rates while maintaining an acceptable
net interest margin. The bank's asset/liability committee monitors the
interest rate sensitivity of the balance sheet on a bi-weekly basis. The
committee reviews asset and liability repricing in the context of
current and possible future interest rate scenarios affecting the
economic climate in our market area.
Our pricing policy is that all earning assets and interest bearing
liabilities be either based on floating rates or have a fixed rate for a
period not exceeding five years. Real estate mortgage loans held by us,
while having long final maturities, are comprised of one-, two- or
three-year adjustable rate loans. The adjustable basis of these loans
significantly reduces interest rate risk.
-20-
<PAGE>
<PAGE>
As the following table shows, at December 31, 1998 we had a slight
bias for falling interest rates in the most immediate time frame. This
structure is similar to our positioning at the beginning of 1998;
however, the bias to falling rates has been reduced to mitigate the
impact of any increases in short-term rates. The cumulative gap
positions in all time frames presented are well within our
asset/liability guidelines.
<TABLE>
<CAPTION>
TIME TO MATURITY OR REPRICING
--------------------------------------------------------------------------------
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>
RATE SENSITIVE ASSETS (RSA):
Loans $241,108 $ 77,687 $164,810 $ 12,064 $495,670
Investment securities 11,857 23,169 18,838 916 54,780
Federal funds 3,430 -- -- -- 3,430
-------- -------- -------- -------- --------
Total RSA $256,395 $100,856 $183,648 $ 12,980 $553,880
======== ======== ======== ======== ========
RATE SENSITIVE LIABILITIES (RSL):
Money market and NOW accounts $142,901 $ -- $ -- $ -- $142,901
Savings 14,918 -- -- -- 14,918
Time deposits 67,481 70,638 67,564 674 206,357
Time deposits over $100,000 15,037 11,865 3,929 342 31,173
Repurchase agreements 13,745 297 -- -- 14,042
S/T other -- 500 -- -- 500
S/T FHLB borrowings 27,000 12,500 -- -- 39,500
L/T FHLB borrowings -- -- 15,125 11,500 26,625
L/T borrowings - other -- -- 13,150 -- 13,150
-------- -------- -------- -------- --------
Total RSL $281,082 $ 95,800 $ 99,768 $ 12,516 $489,166
======== ======== ======== ======== ========
PERIODIC INFORMATION:
GAP (RSA - RSL) $(24,687) $ 5,056 $ 83,880 $ 464
RSA/RSL<F1> 91.22% 105.28% 184.08% 103.71%
RSA/total assets 43.00 16.91 30.80 2.18
RSL/total assets 47.14 16.07 16.73 2.10
GAP/total assets 4.14 0.85 14.07 0.08
GAP/RSA 4.46 0.91 15.14 0.08
CUMULATIVE INFORMATION:
Cumulative RSA $256,395 $357,251 $540,899 $553,880
Cumulative RSL 281,082 376,882 476,650 489,166
GAP (RSA - RSL) (24,687) (19,631) 64,249 64,714
RSA/RSL 91.22% 94.79% 113.48% 113.23%
RSA/total assets 43.00 59.91 90.71 92.89
RSL/total assets 47.14 63.21 79.94 82.04
GAP/total assets 4.14 3.29 10.78 10.85
GAP/RSA 4.46 3.54 11.60 11.68
<FN>
- - -----------
<F1> Our current asset/liability policy is to maintain RSA/RSL
percentage between 80% and 135% for the 0 to 3 month maturity range
and between 75% and 125% for the cumulative one-year maturity
range.
</TABLE>
-21-
<PAGE>
<PAGE>
The following table provides additional information about our
financial instruments as of December 31, 1998. For loans, securities
and liabilities with contractual maturities, the table presents
principal cash flow and related weighted-average interest rates by
contractual maturities. Core deposits that have no contractual maturity
are subject to immediate withdrawal or repricing.
