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Registration No. 333-23911
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
MID-MISSOURI HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
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MISSOURI 6060 43-1676881
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
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318 West Main Street, P.O. Box 489
Sullivan, Missouri 63080-0489
(573) 468-3191
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
_____________________________
E. MILT BRANUM, JR.
President and Chief Executive Officer
Mid-Missouri Holding Company, Inc.
318 West Main Street, P.O. Box 489
Sullivan, Missouri 63080-0489
(573) 468-3191
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_____________________________
COPIES TO:
JOHN K. PRUELLAGE, ESQ. MICHAEL W. FORSTER, ESQ.
Lewis, Rice & Fingersh, L.C. Sandberg, Phoenix & von Gontard,P.C.
500 N. Broadway, Suite 2000 1 City Centre, 15th Floor
St. Louis, Missouri 63102 St. Louis, Missouri 63101
(314) 444-7600 (314) 231-3332
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AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
PROXY STATEMENT
______________________
MID-MISSOURI HOLDING COMPANY, INC.
PROSPECTUS
RELATING TO UP TO 40,000 SHARES OF COMMON STOCK, PAR VALUE $10.00 PER SHARE, OF
MID-MISSOURI HOLDING COMPANY, INC.
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the stockholders of American Federal Savings & Loan Association of
Sullivan, a Federal savings and loan association ("American Federal"), in
connection with the solicitation of proxies by the Board of Directors of
American Federal for use at the special meeting of stockholders of American
Federal (the "Special Meeting") to be held at 10:00 a.m., local time, on June
17, 1997, at the Odd Fellows Community Center, located at 77 Hughes Ford Road,
Sullivan, Missouri, and at any adjournments or postponements thereof.
At the Special Meeting, stockholders of American Federal will consider and
vote upon the Agreement and Plan of Merger, dated December 6, 1996, as amended
on February 13, 1997 and on May 7, 1997 (as amended, the "Merger Agreement"), by
and among American Federal, Mid-Missouri Holding Company, Inc., a Missouri
corporation ("Mid-Missouri"), and Bank of Sullivan, a Missouri bank and wholly
owned subsidiary of Mid-Missouri ("Subsidiary Bank"), which provides for, among
other matters, the merger (the "Merger") of American Federal with and into
Subsidiary Bank, and in connection therewith an amendment to Section 8 of the
Federal Stock Charter of American Federal to eliminate the five-year prohibition
on direct and indirect offers to acquire, and acquisitions of, more than ten
percent (10%) of any class of any equity security of American Federal (the
"Charter Amendment"). In addition, the holders of the issued and outstanding
shares of common stock, par value $1.00 per share, of American Federal
("American Federal Common") may be asked to vote on a proposal to adjourn or
postpone the Special Meeting, which adjournment or postponement could be used
for the purpose, among others, of allowing time for the solicitation of
additional votes to approve the Merger Agreement and the Charter Amendment.
Upon consummation of the Merger, each issued and outstanding share of American
Federal Common (other than shares held by any stockholder properly exercising
dissenters' rights) will be converted into the right to receive a combination of
cash and shares of common stock of Mid-Missouri, par value $10.00 per share
("Mid-Missouri Common"), calculated in accordance with the formula set forth in
Section 1.05 of the Merger Agreement and described in this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus also constitutes a prospectus of Mid-
Missouri with respect to up to 40,000 shares of Mid-Missouri Common issuable in
the Merger to holders of American Federal Common.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of American Federal on or about May 15, 1997 (the
"Mailing Date").
Any proxy given pursuant to this solicitation may be revoked by the grantor
at any time prior to the voting thereof at the Special Meeting. Furthermore,
any such proxy indicating a vote against approval of the Merger Agreement and
Charter Amendment may not be used to vote in favor of an adjournment or
postponement of the Special Meeting if the purpose thereof is to allow time for
the solicitation of additional votes to approve the Merger Agreement and the
Charter Amendment, unless contrary instructions are expressly provided in such
proxy. Holders of American Federal Common will be entitled to dissenters'
rights in connection with the Merger as described herein.
This Proxy Statement/Prospectus does not cover any resales of the Mid-
Missouri Common offered hereby to be received by the stockholders deemed to be
"affiliates" of Mid-Missouri or American Federal upon consummation of the
Merger. No person is authorized to make use of this Proxy Statement/Prospectus
in connection with such resales.
THE SHARES OF MID-MISSOURI COMMON ISSUABLE IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("S.E.C.") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE S.E.C. OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________________
THE SHARES OF MID-MISSOURI COMMON OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
___________________________________
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS May 15, 1997
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................................... 1
FORWARD LOOKING STATEMENTS................................................................ 1
SUMMARY INFORMATION....................................................................... 3
Introduction.......................................................................... 3
The Parties........................................................................... 3
Mid-Missouri..................................................................... 3
American Federal................................................................. 4
Relationship of the Parties...................................................... 4
The Special Meeting................................................................... 4
Date, Time and Place of the Special Meeting...................................... 4
Matters to be Considered at the Special Meeting.................................. 4
Record Date for the Special Meeting.............................................. 5
Vote Required to Approve the Merger Agreement and the Charter Amendment.......... 5
Certain Holders of American Federal Common....................................... 5
Revocation of Proxies............................................................ 5
The Merger............................................................................ 6
Merger Consideration............................................................. 6
Calculation of the Merger Consideration.......................................... 7
Reasons for the Merger and Recommendations of the Boards of Directors............ 8
Opinions of Financial Advisors................................................... 8
Conduct of Business Pending the Merger; Dividends................................ 9
Conditions to the Merger; Regulatory Approvals................................... 9
Termination of the Merger Agreement.............................................. 10
Regulation....................................................................... 10
Federal Income Tax Consequences.................................................. 10
Accounting Treatment............................................................. 11
Effective Time of the Merger..................................................... 11
Interests of Certain Persons in the Merger....................................... 12
Dissenters' Rights............................................................... 12
Management and Operations After the Merger............................................ 12
The Charter Amendment................................................................. 13
General.......................................................................... 13
Conditions to the Charter Amendment; Regulatory Approvals; Effective Time........ 13
Comparison of Shareholder Rights...................................................... 14
COMPARATIVE STOCK PRICES.................................................................. 15
SELECTED COMPARATIVE PER SHARE DATA....................................................... 16
SELECTED FINANCIAL DATA................................................................... 17
THE SPECIAL MEETING....................................................................... 20
Date, Time and Place of the Special Meeting........................................... 20
Matters to be Considered at the Special Meeting....................................... 20
Record Date for the Special Meeting................................................... 20
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Vote Required to Approve the Merger Agreement and the Charter Amendment............... 20
Voting and Revocation of Proxies for the Special Meeting.............................. 21
Solicitation of Proxies for the Special Meeting....................................... 22
Expenses for Preparation of Proxy Statement/Prospectus................................ 22
Mailing Date of Proxy Statement/Prospectus............................................ 22
THE PARTIES............................................................................... 22
Mid-Missouri.......................................................................... 22
American Federal...................................................................... 22
Relationship of the Parties........................................................... 23
THE MERGER AND THE CHARTER AMENDMENT...................................................... 23
General............................................................................... 23
Background of the Merger.............................................................. 23
Background of the Charter Amendment................................................... 24
Reasons for the Merger................................................................ 25
American Federal................................................................. 25
Mid-Missouri..................................................................... 25
Opinions of the Financial Advisors.................................................... 25
Recommendation of the Board of Directors.............................................. 26
Merger Consideration.................................................................. 27
Fractional Shares..................................................................... 28
Form of the Merger.................................................................... 28
Closing Date; Effective Time.......................................................... 28
Conduct of Business Pending the Merger; Dividends..................................... 28
Regulatory Approvals.................................................................. 29
The Merger....................................................................... 29
The Charter Amendment............................................................ 29
Conditions to Consummation of the Merger and the Charter Amendment.................... 30
The Merger....................................................................... 30
The Charter Amendment............................................................ 31
Termination or Abandonment............................................................ 31
Dissenters' Rights.................................................................... 31
Exchange of American Federal Stock Certificates; Fractional Shares.................... 32
Representations and Warranties of American Federal, Mid-Missouri and Subsidiary Bank.. 33
Certain Other Agreements.............................................................. 33
Business of American Federal in Ordinary Course.................................. 33
Additional American Federal Reserves, Accruals, Charges and Expenses............. 34
Other American Federal Agreements................................................ 34
Mid-Missouri's Agreements........................................................ 35
No Solicitation....................................................................... 35
Waiver and Amendment.................................................................. 35
Federal Income Tax Consequences....................................................... 35
Resale of Mid-Missouri Common......................................................... 37
Interests of Certain Persons in the Merger............................................ 37
Insurance; Indemnification....................................................... 37
Accounting Treatment.................................................................. 37
Management and Operations After the Merger............................................ 38
PRO FORMA FINANCIAL DATA.................................................................. 39
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DESCRIPTION OF MID-MISSOURI CAPITAL STOCK................................................. 43
Mid-Missouri Common................................................................... 43
COMPARISON OF SHAREHOLDER RIGHTS.......................................................... 43
Shareholder Vote Required for Certain Transactions.................................... 44
Business Combinations............................................................ 44
Removal of Directors............................................................. 44
Amendments to Articles of Incorporation/Charter.................................. 45
Voting Rights......................................................................... 45
Special Meetings of Shareholders; Shareholder Action by Written Consent............... 46
Dissenters' Rights.................................................................... 46
Takeover Statutes..................................................................... 47
Liability of Directors; Indemnification............................................... 48
Limitation of Liability of Directors.................................................. 49
Consideration of Non-Shareholder Interests............................................ 49
INFORMATION ABOUT MID-MISSOURI............................................................ 50
Business of Mid-Missouri.............................................................. 50
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Mid-Missouri....................................................... 53
INFORMATION ABOUT AMERICAN FEDERAL........................................................ 66
Business of American Federal.......................................................... 66
Management's Discussion and Analysis of Financial Condition and Results of
Operations of American Federal................................................... 66
Security Ownership of Certain Beneficial Owners and Management........................ 74
Family Relationships.................................................................. 75
LEGAL OPINION............................................................................. 76
EXPERTS................................................................................... 76
Independent Auditors for Mid-Missouri................................................. 76
Independent Auditors for American Federal............................................. 76
Presence at Special Meeting........................................................... 76
SHAREHOLDER PROPOSALS..................................................................... 76
FINANCIAL STATEMENTS FOR MID-MISSOURI AND AMERICAN FEDERAL................................ FS-1
APPENDICES
Merger Agreement................................................................. A-1
Section 8 of the Federal Stock Charter of American Federal....................... B-1
Proposed Stockholder Resolutions Regarding the Merger Agreement and the Charter
Amendment.................................................................. C-1
Fairness Opinion of Norman Backues & Associates, Inc............................. D-1
Fairness Opinion of Lexington Financial Group, L.L.C............................. E-1
Excerpts of Title 12 - Banks and Banking (Dissenters' Rights).................... F-1
Preliminary Tax Opinion of Lewis, Rice & Fingersh, L.C........................... G-1
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH INFORMATION OR REPRESENTATION,
IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MID-
MISSOURI OR AMERICAN FEDERAL. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE A SOLICITATION OR AN OFFERING OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT ANY INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
AVAILABLE INFORMATION
Mid-Missouri has filed with the Securities and Exchange Commission (the
"S.E.C.") a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Mid-Missouri
Common to be issued pursuant to the Merger described herein. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information
may be obtained from the S.E.C., 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. Statements contained in this Proxy Statement/Prospectus
or in any document incorporated in this Proxy Statement/Prospectus by reference
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance where reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement is qualified
in all respects by such reference.
In connection with the filing of the Registration Statement, Mid-Missouri is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith is required
to file reports, proxy statements and other information with the SEC. The
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, New York, New York 10048, and Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661, and copies of such materials
can be obtained from the public reference section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the SEC. The address of that site is http://www.sec.gov.
FORWARD LOOKING STATEMENTS
THIS PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE BUSINESS
OF MID-MISSOURI FOLLOWING THE CONSUMMATION OF THE MERGER. SEE "SUMMARY
INFORMATION," "THE MERGER AND THE CHARTER AMENDMENT -- REASONS FOR THE MERGER,"
"THE MERGER AND THE CHARTER AMENDMENT -- RECOMMENDATION OF THE BOARD OF
DIRECTORS," AND "PRO FORMA FINANCIAL DATA." THESE FORWARD LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
1
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(1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT
ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER IS GREATER THAN
EXPECTED; (3) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES
OF MID-MISSOURI AND AMERICAN FEDERAL ARE GREATER THAN EXPECTED; (4) CHANGES IN
THE INTEREST RATE ENVIRONMENT AND REDUCED MARGINS; (5) THE IMPACT OF REGULATORY
CHANGES IS OTHER THAN AS EXPECTED; AND (6) GENERAL ECONOMIC CONDITIONS, EITHER
NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED RESULTING IN A
DETERIORATION OF CREDIT QUALITY.
2
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SUMMARY INFORMATION
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus. Although the following summary addresses
material information regarding the Merger, it is not intended to be complete and
is qualified in all respects by the information appearing elsewhere herein or
incorporated by reference into this Proxy Statement/Prospectus, the Appendices
hereto and the documents referred to herein. All information contained in this
Proxy Statement/Prospectus relating to Mid-Missouri and its subsidiary has been
supplied by Mid-Missouri and all information relating to American Federal has
been supplied by American Federal. Stockholders are urged to read this Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
INTRODUCTION
This Proxy Statement/Prospectus relates to an Agreement and Plan of Merger
dated December 6, 1996, as amended on February 13, 1997 and on May 7, 1997 (as
amended, the "Merger Agreement"), by and among American Federal Savings & Loan
Association of Sullivan, a Federal savings and loan association ("American
Federal"), Mid-Missouri Holding Company, Inc., a Missouri corporation ("Mid-
Missouri"), and Bank of Sullivan, a Missouri bank and wholly owned subsidiary of
Mid-Missouri ("Subsidiary Bank"), which provides for, among other matters, the
merger (the "Merger") of American Federal with and into Subsidiary Bank, and in
connection therewith a proposal to amend Section 8 of the Federal Stock Charter
of American Federal (the "American Federal Charter"), to eliminate the five-year
prohibition on direct and indirect offers to acquire, and acquisitions of, more
than ten percent (10%) of any class of any equity security of American Federal
(the "Charter Amendment"). Both of these matters will be presented as a single
item for consideration and approval to the holders of the common stock, par
value $1.00 per share, of American Federal ("American Federal Common"), at the
Special Meeting (as hereinafter defined). In addition, the holders of American
Federal Common may be asked to vote on a proposal to adjourn or postpone the
Special Meeting, which adjournment or postponement could be used for the
purpose, among others, of allowing time for the solicitation of additional votes
to approve the Merger Agreement and the Charter Amendment. As a result of the
Merger, Mid-Missouri will retain beneficial ownership of all of the issued and
outstanding stock of Subsidiary Bank, and the separate corporate existence of
American Federal will cease.
The summary set forth in this Proxy Statement/Prospectus of certain
provisions of the Merger Agreement is qualified in its entirety by reference to
the full text of the Merger Agreement incorporated as Appendix A to this Proxy
Statement/Prospectus. The summary set forth herein with respect to the Charter
Amendment is qualified in its entirety by Section 8 of the American Federal
Charter and the resolutions seeking amendment thereof, incorporated as Appendix
B and C, respectively, to this Proxy Statement/ Prospectus.