<TABLE>
<CAPTION>
YEAR OF CONTRACTUAL MATURITY
------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 THEREAFTER TOTAL
-------- ------- ------- ------- ------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS:
Fixed rate loans $ 70,498 $63,377 $56,938 $25,309 $24,468 $ 6,845 $247,435
Average interest rate 8.07% 8.48% 8.40% 8.40% 8.29% 8.35% 8.37%
Variable rate loans $155,556 $31,913 $15,494 $ 8,594 $16,202 $20,475 $248,234
Average interest rate 8.45% 8.01% 8.24% 8.50% 7.78% 8.40% 8.33%
Fixed rate securities $ 7,739 $ 6,450 $ 4,403 $ 5,223 $10,240 $ 8,629 $ 42,684
Average interest rate 6.11% 6.34% 6.00% 6.09% 5.62% 5.98% 5.98%
Variable rate securities $ -- $ 4,000 $ -- $ -- $ -- $ 8,096 $ 12,096
Average interest rate -- 4.85% -- -- -- 6.82% 6.17%
Federal funds sold $ 3,430 $ -- $ -- $ -- $ -- $ -- $ 3,430
Average interest rate 4.55% -- -- -- -- -- 4.55%
RATE SENSITIVE LIABILITIES:
Non-interest-bearing deposits $ 55,417 $ -- $ -- $ -- $ -- $ -- $ 55,417
Savings and interest-bearing
checking 157,819 -- -- -- -- -- 157,819
Average interest rate 3.89% -- -- -- -- -- 3.89%
Time deposits $165,021 $41,452 $18,513 $ 6,126 $ 5,402 $ 1,016 $237,530
Average interest rate 5.48% 5.41% 5.79% 5.96% 5.67% 6.12% 5.51%
Fixed interest rate
borrowings $ 17,042 $20,000 $12,650 $ 625 $ 1,500 $42,000 $ 93,817
Average interest rate 4.19% 5.70% 7.00% 5.87% 5.62% 5.01% 5.29%
</TABLE>
LIQUIDITY MANAGEMENT
Long-term liquidity is a function of the core deposit base and an
adequate capital base. We are committed to growth of our core deposit
base. This growth is both internally generated through product pricing
and product development and externally generated through acquisition.
During 1998, both of these elements contributed heavily to developing
and maintaining long-term liquidity. Our capital position has been
maintained through earnings retention and raising of capital. See
"-- Capital Resources."
Short-term liquidity needs arise from continuous fluctuations in
the flow of funds on both sides of the balance sheet resulting from
growth and seasonal and cyclical customer demands. The securities
portfolio provides stable long-term earnings as well as being a primary
source of liquidity. The designation of securities as available-for-
sale and held-to-maturity does not impact the portfolio as a source of
liquidity due to the ability to transact repurchase agreements using
those securities.
Average short-term borrowings were virtually unchanged in
comparing 1998 levels to 1997 levels. The 1998 level also was
consistent throughout the year with only small quarterly fluctuations in
average balances. Due to favorable rate differentials, slightly more
repurchase agreements and borrowings from the Federal Home Loan Bank
were utilized instead of Federal Funds being purchased. We experienced
strong loan demand during 1998 and anticipate the continuation of this
demand during 1999. Based on this demand, we expect to continue to
utilize borrowings from the Federal Home Loan Bank as a funding vehicle
in advance of the slower growth rate obtainable in core deposits.
-22-
<PAGE>
<PAGE>
The following table summarizes short-term borrowings for the
periods indicated:
<TABLE>
AVERAGE SHORT-TERM BORROWINGS
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996
------------------------ ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased $ 1,272 5.56% $ 2,851 5.14% $ 2,737 5.33%
Securities sold under agreement
to repurchase and other
short-term borrowings 51,583 4.95 49,851 5.51 24,744 5.65
------- ------- -------
Total $52,855 4.96 $52,702 5.49 $27,481 5.61
======= ======= =======
Total maximum short-term borrowings
outstanding at any month-end
during the year $63,449 $71,496 $51,060
</TABLE>
CAPITAL RESOURCES
Total shareholders' equity was $48.10 million at December 31,
1998, an increase of 14.34% over 1997's level of $42.07 million which
represented an increase of 156.75% compared to year-end 1996. The
increase in total equity was the result of earnings retention and the
exercise of stock options and warrants. The increase in 1997 was the
result of two common stock rights offerings and an acquisition effected
by the issuance of common stock.