THE PARTIES
MID-MISSOURI
Mid-Missouri, a Missouri corporation organized in 1993, is a bank holding
company headquartered in Sullivan, Missouri. At December 31, 1996, Mid-Missouri
had consolidated assets of approximately $120.7 million, shareholders' equity of
approximately $9.6 million, and approximately 76 shareholders.
3
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The principal executive offices of Mid-Missouri are located at 318 West Main
Street, Sullivan, Missouri 63080-0489 (telephone number (573) 468-3191).
AMERICAN FEDERAL
American Federal, a Federal savings and loan association, was organized as a
mutual savings and loan association in 1962, and converted to stock form on
January 6, 1993. American Federal is headquartered in Sullivan, Missouri. At
December 31, 1996, American Federal had total assets of approximately $18.9
million, stockholders' equity of approximately $3.7 million, and approximately
100 stockholders. The principal executive offices of American Federal are
located at 20 Hughes Ford Road, Sullivan, Missouri 63080 (telephone number (573)
468-4176), which location is directly across the street from the principal
executive offices of Mid-Missouri and Subsidiary Bank.
RELATIONSHIP OF THE PARTIES
Mid-Missouri, Subsidiary Bank and American Federal have had an ongoing
relationship due principally to the service of John W. Waller, as Chairman of
the Board, and James E. McIntosh, as a director, of all three entities. John M.
Brummet, a long-time director of American Federal, was appointed during January,
1997, to serve as a director of each of Mid-Missouri and Subsidiary Bank. Other
than these relationships and the proposed Merger, however, neither Mid-Missouri
nor Subsidiary Bank has engaged in any material contracts (including loan
participations), arrangements, understandings, or other transactions with
American Federal. Mid-Missouri (together with Subsidiary Bank) and American
Federal have conducted, and continue to conduct, their respective business
operations independently.
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of stockholders of American Federal (the "Special
Meeting") will be held at the Odd Fellows Community Center, located at 77 Hughes
Ford Road, Sullivan, Missouri, on June 17, 1997, at 10:00 a.m., local time.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of American Federal Common will consider and
vote upon the approval of the Merger Agreement providing for, among other
matters, the Merger of American Federal with and into Subsidiary Bank, and in
connection therewith an amendment to Section 8 of the American Federal Charter
to eliminate the five-year prohibition on direct and indirect offers to acquire,
and acquisitions of, more than ten percent (10%) of any class of any equity
security of American Federal. In addition, the holders of American Federal
Common may be asked to vote on a proposal to adjourn or postpone the Special
Meeting, which adjournment or postponement could be used for the purpose, among
others, of allowing time for the solicitation of additional votes to approve the
Merger Agreement and the Charter Amendment.
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RECORD DATE FOR THE SPECIAL MEETING
The record date for the determination of holders of American Federal Common
to receive notice of and to vote at the Special Meeting is May 13, 1997 (the
"Record Date").
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT AND THE CHARTER AMENDMENT
The presence, in person or by proxy, of a majority of the outstanding shares
of American Federal Common entitled to vote on the Record Date is necessary to
constitute a quorum at the Special Meeting. Approval of the Merger Agreement
will require the affirmative vote of two-thirds (2/3) of the outstanding shares
of American Federal Common entitled to vote thereon. The Charter Amendment, if
presented as a separate proposal, would only require the affirmative vote of a
majority of the outstanding shares of American Federal Common entitled to vote
thereon. The Charter Amendment is, however, a part of the proposal to approve
the Merger Agreement. Holders of American Federal Common will be entitled to
one vote per share of American Federal Common held on the Record Date. The
failure to submit a proxy card (or to vote in person) at the Special Meeting,
the abstention from voting at the Special Meeting and, in the case of shares
held in street name, the failure of the beneficial owner thereof to give
specific voting instructions to the broker holding such shares (broker non-
votes), will have the same effect as a vote against approval of the Merger
Agreement and the Charter Amendment. Any proxy given in connection with this
solicitation indicating a vote against approval of the Merger Agreement and the
Charter Amendment may not be used to vote in favor of an adjournment or
postponement of the Special Meeting if the purpose of such adjournment or
postponement is to allow time for the solicitation of additional votes to
approve the Merger Agreement and the Charter Amendment, unless contrary
instructions are expressly provided in such proxy.
CERTAIN HOLDERS OF AMERICAN FEDERAL COMMON
As of the Record Date, the executive officers and directors of American
Federal and their affiliates owned beneficially 51,672 shares (approximately
34%) of American Federal Common, all of which are expected by management of
American Federal to be voted in favor of the Merger Agreement and the Charter
Amendment. The 51,672 shares includes 13,676 shares (approximately 9%) of
American Federal Common held by the American Federal Employee Stock Ownership
Plan (the "ESOP") for which Mr. Waller, Mr. McIntosh and Ms. Heady are trustees.
The 13,676 shares of American Federal Common held by the ESOP have been
allocated to the accounts of the ESOP participants and thus are deemed issued
and outstanding for corporate purposes. These ESOP shares are entitled to and
shall be converted into the right to receive the Merger Consideration (as
hereinafter defined) on the same basis as all other shares of American Federal
Common issued and outstanding on the Record Date. In addition, two directors of
Mid-Missouri and Subsidiary Bank, who are not also directors or officers of
American Federal, own a total 6,980 shares (approximately 4.6%) of American
Federal Common. These shares are also expected to be voted in favor of the
Merger Agreement and the Charter Amendment. See "INFORMATION ABOUT AMERICAN
FEDERAL -- Security Ownership of Certain Beneficial Owners and Management."
REVOCATION OF PROXIES
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. Any proxy given pursuant to this solicitation may be
revoked by the grantor at any time prior to the voting thereof on the Merger
Agreement and the Charter Amendment by filing with Mr. Joseph G. Withington,
Secretary of
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American Federal, 20 Hughes Ford Road, P.O. Box 250, Sullivan, Missouri 63080, a
written revocation or a duly executed proxy bearing a later date. A holder of
American Federal Common may revoke his or her proxy at the Special Meeting at
any time before it is exercised by giving notice of such revocation to Mr.
Joseph G. Withington, Secretary of American Federal, at the Special Meeting and
voting in person by ballot at such meeting; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the proxy.
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached as Appendix A hereto and
incorporated herein by reference.
MERGER CONSIDERATION
At the effective time of the Merger (the "Effective Time"), each share of
American Federal Common issued and outstanding immediately prior thereto, other
than shares held by any stockholder properly exercising and perfecting his or
her dissenters' rights under applicable federal law, will, by virtue of the
Merger and without any action on the part of the holders thereof, be converted
into the right to receive a combination of cash and shares of common stock, par
value $10.00 per share, of Mid-Missouri ("Mid-Missouri Common"), in an aggregate
amount equal to the per share Closing Book Value (as hereinafter defined) of
American Federal (such aggregate amount of cash and Mid-Missouri Common is
hereinafter referred to as the "Merger Consideration").
As used herein, the term "Closing Book Value" shall mean the amount of
American Federal's consolidated stockholders' equity accounts, exclusive of
preferred stock, REDUCED BY any and all accruals, expenses, charge-offs,
deductions or adjustments to the accounts in connection with the Merger. The
Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the date of the closing of the Merger
(the "Closing Date") occurs in accordance with generally accepted accounting
principles consistently applied.
The Stock Component of the Merger Consideration.
The aggregate number of shares of Mid-Missouri Common constituting the stock
portion of the Merger Consideration (the "Stock Component") will be calculated
as follows:
"Total Assets" of American Federal x .07
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Per Share "Book Value" of Mid-Missouri Common
For purposes of this calculation, the "Total Assets" will mean the total assets
of American Federal as shown on the books of American Federal as of the last day
of the month immediately preceding the month in which the Closing Date occurs
and the term "Book Value" will mean the amount of the consolidated shareholders'
equity accounts, exclusive of preferred stock, of Mid-Missouri, REDUCED BY any
and all accruals, expenses, charge-offs, deductions or adjustments to the
accounts in connection with the Merger, determined as of the last day of the
month immediately preceding the month in which the Closing Date occurs. The per
share Book Value of Mid-Missouri shall be determined by dividing the Book Value
of Mid-Missouri by the number of shares of Mid-Missouri Common outstanding on
the last day of the month immediately preceding the month in which the Closing
Date occurs.
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The Cash Component of the Merger Consideration.
The aggregate amount of cash constituting the cash portion of the Merger
Consideration (the "Cash Component") will equal the difference between the
Merger Consideration minus the aggregate Book Value of the Stock Component as
described immediately above.
Notwithstanding the foregoing, the Stock Component issuable pursuant to the
Merger Agreement will be increased, as necessary, and the amount of the Cash
Component payable will be decreased, as necessary, such that the aggregate Book
Value of the Stock Component, determined as of the Closing Date, will not be
less than forty percent (40%) of the Merger Consideration (after adjustments for
fractional shares).
The stockholders of American Federal will receive the combination of cash
and Mid-Missouri Common described herein and in the Merger Agreement and will
not be entitled to elect to receive more or less cash or stock.
CALCULATION OF THE MERGER CONSIDERATION
The actual Merger Consideration to be received by stockholders of American
Federal, including the number of shares of Mid-Missouri Common constituting the
Stock Component and the cash constituting the Cash Component, cannot be
calculated as of the date of this Proxy Statement/Prospectus. In accordance
with the Merger Agreement, the actual Merger Consideration will be determined
based upon the applicable financial information as of the last day of the month
immediately preceding the month in which the Closing Date occurs. The Closing
Date is expected to occur during the second or third quarter of this year.
For illustration purposes using information available as of December 31,
1996, and an estimate of expenses relating to the Merger, the Merger
Consideration would be calculated as follows: The amount of the consolidated
shareholders' equity accounts, exclusive of preferred stock, of American Federal
at December 31, 1996 was approximately $3,732,215 (see "SELECTED FINANCIAL
DATA"). The "Closing Book Value" of American Federal used in the calculation of
the actual Merger Consideration would be the amount of the consolidated
shareholders' equity accounts, exclusive of preferred stock, of American Federal
REDUCED BY any and all accruals, expenses, charge-offs, deductions or
adjustments to the accounts in connection with the Merger. As of the date of
this Proxy Statement/Prospectus, expenses incurred by American Federal in
connection with the Merger are estimated to be approximately $25,000. Applying
this estimate of expenses to December 31, 1996, the Closing Book Value of
American Federal, and thus the aggregate Merger Consideration, would be
approximately $3,707,215, or $24.38 per share [$3,732,215, which is the total
shareholders' equity of American Federal, minus $25,000, estimated American
Federal expenses]. Although the Stock Component is to be calculated by dividing
the product of the Total Assets of American Federal multiplied by .07, by the
Book Value of Mid-Missouri Common, the Stock Component will be not be less than
forty percent (40%) of the Merger Consideration, which using the estimate for
December 31, 1996, of $3,707,215, would be approximately $1,482,886 [$3,707,215
x .40], and the Cash Component would be 60% or $2,224,329. Using an estimated
per share Book Value for Mid-Missouri Common of $47.24 (which was determined by
subtracting an estimated $125,000 for expenses from the December 31, 1996
Stockholders' Equity of Mid-Missouri of $9,573,000, and dividing that quotient
by 200,000, the total number of outstanding shares of Mid-Missouri Common), the
total number of shares of the Stock Component would be 31,403. Using these
estimates and available information as of December 31, 1996, each share of
American Federal would be converted into the right to receive approximately
.2064 shares of Mid-Missouri Common and $14.63 in cash.
7
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The Merger Consideration estimated above may increase or decrease depending
on the components making up the determination of American Federal's Closing Book
Value, as herein described, and the date on which the Effective Time occurs.
The actual Stock Component and Cash Component may also vary based upon the Total
Assets of American Federal and Book Value of Mid-Missouri. The Merger Agreement
contemplates that shares of American Federal Common will be converted, at the
Effective Time, into cash and shares of Mid-Missouri Common in an amount equal
to the Closing Book Value of American Federal as defined above. There is no
assurance that the Closing Book Value of American Federal will not decrease from
the estimated amount reflected at December 31, 1996 in the example above,
resulting in stockholders of American Federal receiving less cash and fewer
shares of Mid-Missouri Common for each share of American Federal Common.
Notwithstanding the foregoing, the stockholders of American Federal will be
resolicited and will thereby have an opportunity to reconsider the proposed
Merger should the per share Closing Book Value, as determined in accordance with
the Merger Agreement, decrease by an amount greater than ten percent (10%) of
the per share value estimated in the example above as of December 31, 1996, or
be less than $21.94 per share.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARDS OF DIRECTORS
American Federal
The Board of Directors of American Federal has determined that the Merger
and the Merger Agreement, including the Merger Consideration, are fair to, and
in the best interests of, American Federal and its stockholders. The Board of
Directors of American Federal believes that a business combination with Mid-
Missouri would, in addition to providing significant value to all stockholders,
enable American Federal, as part of a larger institution, to compete more
efficiently and effectively in its market area and participate in the expanded
opportunities for growth that the Merger will make possible. ACCORDINGLY, THE
BOARD RECOMMENDS THAT STOCKHOLDERS OF AMERICAN FEDERAL VOTE FOR THE MERGER
AGREEMENT PROVIDING FOR THE MERGER AND, IN CONNECTION THEREWITH, THE CHARTER
AMENDMENT.
Certain members of the management and Board of Directors of American Federal
have interests in the Merger that are in addition to the interests of
stockholders of American Federal generally. See "THE MERGER AND THE CHARTER
AMENDMENT -- Interests of Certain Persons in the Merger."
Mid-Missouri
As part of its ongoing operations, Mid-Missouri continually is presented
with and seeks out acquisition opportunities to enhance its banking franchise.
The Board of Directors of Mid-Missouri believes the acquisition of American
Federal would be a natural and desirable addition to Mid-Missouri's existing
banking franchise.
OPINIONS OF FINANCIAL ADVISORS
Norman Backues & Associates, Inc., American Federal's financial advisor, has
delivered a written opinion to the Board of Directors of American Federal
stating that, as of December 31, 1996, based on the matters set forth in such
opinion, the consideration to be paid by Mid-Missouri pursuant to the Merger
Agreement is fair, from a financial point of view, to the holders of American
Federal Common. A copy
8
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of this written opinion, which sets forth the assumptions made, the procedures
followed, the matters considered and the limits on the review undertaken by
Norman Backues & Associates, Inc., is attached as Appendix D to this Proxy
Statement/Prospectus and the holders of American Federal Common are urged to
read carefully this written opinion in its entirety. See "THE MERGER AND THE
CHARTER AMENDMENT -- Opinions of the Financial Advisors."
Lexington Financial Group, L.L.C., Mid-Missouri's financial advisor, has
delivered a written opinion to the Board of Directors of Mid-Missouri stating
that, as of December 31, 1996, based on the matters set forth in such opinion,
the consideration to be paid by Mid-Missouri pursuant to the Merger Agreement is
fair, from a financial point of view, to the holders of the common stock of Mid-
Missouri. The written opinion delivered by Lexington Financial Group, L.L.C.,
which sets forth the assumptions made, the procedures followed, the matters
considered and the limits on the review undertaken by Lexington Financial Group,
L.L.C., is attached as Appendix E to this Proxy Statement/Prospectus and the
holders of American Federal Common are urged to read carefully this written
opinion in its entirety. See "THE MERGER AND THE CHARTER AMENDMENT -- Opinions
of the Financial Advisors."