Average shareholders' equity showed a substantial increase of
76.82% during 1998 compared to 1997. Shareholders' equity averaged
$44.72 million during 1998 compared to $25.29 million in 1997. The
large increase in average equity was related to the timing of the events
during 1997 mentioned above. The acquisition occurred during the third
quarter of 1997 and one of the rights offerings was completed during
December of 1997. The average for 1998 therefore includes a full year's
effect of these transactions compared to only a partial effect on 1997
averages. Average shareholders' equity has increased at a five year
compound growth rate of 57.52%. Our average equity to asset ratio
improved to 7.22% in 1998 from 5.46% in 1997.
Dividends paid during 1998 were $0.12 per common share, an
increase of 50.00% compared to the $0.08 per common share paid during
1997 which was a 33.33% increase over the $0.06 paid in 1996. Our
dividend payout ratio was 20.22% in 1998 compared to 13.77% during 1997
and 10.34% in 1996.
We also analyze our capital and the capital position of our
subsidiaries in terms of regulatory risked-based capital guidelines.
This 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.
Management believes that, as of December 31, 1998, Allegiant and its
subsidiaries met all capital adequacy requirements.
-23-
<PAGE>
<PAGE>
As of December 31, 1998, Allegiant's and the bank's capital ratios
were as follows:
<TABLE>
<CAPTION>
ALLEGIANT ALLEGIANT BANK
--------- --------------
<S> <C> <C>
Total capital (to risk-weighted assets) 8.68% 10.93%
Tier 1 capital (to risk-weighted assets) 7.42 9.68
Tier 1 capital (to average assets) 5.83 7.61
</TABLE>
YEAR 2000
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE READINESS OF
ALLEGIANT. The Year 2000 issue is a result of computer programs being
written using two digits rather than four digits to define the
applicable year. Any of our computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations
including, among other things, a temporary inability to process
transactions, or engage in similar normal business activities. To
mitigate the risk of disruption, a Year 2000 plan has been developed and
implemented. The plan is comprised of five phases, with completion of
all five necessary to protect us against potential Year 2000 failures.
Our plan to resolve the Year 2000 issue involves the following
five phases: awareness, assessment, remediation, testing and
implementation. During the awareness phase, a comprehensive strategy
for addressing the Year 2000 issue was formulated. We have fully
completed our assessment of all systems that could be significantly
affected by the Year 2000. The completed assessment indicated that most
of the significant information technology systems could be affected,
including the loan, deposit, general ledger and billing systems. All
software and hardware systems have been provided by third party vendors;
therefore, the remediation of systems primarily involves the
installation of upgraded systems that have been certified by the vendors
as Year 2000 compliant. We are in the process of testing all hardware
and software systems to validate that systems have been renovated. In
addition, testing will validate the compatibility of system interfaces.
After all testing is completed, all systems will be implemented, which
will include certification that all systems are Year 2000 compliant.
YEAR 2000 STATUS, INCLUDING TIMETABLE FOR COMPLETION. As of June
30, 1999, the awareness and assessment phases are 100% complete. The
remediation phase is substantially complete, with only two lesser
significant software systems requiring upgrades. It is anticipated that
these systems will be upgraded no later than September 30, 1999. Testing
of our systems is accomplished after upgrades are provided by and
certified as Year 2000 compliant by a third party vendor. As of June
30, 1999, approximately 85% of all internal systems have been tested.
The testing of mission critical systems was substantially complete by
December 31, 1998. Except for the two systems identified above, it is
anticipated that testing of all systems will be substantially completed
by July 31, 1999, with the implementation phase to be completed by
August 31, 1999.
IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR 2000.
We have some systems that interface directly with significant third
party vendors. These include the Electronic Fund Transfer (EFT) systems
related to wire transfers, automated teller machine and debit card
transactions, in addition to trust system software. These third parties
have made, or are in the process of making, their systems Year 2000
compliant. We are working with these third party vendors to ensure that
the third party systems interface properly with our systems. Testing
for these systems will be accomplished using actual and proxy testing.
Proxy testing is testing that takes place in a controlled environment
using similar software/hardware that we and the third party vendors
utilize. These tests have been completed.
-24-
<PAGE>
<PAGE>
We also have gathered information about the Year 2000 compliance
status of customers with significant credit relationships. In addition,
significant suppliers and other third parties that do not share
information with our systems (external agents) have been queried to
assess their Year 2000 status. As of June 30, 1999, there is no
evidence of any significant customers or external agents that would
materially impact our operations, liquidity or capital resources.
However, we have no means of ensuring that these entities will be Year
2000 compliant. The inability of third parties and external agents to
complete their Year 2000 resolution process in a timely fashion could
materially impact us. The effect of non-compliant third parties and
external agents is not determinable.
YEAR 2000 COSTS. We have utilized and will continue to utilize
both internal and external resources to reprogram, replace, test and
implement the software and operating equipment for Year 2000
modifications. The total cost of the Year 2000 project is estimated at
$0.20 million and is being funded through operating cash flows. As of
June 30, 1999, we have incurred approximately $0.20 million ($0.11
million expensed and $0.09 million capitalized for new systems and
equipment), related to all phases of the Year 2000 project. The total
remaining project costs, which we approximate will be $0.03 million, are
attributable to the testing and validation phases of the project and
will be expensed as incurred.
OVERALL YEAR 2000 RISKS. Management believes it has an effective
program in place to resolve the Year 2000 issue in a timely manner. As
noted above, all necessary phases of the Year 2000 program have not yet
been completed. In the event that such phases are not completed in a
timely fashion, we could experience system failures that may have a
significant impact on our financial condition. In addition, disruptions
in the economy generally resulting from the Year 2000 issue also could
materially adversely affect us. We could be subject to litigation for
computer system product failures. The amount of potential liability and
lost revenue cannot be reasonably estimated at this time.
CONTINGENCY PLANNING. We have contingency plans for certain
mission critical applications and are working on plans for all other
systems. These contingency plans involve, among other actions, manual
workarounds and adjusting staffing strategies. In addition, funding
plans are being developed to assure adequate levels of liquid assets are
available in the event of significant customer withdrawals of cash items
as a result of concerns regarding the Year 2000 issue.
-25-
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized as of the
12th day of July 1999.
ALLEGIANT BANCORP, INC.
(Registrant)
By /s/ Shaun R. Hayes
-------------------------------
Shaun R. Hayes, President and
Chief Executive Officer
-26-
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- - ----------- -----------
3.1 Articles of Incorporation, as amended, of the Company,
filed as Exhibit 3.1 to Registrant's Registration
Statement on Form 10-SB (Reg. No. 0-26350) is hereby
incorporated by reference.
3.1(a) Amendment to Articles of Incorporation, as amended, of
the Company, filed as Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, is hereby incorporated by reference.
3.2 By-laws of the Company, as currently in effect, filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, are hereby
incorporated by reference.
4.1 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.
4.2 Form of Warrant Agreement, filed as Exhibit 4.3 to
Company's Registration Statement on Form 10-SB (Reg.
No. 0-26350), is hereby incorporated by reference.
10.1 Loan Agreement, dated November 12, 1998, by and between
LaSalle National Bank and the Company, filed as Exhibit
10.1 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, is hereby incorporated by
reference.
10.2 Pledge Agreement, dated November 12, 1998, by and between
LaSalle National Bank and the Company, filed as Exhibit
10.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, is hereby incorporated by
reference.
10.3 Allegiant Bancorp, Inc. 1994 Stock Option Plan, filed as
Exhibit 10.7 to Company's Registration Statement on Form
10-SB (Reg. No. 0-26350) is hereby incorporated by
reference.<F*>
10.4 Allegiant Bancorp, Inc. 1996 Stock Option Plan, filed as
Exhibit 4.4 to Company's Form S-8 (Reg. No. 0-26350) is
hereby incorporated by reference.<F*>
10.5 Allegiant Bancorp, Inc. Directors Stock Option Plan,
filed as Exhibit 4.5 to Company's Form S-8 (Reg. No.
0-26350) is hereby incorporated by reference.<F*>
10.6 Allegiant Bancorp, Inc. 1989 Stock Option Plan, filed as
Exhibit 4.6 to Company's Form S-8 (Reg. No. 0-26350) is
hereby incorporated by reference.<F*>
10.7 Agreement for Advances, Pledge and Security Agreement,
dated May 3, 1993, by and between Allegiant Bank and the
Federal Home Loan Bank of Des Moines.