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, American Federal has agreed to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement. The Merger
Agreement provides that, after the date of the Merger Agreement and prior to the
Effective Time or the earlier termination of the Merger Agreement, American
Federal may not declare and/or pay any dividend or make any other distribution
to stockholders, whether in cash, stock or other property.
CONDITIONS TO THE MERGER; REGULATORY APPROVALS
The Merger is subject to various conditions including, among other things:
(i) approval of the Merger Agreement, by the requisite two-thirds (2/3) vote of
the stockholders of American Federal, and the Charter Amendment; (ii) receipt of
regulatory approval from Missouri Division of Finance (the "Division of
Finance") and the Federal Deposit Insurance Corporation (the "F.D.I.C."), and
the submission of notice to the Office of Thrift Supervision (the "O.T.S."),
with respect to the Merger; and (iii) receipt of an opinion of counsel to Mid-
Missouri on certain tax aspects of the Merger. The conditions described in
items (i) and (ii) above (the receipt of stockholder and regulatory approvals)
may not be waived by any party. Although the remaining conditions to effect the
Merger may be waived by any party entitled to the benefit thereof, neither Mid-
Missouri, Subsidiary Bank nor American Federal intend to waive any such
conditions except in those circumstances where the Board of Directors of either
Mid-Missouri, Subsidiary Bank or American Federal, as the case may be, deems
such waiver to be in the best interests of Mid-Missouri, Subsidiary Bank or
American Federal, as the case may be, and its respective shareholders and
stockholders. There can be no assurances as to when and if any conditions to
the Merger will be satisfied (or, where permissible, waived) or that the Merger
will be consummated.
Applications for the required regulatory approvals of the Merger from the
F.D.I.C. and the Division of Finance were filed on March 17, 1997 and March 20,
1997, respectively, and the required notice was provided to the O.T.S on March
21, 1997. The Division of Finance approved the proposed Merger by Order dated
April 18, 1997, and the F.D.I.C. approved such transaction on May 8, 1997.
Lewis, Rice & Fingersh, L.C., counsel to Mid-Missouri, has delivered a
preliminary tax opinion, as hereinafter described
9
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and attached hereto as Appendix G, to Mid-Missouri on May 7, 1997. However, one
of the conditions set forth in the preliminary tax opinion is that certain
certificates and representations will be delivered in connection with the
closing of the Merger. If such certificates and representations are not
delivered, a final tax opinion may not be delivered by Lewis, Rice & Fingersh,
L.C., and this condition may not be satisfied. There can be no assurance as to
when and if the Merger will be consummated.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by any party if the Merger is not consummated on or prior to July 31,
1997; provided, however, a party which is then in breach of its obligations or
covenants under the Merger Agreement in any material respect may not exercise
such right to terminate unless the other party is in breach of its obligations
or covenants under the Merger Agreement in any material respect; (ii) by mutual
written agreement of the parties; (iii) by any party in the event of a material
breach by the other of any of its representations and warranties or agreements
under the Merger Agreement not cured within 30 days after written notice of such
breach is given by the non-breaching party; (iv) by any party in the event any
of the conditions to its obligations are not satisfied or waived (and not cured
within any applicable cure period); (v) by Mid-Missouri in the event that
American Federal becomes a party or subject to any new or amended written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding with
any federal or state agency charged with the supervision or regulation of
thrifts or banks after the date of the Merger Agreement which is significant to
American Federal's overall business, operations or financial condition; (vi) by
any party with written notice within thirty (30) calendar days of June 30, 1997,
if any regulatory application filed in connection with the Merger should be
finally denied or disapproved by the applicable regulatory authority or if Mid-
Missouri fails to obtain any regulatory approvals required to consummate the
Merger on or before June 30, 1997; and (vii) by any party if the stockholders of
American Federal do not approve the Merger.
REGULATION
Following consummation of the proposed Merger, the primary regulatory agency
for Mid-Missouri will be the Board of Governors of the Federal Reserve System.
Subsidiary Bank will remain subject to regulation by the Missouri Division of
Finance and the Federal Deposit Insurance Corporation.
FEDERAL INCOME TAX CONSEQUENCES
The discussion set forth under this heading is a reflection of the
preliminary tax opinion dated May 7, 1997, delivered to Mid-Missouri by its
counsel, Lewis, Rice & Fingersh, L.C. A copy of such preliminary tax opinion is
attached as Appendix G to this Proxy Statement/Prospectus and the holders of
American Federal Common are urged to read carefully this preliminary tax opinion
in its entirety.
Pursuant to Sections 6.01(h) and 6.02(g) of the Merger Agreement,
consummation of the Merger is conditioned upon receipt by Mid-Missouri of an
opinion of Mid-Missouri's accountants or tax counsel that, if the Merger is
consummated in accordance with the terms set forth in the Merger Agreement, the
Merger will qualify as a reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preliminary tax opinion
delivered by Mid-Missouri's counsel, and set forth as Appendix G hereto, is
subject to certain assumptions and based on the receipt of certain
representations of each of Mid-Missouri, American Federal and certain holders of
American Federal Common (the "Representations").
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Further, the preliminary tax opinion is based on current law, which could be
amended, revoked, or modified with or without retroactive effect, in a manner
which would change such opinion. If the Representations, as described above,
are not delivered in connection with the closing of the Merger, the required
final tax opinion to Mid-Missouri may not be delivered, which delivery is a
condition to the closing of the proposed Merger. See "THE MERGER AND CHARTER
AMENDMENT - Federal Income Tax Consequences."
Except for stockholders perfecting their dissenters' rights, and cash
received as part of the Merger Consideration, holders of shares of American
Federal Common will recognize no gain or dividend income on the receipt of Mid-
Missouri Common in the Merger. Additionally, a stockholder's aggregate basis in
the shares of Mid-Missouri Common received in the Merger will be the same as his
or her aggregate basis in the shares of American Federal Common converted in the
Merger decreased by the amount of cash received by such stockholder and
increased by the amount, if any, treated as a dividend and the amount of gain,
if any, recognized by such stockholder on the exchange. Provided the shares
surrendered are held as capital assets, the holding period of the shares of Mid-
Missouri Common received by stockholders will include the holding period of
their shares of American Federal Common exchanged therefor. Cash received as
the Cash Component of the Merger Consideration and cash received by stockholders
exercising their dissenters' rights will be treated as a distribution in full
payment of such interests, or shares surrendered in exercise of dissenters'
rights, resulting in capital gain or ordinary income, as the case may be,
depending upon each stockholder's particular situation. Subject to the
conditions hereinabove described and as set forth in the preliminary tax opinion
attached hereto as Appendix G, Mid-Missouri, American Federal and Subsidiary
Bank should each be a "party to a reorganization" within the meaning of Section
368(b) of the Code and no gain should be recognized by Mid-Missouri, American
Federal or Subsidiary Bank by reason of the Merger.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO AMERICAN FEDERAL STOCKHOLDERS, WITHOUT REGARD TO
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH STOCKHOLDER'S TAX SITUATION AND
STATUS. EACH AMERICAN FEDERAL STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for by Mid-Missouri under the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
combined entity will not include results of operations of American Federal prior
to the Effective Time.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become effective upon the
filing for record a copy of the short-form merger agreement required by law in
the office of the recorder of deeds of Franklin County, Missouri and Crawford
County, Missouri. It is presently anticipated that the Merger will become
effective during the second or third quarter of 1997, but no assurance can be
given that such timetable will be met.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of American Federal's management and Board of Directors have
interests in the Merger that are in addition to, and separate from, the
interests of stockholders of American Federal generally. Pursuant to Section
5.04 of the Merger Agreement, American Federal has obtained a one (1) year, One
Million Dollar ($1,000,000) Officers and Directors Liability Bond, which is
renewable annually for additional one year terms for a period of five (5) years,
indemnifying the present and former directors, officers, employees and agents of
American Federal against any liability arising out of or related to actions or
omissions occurring on or prior to the consummation of the proposed Merger. In
addition, as described below under the heading "Management and Operations After
the Merger," certain officers and directors of American Federal will continue to
serve Mid-Missouri and/or Subsidiary Bank following consummation of the proposed
Merger. None of these continuing officers or directors have, or will have
following consummation of the proposed Merger, an employment agreement with Mid-
Missouri and/or Subsidiary Bank.