13 Portions of the 1998 Annual Report of the Company to its
Shareholders, filed as Exhibit 13 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998,
are hereby incorporated by reference.
21.1 Subsidiaries of the Company, filed herewith.
[FN]
- - ------------
<F*>Management contract or compensatory plan or arrangement.
-27-
<PAGE>
FEDERAL HOME LOAN BANK OF DES MOINES
Des Moines, Iowa
AGREEMENT FOR ADVANCES, PLEDGE AND SECURITY AGREEMENT
Blanket Pledge
This Agreement for Advances, Pledge and Security Agreement ("Agreement"),
effective the 3rd day of May, 1993, is entered between Allegiant Bank
("Member"), with principal offices at 4323 N. Grand, St. Louis, MO 63107
and the Federal Home Loan Bank of Des Moines ("Bank"), with principal
offices at 907 Walnut, Des Moines, Iowa 50809.
WHEREAS, The Bank in accordance with the Federal Home Loan Bank Act,
regulations and directives of the Federal Housing Finance Board, and
policies promulgated by its own Board, makes available advances to its
members. The available advances are set forth by the Bank in a statement
of "Credit Policy," as may be amended from time to time.
WHEREAS, The member may, from time to time, apply for an advance or
advances which may be available to it.
NOW THEREFORE, For valuable consideration and with respect to each
and every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATION OF ADVANCE. To be bound by the terms and
conditions set forth herein, in the confirmation of advance issued with
respect to each advance, and in the Bank's Credit Policy as may be amended
from time to time. A confirmation of advance shall mean a writing or
machine readable electronic transmission in such form or forms as may be
determined by the Bank from time to time.
SECTION 2. PAYMENT TO THE BANK. To repay each and any advance together
with interest thereon according to the confirmation of each such advance
communicated to the Member by the Bank, together with any unpaid costs and
expenses in connection therewith. Such payment shall be made at the office
of the Bank in Des Moines, Iowa, or at such other place as the Bank, or its
successors or assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at the option
of the Bank, be at a rate of 1% per annum higher than the then current rate
being charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK STOCK. The
Member hereby assigns, transfers and pledges to the Bank, its successors
and assigns, all stock of the Federal Home Loan Bank of Des Moines
owned by the Member as collateral security for payment of any and all
Indebtedness, whether in the nature of an advance or otherwise, of the
Member to the Bank, its successors and assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER COLLATERAL.
As additional collateral security for any and all such advances, Member
assigns, transfers, and pledges to the Bank, its successors or assigns,
each and every note or other instrument evidencing a debt and any
mortgage, deed of trust, title, or document of title securing it; all
securities (including, but not limited to mortgage-backed securities issued
or guaranteed by the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, obligations of or guaranteed by the
United States or any agency thereof, share certificates or other
participation interests in any securities trust, mortgage loan participation
certificates); all contract for deeds; all chattel paper; any chose in
action; all general intangibles; all deposit accounts; certificates of
deposit; and proceeds from any of the above (hereinafter "Collateral").
With respect to such Collateral, Member undertakes and agrees as follows:
A. That such security interest shall extend to after acquired Collateral
of a similar nature;
<PAGE>
<PAGE>
B. That the Member shall be at liberty to use, commingle, and dispose
of all or part of the Collateral, and to collect, compromise, and dispose
of the proceeds of the Collateral without being required to account for
the proceeds or replace the Collateral subject only to its obligation
to maintain the Collateral as herein provided;
C. To keep and maintain such Collateral free and clear of pledges,
liens, and encumbrances to others as the required collateral maintenance
level. The "required collateral maintenance level" means the amount of
collateral the member is required to maintain free and clear of pledge,
liens, and encumbrances to others as set forth from time to time in the
Credit Policy:
D. To assemble and deliver Collateral to the Bank or its authorized
agents immediately upon demand of the Bank; and as specified by the Bank
in its Credit Policy from time to time, and to pay for the safekeeping
collateral as established by the Bank;
E. To make, execute, and deliver to the Bank such assignments,
endorsements, listings, powers, financing statements or other instruments
as the Bank may reasonably request respecting such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member delivers
security to Bank or its Agent pursuant to paragraph 4 above, the duty
of the Bank with respect to said security shall be solely to use
reasonable care in the custody and preservation of the security in its
possession.