For information about the percentage of American Federal Common owned by the
directors and executive officers of American Federal, see "INFORMATION ABOUT
AMERICAN FEDERAL -- Security Ownership of Certain Beneficial Owners and
Management." None of the directors or executive officers of American Federal
would own, on a pro forma basis giving effect to the Merger, more than 26% of
the issued and outstanding shares of Mid-Missouri Common.
DISSENTERS' RIGHTS
Under federal banking law, holders of American Federal Common who (i)
dissent from the Merger, (ii) do not vote in favor of the Merger, and (iii) meet
the procedural requirements, have the right to demand payment of the fair or
appraised value of such stock. Any holders of American Federal Common electing
to make a demand for the fair or appraised value of such stock must deliver to
American Federal, before voting on the Merger, a writing identifying himself or
herself and stating his or her intent thereby to demand appraisal of and payment
for his or her shares. Such demand must be in addition to and separate from any
proxy or vote against the Merger. See "THE MERGER AND THE CHARTER AMENDMENT --
Dissenters' Rights" and Appendix F hereto.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Subsidiary Bank will be the surviving bank in the Merger. The Board of
Directors of Subsidiary Bank will continue following the Merger. The Subsidiary
Bank Board and the Mid-Missouri Board each currently include three individuals
who are presently directors of American Federal: John W. Waller, James E.
McIntosh and John M. Brummet. These directors will continue to serve the
Subsidiary Bank and Mid-Missouri Boards following consummation of the Merger.
The remaining members of the American Federal Board do not presently, and will
not, serve on either the Subsidiary Bank Board or the Mid-Missouri Board.
John W. Waller is presently Chairman of Mid-Missouri and Subsidiary Bank and
Chairman and President of American Federal. Mr. Waller will continue as
Chairman of Mid-Missouri and Subsidiary Bank following consummation of the
proposed Merger. James E. McIntosh is presently Treasurer of Mid-Missouri and
Vice President, Assistant Secretary and Assistant Treasurer of American Federal.
Mr.
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McIntosh will continue as Treasurer of Mid-Missouri following consummation of
the proposed Merger. Rita J. Heady, Executive Vice President and Managing
Officer of American Federal, will become an executive officer of Mid-Missouri
and Subsidiary Bank following consummation of the proposed Merger. No other
officers of American Federal will continue as executive officers of either
Subsidiary Bank or Mid-Missouri following consummation of the proposed Merger.
None of the officers of Mid-Missouri, Subsidiary Bank or American Federal have,
or will have (as applicable), written employment agreements with any of such
institutions.
Following consummation of the Merger, the present executive office of
American Federal, which is owned by American Federal and is located directly
across the street from the executive offices of Mid-Missouri and Subsidiary
Bank, will not be maintained as a branch office of Subsidiary Bank and no branch
activities will thereafter be conducted at that location. The Board of
Directors and management of Mid-Missouri have not yet determined whether Mid-
Missouri and/or Subsidiary Bank will utilize the present executive office of
American Federal or lease or sell the facility. The majority of the space in
the building owned by American Federal and in which American Federal maintains
its executive office is presently leased to non-related businesses. Following
consummation of the proposed Merger, Subsidiary Bank will continue to operate
its main office facility located at 318 West Main Street, Sullivan, Missouri,
its drive-in facility located at Fisher and Springfield Streets, Sullivan,
Missouri, and its full service branch located at 1 Meramec Plaza, Sullivan,
Missouri. No additional facilities will be operated by Subsidiary Bank
immediately following, and in connection with, the proposed Merger.
THE CHARTER AMENDMENT
GENERAL
Section 8.A. of the American Federal Charter provides that during the 5-year
period beginning on January 6, 1993 and ending on January 6, 1998, no person
shall, subject to certain exceptions, directly or indirectly offer to acquire or
acquire the beneficial ownership of more than ten percent (10%) of any class of
any equity security of American Federal. Section 8 of the American Federal
Charter is attached hereto in its entirety as Appendix B. Unless repealed, such
Section 8 would prohibit the Merger proposed herein as such transaction involves
an offer to acquire 100% of the outstanding shares of American Federal Common.
As discussed above, the Board of Directors of American Federal has determined
that the Merger and the Merger Agreement, including the Merger Consideration,
are fair to, and in the best interests of, American Federal and its
stockholders. As such, in order to complete the Merger it is necessary to
repeal Section 8.A. A copy of the proposed stockholders resolutions to approve
the Merger Agreement and to amend the American Federal Charter to repeal Section
8.A. thereof are attached hereto as Appendix C. ACCORDINGLY, THE BOARD
RECOMMENDS THAT STOCKHOLDERS OF AMERICAN FEDERAL VOTE FOR THE MERGER AGREEMENT
PROVIDING FOR THE MERGER AND, IN CONNECTION THEREWITH, THE CHARTER AMENDMENT.
CONDITIONS TO THE CHARTER AMENDMENT; REGULATORY APPROVALS; EFFECTIVE TIME
Amending the American Federal Charter requires that the amendment first be
proposed by the association's Board of Directors and thereafter approved by the
stockholders of American Federal at the Special Meeting. At its regular meeting
on March 5, 1997, the Board of Directors of American Federal proposed that the
Charter Amendment be presented to the stockholders of American Federal.
According
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to the O.T.S., the Charter Amendment will become effective upon approval by the
stockholders of American Federal in accordance with the American Federal Charter
and Bylaws. Thereupon, American Federal must provide written notice of such
approval to the O.T.S. No additional approvals by the O.T.S. or any other
regulatory authorities are required in connection with consummation of the
Charter Amendment.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the stockholders of American Federal Common and the
shareholders of Mid-Missouri Common differ in certain respects. The rights of
the stockholders of American Federal who receive shares of Mid-Missouri Common
in the Merger will be governed by the corporate law of Missouri, the state in
which Mid-Missouri is incorporated, and by Mid-Missouri's Articles of
Incorporation, Bylaws and other corporate documents. The governing law and
documents of Mid-Missouri differ from those which apply to American Federal,
which is a federal savings and loan association, in several respects. The
material differences between American Federal Common and Mid-Missouri Common
from the perspective of the shareholders, as described in more detail under
"COMPARISON OF SHAREHOLDER RIGHTS," are the procedures for shareholders to make
proposals for consideration at meetings of shareholders; the ability of
shareholders to amend the Articles or Certificate of Incorporation; and rights
of Mid-Missouri and its shareholders pursuant to certain corporate takeover
statutes. See "COMPARISON OF SHAREHOLDER RIGHTS."
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COMPARATIVE STOCK PRICES
There is no established trading market for shares of Mid-Missouri Common or
shares of American Federal Common. Mid-Missouri and American Federal have had
minimal transfers of their respective common shares during 1994, 1995 and 1996.
To the best knowledge of Mid-Missouri and American Federal, the transfers that
have occurred in such stock primarily relate to estate planning transactions.
The management of Mid-Missouri and American Federal have no knowledge of the
prices used in or the values assigned to such transfers.
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SELECTED COMPARATIVE PER SHARE DATA
The following summary presents comparative historical, pro forma and pro
forma equivalent unaudited per share data for Mid-Missouri and American Federal.
The pro forma amounts assume the Merger had been effective during the period
presented and has been accounted for under the purchase method of accounting.
For a description of the purchase method of accounting with respect to the
Merger, see "THE MERGER AND THE CHARTER AMENDMENT -- Accounting Treatment."