SECTION 6. ADDITIONAL SECURITY. Member shall assign additional or
substituted Collateral for such advances at any time the Bank shall deem
it necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the Member in
default hereunder upon the occurrence of any of the following events or
conditions:
A. Failure of the Member to pay any interest, or repay any principal,
or any advances as herein required; or
B. Breach or failure to perform by the Member of any covenant, promise,
condition, obligation or liability contained or referred to herein, or
any other agreement to which the Member and the Bank are parties; or
C. Proof being made that any representations, statements or warranty
made or furnished in any manner to the Bank by or on behalf of the Member
in connection with all or part of any advance was false in any material
respect when made or furnished; or
D. Loss, theft, damage, destruction, sale or encumbrance to or of
any of the Collateral except as herein permitted, or the making of any
levy, seizure or attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution or other
process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or any
events which results in acceleration to the maturity of any indebtedness
of the Member to others under any indenture, agreement or undertaking or
G. Application for, or appointment of, a receiver of any part of the
property of the Member, or in case of adjudication of insolvency, or
assignment for benefit of creditors, or general transfer of assets by
the Member, of if management of the Member is taken over by any
supervisory authority, or in case of any other form of liquidation,
merger, sale of assets or voluntary dissolution, or upon termination
of the membership of the Member in the Federal Home Loan Bank of
Des Moines, or in the case of advances made under the provisions of 12
U.S.C. Section 1431(g)(4), if at any time thereafter the creditor
liabilities of the Member, excepting its liabilities to the Bank,
are increased in any manner to an amount exceeding 5% of its net
assets or;
H. Determination by the Bank that a material adverse change has
occurred in the financial condition of the Member from that disclosed
at the time of the making of any advance, or from the condition of the
Member as theretofore most recently disclaimed to the Bank in any
manner; or
I. If the Bank reasonably and in good faith deems itself insecure
even though the Member is not otherwise in default.
<PAGE>
<PAGE>
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time after
any default as herein before provided, the Bank may, at its option,
declare the entire amount of any and all advances to be immediately due
and payable. The Bank shall have all of the remedies of a secured party
under the Uniform Commercial Code of the State of Iowa. In addition
thereto, the Bank may take immediate possession of any of the Collateral
or any part thereof wherever the name may be found. The Member agrees to
pay all the costs and expenses of the Bank in the collection of the
secured indebtedness and enforcement of the Bank's rights hereunder
including, without limitation, reasonable attorney's fees. The Bank
may sell the Collateral or any part thereof in such manner and for
such price as the Bank deems appropriate without any liability for any
loss due to decrease in the market value of the Collateral during the
period held. The Bank shall have the right to purchase all or part of
the Collateral at public or private sale. If any notification of intended
disposition of any of the Collateral is required by law, such notification
shall be deemed reasonable and properly given if mailed, postage prepaid,
at least five days before any such disposition to the address of the
Member appearing on the records of the Bank. The proceeds of any sale
shall be applied in the following order: First, to pay all costs and
expenses of every kind for the care, collection, safekeeping, sale,
foreclosure, delivery or otherwise respecting the Collateral (including
expenses incurred in the protection of the Bank's title to or lien upon
or right in any of the Collateral, expenses for legal services of any
kind in connection therewith or in making any such sale or sales,
insurance, commission for sales and guaranty); then to interest on all
indebtedness of the Member to the Bank; then to the principal amount
of any such indebtedness whether or not such indebtedness is due or
accrued. The Bank, at its discretion, may apply any surplus to indebtedness
of Member to third parties claiming a secondary security interest in the
Collateral. Any remaining surplus shall be paid to the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the event of
default, and without limiting any other rights the Bank might have as a
secured party under the Uniform Commercial Code of Iowa, or the laws
of any jurisdiction under which Bank might be exercising rights
hereunder, and under this Agreement, Member does hereby make, constitute
and appoint Bank its true and lawful attorney-in-fact to deal with the
Collateral and, in its name and stand to release, collect, compromise,
settle and release or record any mortgage of deed or trust which in a part
of such Collateral as fully as the Member could do if acting for itself.