The amounts designated "Pro Forma Combined Per Mid-Missouri Share" represent
the pro forma results of the Merger, the amounts designated "Equivalent Pro
Forma Per American Federal Share" are computed by multiplying the Pro Forma
Combined Per Mid-Missouri Share amounts by a factor of .2051 to reflect the
Merger Consideration (which is assumed to equal $14.72 in cash plus .2051 shares
of Mid-Missouri Common for each share of American Federal Common). See "THE
MERGER AND THE CHARTER AMENDMENT -- Merger Consideration."
The data presented should be read in conjunction with the more detailed
information and financial statements included herein or incorporated by
reference in this Proxy Statement/Prospectus and with the unaudited pro forma
financial statements included elsewhere in this Proxy Statement/Prospectus. See
"PRO FORMA FINANCIAL DATA" and "FINANCIAL STATEMENTS FOR MID-MISSOURI AND
AMERICAN FEDERAL."
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
------------------- -------------------
<S> <C> <C>
NET INCOME PER COMMON SHARE:
Historical:
Mid-Missouri...................................... $ 5.57 $ 5.30
American Federal.................................. .67 .86
Pro forma combined per Mid-Missouri share............. 5.23 5.11
Equivalent pro forma per American Federal share....... 1.08 1.11
DIVIDENDS PER COMMON SHARE:
Historical
Mid-Missouri...................................... $ 2.00 $ 1.50
American Federal.................................. .83 .60
Pro forma combined per Mid-Missouri share/(1)/........ 2.27 1.65
Equivalent pro forma per American Federal share/(2)/.. .47 .36
BOOK VALUE PER COMMON SHARE (PERIOD END):
Historical
Mid-Missouri...................................... $47.86 $44.37
American Federal.................................. 24.54 24.11
Pro forma combined per Mid-Missouri share............. 51.11 47.51
Equivalent pro forma per American Federal share/(3)/.. 25.20 24.80
</TABLE>
____________________________________
/(1)/ Mid-Missouri's pro forma dividends per share represent historical
dividends per share paid by Mid-Missouri and American Federal.
/(2)/ Represents historical dividends per share paid by Mid-Missouri calculated
on the basis of the Merger Consideration.
/(3)/ Including cash paid to American Federal Stockholders.
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SELECTED FINANCIAL DATA
The following tables present selected consolidated historical financial data
for Mid-Missouri, selected historical financial data for American Federal and
pro forma combined amounts reflecting the Merger. The pro forma amounts assume
that the Merger had been effective during the periods presented. The data
presented are derived from the consolidated financial statements of Mid-Missouri
and the financial statements of American Federal and should be read in
conjunction with the more detailed information and financial statements included
herein or incorporated by reference in this Proxy Statement/Prospectus. The
data should also be read in conjunction with the unaudited pro forma financial
statements included elsewhere in this Proxy Statement/Prospectus. See "PRO
FORMA FINANCIAL DATA" and "FINANCIAL STATEMENTS FOR MID-MISSOURI AND AMERICAN
FEDERAL."
MID-MISSOURI HOLDING COMPANY, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Summarized Income Statement:
- ---------------------------
Net Interest Income........................... 4,248 4,132 3,908 3,964 3,444 3,007
Provision for Loan Losses..................... 0 0 0 60 7 238
Noninterest Income (Loss)..................... 874 865 124 811 551 (225)
Noninterest Expense........................... 3,550 3,460 3,128 3,116 2,852 2,564
Income Tax Expense............................ 459 478 237 499 327 --
Net Income.................................... 1,113 1,059 667 1,100 809 (20)
Per Common Share Data:
- ---------------------
Net Income (Loss)............................. 5.57 5.30 3.33 5.50 4.04 (.10)
Cash Dividends Paid........................... 2.00 1.50 1.25 1.50 .50 .50
Stockholders' Equity (period end)............. 47.86 44.37 39.35 39.13 35.13 31.59
Financial Position at Period End:
- --------------------------------
Loans, Net of Unearned Income................. 72,609 61,306 56,682 44,950 38,873 37,167
Total Assets.................................. 120,742 102,871 101,903 89,476 90,860 89,740
Deposits...................................... 95,755 86,468 88,779 73,051 78,573 77,976
Borrowed Money................................ 14,910 6,876 4,884 8,044 4,875 4,758
Stockholders' Equity.......................... 9,573 8,873 7,869 7,827 7,027 6,318
Selected Financial Ratios:
- -------------------------
Return on Average Assets...................... 1.03 1.01 .71 1.21 .92 (.02)
Return on Average Common Equity............... 12.23 12.66 8.42 14.63 12.47 (.29)
Return on Average Total Equity................ 12.23 12.66 8.42 14.63 12.47 (.29)
Net Interest Margin........................... 4.06 4.33 4.51 4.81 4.14 3.40
Nonperforming Assets as % of Total Loans and
Foreclosed Property.......................... .21 .09 .09 .23 1.14 .83
Nonperforming Loans as % of Total Loans....... .21 .09 .09 .23 1.14 .83
Loan Reserve as % of Net Loans................ .84 1.13 1.04 1.42 1.58 1.73
Net Charge-Offs as % of Average Loans......... .13 .00 .09 .09 .10 .08
Equity to Assets.............................. 7.93 8.57 7.78 8.73 7.72 7.04
Tangible Equity to Assets..................... 7.48 7.98 6.96 8.73 7.71 7.04
Tier 1 Risk-Based Capital..................... 13.12 13.00 12.55 16.02 15.95 14.13
Total Risk-Based Capital...................... 14.01 14.11 13.55 17.27 17.20 15.39
</TABLE>
___________________________
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ -----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summarized Income Statement:
- ---------------------------
Interest Income...................... 1,380 1,379 1,443 1,551 1,612
Interest Expense..................... 752 708 621 696 947
Net Interest Income................. 628 671 822 855 665
Provision for Loan Losses............ 0 0 0 0 0
Noninterest Income................... 21 21 22 24 24
Noninterest Expense.................. 503 481 488 414 345
Income Tax Expense................... 44 80 133 165 105
Income Before Change in Accounting
Principle.......................... 102 131 223 300 239
Cumulative Effect of Change in
Accounting Principle............... 0 0 0 (12) 0
Net Income........................... 102 131 223 288 239
Per Common Share Data:
- ---------------------
Before Extraordinary Item............ .67 .86 1.46 1.98 1.57
Cumulative Effect of Change in
Accounting Principle................ 0 0 0 (.09) 0
Net Income........................... .67 .86 1.46 1.89 1.57
Cash Dividends Paid.................. .83 .60 .55 .60 0
Book Value Per Common and Common
Equivalent Shares................... 24.54 24.11 23.30 21.74 12.04
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding......................... 152,087 152,087 152,087 152,087 0
Financial Position at Period End:
- --------------------------------
Total Assets......................... 18,922 19,317 19,079 20,267 20,243
Loans, Net........................... 7,831 7,140 7,133 7,759 8,552
Total Deposits....................... 15,006 15,467 15,370 16,723 18,263
Total Stockholders' Equity........... 3,732 3,666 3,544 3,307 1,831
Selected Financial Ratios:
- -------------------------
Return on Average Assets............. .53 .68 1.13 1.49 1.27
Return on Average Total Equity....... 2.75 3.63 6.51 11.71 13.96
Non-Performing Assets as % of Total
Loans and Foreclosed Property/(1)/.. .5 1.1 .7 .8 .5
Nonperforming Loans as % of
Total Loans......................... .5 1.1 .7 .8 .5
Nonperforming Loans as % of
Net Loans........................... .5 1.1 .7 .8 .5
Loan Loss Reserve as % of Net Loans.. .6 .7 .7 .6 .6
Net Charge-Offs as % of 0
Average Loans....................... 0 0 0 0
Total Equity to Total Assets......... 19.72 18.98 18.57 16.32 9.05
Tangible Equity to Assets/(2)/....... 18.86 18.58 18.57 16.32 9.05
Tier 1 Risk-Based Capital............ 59.68 61.10 61.49 53.88 27.65
Total Risk-Based Capital............. 62.64 63.59 62.37 54.69 28.40
</TABLE>
___________________________
/(1)/ Nonperforming assets include nonaccrual, restructured and impaired loans,
loans past due 90 days or more, and foreclosed property.