The powers herein granted are coupled with an interest, and are
irrevocable, and full power of substitution is granted to the Bank in the
premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In extension and not
in limitation of all requirements of law respecting examination of the
Member by or on behalf of the Bank, the Member agrees that all Collateral
pledged hereunder shall always be subject to audit and verification by or
on behalf of the Bank in its corporate capacity.
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member agrees to
furnish to the Bank from time to time a certified copy of resolution of
its Board of Directors or other governing body authorizing such of the
Member's officers, as the Member shall select, to apply for advances
from the Bank. Unless the Bank shall be otherwise notified in writing, the
Bank may honor applications made by such officers other than in writing; but,
in such event the member shall confirm such application for advance in
writing on forms furnished by the Bank. But the Member shall forever be
stopped to deny its obligation to repay such advance whether or not an
application in writing is ever received by the Bank so long only as the
advance is made in good faith by the Bank on the request of an officer
or employee so authorized by the Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the terms and
conditions herein specifically set forth, all advances are subject to the
rights, powers, privileges and duties conferred upon the Federal Housing
Finance Board, the Federal Home Loan Banks, and on member institutions by
the Act of Congress entitled, "Federal Home Loan Bank Act, as amended."
SECTION 13. JURISDICTION. In any action or proceeding brought by the
Bank or the Member in order to enforce any right or remedy under this
Agreement, Member will submit to the jurisdiction of the United States
District Court for the Southern District of Iowa, or if such action or
proceeding may not be brought in Federal Court, the jurisdiction of the
Iowa District Court in Polk County.
If any action or proceeding is brought by the Member seeking to
obtain relief against the Bank arising out of this Agreement and such
relief is not granted by a court of competent jurisdiction, the Member
will pay all attorney's fees and court costs incurred by the Bank
in connection therewith.
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<PAGE>
SECTION 14. CHOICE OF LAW. This Agreement shall be construed and
enforced according to the laws of the State of Iowa, except that the
rate of interest on advances hereunder shall be governed by the
provisions of 12 U.S.C. Section 1430 (as amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This Agreement
embodies the entire Agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes all prior
agreements between such parties that relate to the subject matter
except that: The Credit Policy as duly adopted by the Bank's Board of
Directors from time to time shall be incorporated herein, unless agreed
to in writing by both parties. Advances made by the Bank to Member prior
to the execution of this Agreement shall continue to be governed
exclusively by the terms of the prior agreements pursuant to which such
advances were made, except that (i) any default thereunder shall
constitute default hereunder, (ii) Collateral furnished as security
hereunder shall also secure such prior advances and (iii) the rights
and obligations with respect to such Collateral shall be governed by the
terms of this Agreement.
SECTION 16. SECTION HEADINGS. Section headings are not to be
considered part of this Agreement. Section headings are solely for
convenience of reference, and shall not affect the meaning of
interpretation of this Agreement or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or portion
thereof is deemed void in any legal proceeding, the remainder of the
Agreement shall remain in full force and effect.
SECTION 18. The person signing this document on behalf of the Member
represents that its execution was authorized by appropriate action of
the directors of the Member which was completed on the 22nd day of
April, 1993, and that such action is duly reflected in the records of
the Member.
Allegiant Bank FEDERAL HOME LOAN BANK OF DES MOINES
- - ---------------------------------
(Full Corporate Name of Member)
By: /s/ Kay Weber By: /s/ George A. Katterman
------------------------------ ---------------------------------
Title: Vice President Title: Senior Vice President
--------------------------- ------------------------------
Date: May 3, 1993 Date: May 4, 1993
---------------------------- -------------------------------
By: /s/ Shaun R. Hayes By: /s/ Jerry R. Ferguson
------------------------------ ---------------------------------
Title: President/CEO Title: Vice President
--------------------------- ------------------------------
Date: May 3, 1993 Date: May 4, 1993
---------------------------- -------------------------------
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
(as of June 30, 1999)
Allegiant Bank Missouri
Allegiant Investment Company Delaware
Allegiant Real Estate Investment Trust Delaware
Allegiant Insurance Services Co. Missouri
Kratky Road, Inc. Missouri
Allegiant Capital Trust I Delaware