/(2)/ Tangible equity to assets is defined as total equity less all intangibles
as a percentage of total tangible assets.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
MID-MISSOURI/AMERICAN FEDERAL
PRO FORMA COMBINED SELECTED FINANCIAL DATA
Year Ended December 31, 1996
(In Thousands, except per share data)
<TABLE>
<S> <C>
Summarized Income Statement:
- ---------------------------
Interest Income...................... 9,545
Interest Expense..................... 4,667
Net Interest Income................. 4,878
Provision for Loan Losses............ 0
Noninterest Income................... 895
Noninterest Expense.................. 4,006
Income Tax Expense................... 558
Net Income........................... 1,209
Per Common Share Data:
- ---------------------
Net Income........................... 5.23
Cash Dividends Paid.................. 2.27
Book Value Per Common and Common
Equivalent Shares................... 51.11
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding......................... 231,189
Financial Position at Period End:
- --------------------------------
Total Assets......................... 138,260
Loans, Net........................... 80,490
Total Deposits....................... 110,761
Total Stockholders' Equity........... 11,815
Selected Financial Ratios:
- -------------------------
Return on Average Assets............. .94%
Return on Average Total Equity....... 10.63%
Non-Performing Assets as % of Total
Loans and Foreclosed Property/(1)/.. .46
Nonperforming Loans as % of
Total Loans......................... .46
Nonperforming Loans as % of
Net Loans........................... .47
Loan Loss Reserve as % of Net Loans.. .64
Net Charge-Offs as % of .12
Average Loans.......................
Total Equity to Total Assets......... 8.50%
Tangible Equity to Assets/(2)/....... 7.78%
Tier 1 Risk-Based Capital............ 14.54%
Total Risk-Based Capital............. 45.24%
Leverage Capital..................... 7.69%
</TABLE>
___________________________
/(1)/ Nonperforming assets include nonaccrual, restructured and impaired loans,
loans past due 90 days or more, and foreclosed property.
/(2)/ Tangible equity to assets is defined as total equity less all intangibles
as a percentage of total tangible assets.
- --------------------------------------------------------------------------------
19
<PAGE>
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to stockholders of
American Federal Savings & Loan Association of Sullivan, a Federal savings and
loan association ("American Federal"), in connection with the solicitation of
proxies by the Board of Directors of American Federal for use at the special
meeting of stockholders of American Federal (the "Special Meeting") to be held
at the Odd Fellows Community Center located at 77 Hughes Ford Road, Sullivan,
Missouri, on June 17, 1997, at 10:00 a.m., local time, and at any adjournments
or postponements thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of common stock, par value $1.00 per
share, of American Federal ("American Federal Common") will be asked to vote
upon and approve the Agreement and Plan of Merger, dated December 6, 1996, as
amended on February 13, 1997 and on May 7, 1997 (as amended, the "Merger
Agreement"), by and among American Federal, Mid-Missouri Holding Co., a Missouri
corporation ("Mid-Missouri"), and Bank of Sullivan, a Missouri bank and wholly-
owned subsidiary of Mid-Missouri ("Subsidiary Bank"), providing for, among other
matters, the merger (the "Merger") of American Federal with and into Subsidiary
Bank, and in connection therewith an amendment to Section 8 of the Federal Stock
Charter of American Federal (the "American Federal Charter") to eliminate the
five-year prohibition on direct and indirect offers to acquire, and acquisitions
of, more than ten percent (10%) of any class of any equity security of American
Federal (the "Charter Amendment"). Both of these matters will be presented as a
single item for consideration and approval to the stockholders of American
Federal at the Special Meeting. In addition, the holders of American Federal
Common may be asked to vote on a proposal to adjourn or postpone the Special
Meeting, which adjournment or postponement could be used for the purpose, among
others, of allowing time for the solicitation of additional votes to approve the
Merger Agreement and the Charter Amendment.
RECORD DATE FOR THE SPECIAL MEETING
The Board of Directors of American Federal has fixed the close of business
on May 13, 1997, as the record date (the "Record Date") for the determination of
holders of shares of American Federal Common to receive notice of and to vote at
the Special Meeting. On the Record Date, there were 152,087 shares of American
Federal Common outstanding held by approximately 100 stockholders. Only holders
of shares of American Federal Common of record on the Record Date are entitled
to vote at the Special Meeting. No shares of American Federal Common can be
voted at the Special Meeting unless the record holder is present in person or
represented by proxy.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT AND THE CHARTER AMENDMENT
The presence, in person or by proxy, of a majority of the outstanding shares
of American Federal Common entitled to vote on the Record Date is necessary to
constitute a quorum at the Special Meeting. Approval of the Merger Agreement
will require the affirmative vote of two-thirds (2/3) of the outstanding shares
of American Federal Common entitled to vote thereon. The Charter Amendment, if
presented as a separate proposal, would only require the affirmative vote of a
majority of the outstanding shares of American Federal
20
<PAGE>
Common entitled to vote thereon. The Charter Amendment is, however, a part of
the proposal to approve the Merger Agreement. Each holder of American Federal
Common will be entitled to one vote per share of American Federal Common held by
him or her on the Record Date. Proxies marked as abstentions and shares held in
street name, which have been designated by brokers on proxy cards as not voted,
will not be counted as votes cast and, as a result, will have the same effect as
a vote against the Merger Agreement, and the transactions contemplated thereby,
including the Merger, and the Charter Amendment. Proxies marked as abstentions,
however, will be treated as shares present for purposes of determining whether a
quorum is present.
As of the Record Date, the executive officers and directors of American
Federal and their affiliates have the power to vote 51,672 shares (approximately
34% of American Federal Common), including 13,676 shares (approximately 9% of
American Federal Common) held by the American Federal Employee Stock Ownership
Plan for which Mr. Waller, Mr. McIntosh and Ms. Heady are trustees, all of which
are expected by management of American Federal to be voted in favor of the
Merger Agreement and the Charter Amendment. For information regarding the
shares of American Federal Common beneficially owned, directly or indirectly, by
certain stockholders, by each director and executive officer of American
Federal, and by all directors and officers of American Federal as a group, see
"INFORMATION ABOUT AMERICAN FEDERAL -- Security Ownership of Certain Beneficial
Owners and Management." In addition, two directors of Mid-Missouri and
Subsidiary Bank, who are not also directors or officers of American Federal, own
a total 6,980 shares (approximately 4.6%) of American Federal Common. These
shares are also expected to be voted in favor of the Merger Agreement and the
Charter Amendment.
VOTING AND REVOCATION OF PROXIES FOR THE SPECIAL MEETING
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. A stockholder may use his or her proxy if he or she is
unable to attend the Special Meeting in person or wishes to have his or her
shares voted by proxy even if he or she does attend the Special Meeting. Shares
of American Federal Common represented by a proxy properly signed and returned
to Mr. Joseph G. Withington, Secretary of American Federal, 20 Hughes Ford Road,
Sullivan, Missouri 63080, at, or prior to, the Special Meeting, unless
subsequently revoked, will be voted at the Special Meeting in accordance with
the instructions thereon. If a proxy is properly signed and returned and the
manner of voting is not indicated on the proxy, all shares of American Federal
Common represented by such proxy will be voted FOR the Merger Agreement
providing for the Merger and, in connection therewith, the Charter Amendment,
and FOR any proposal regarding adjournment or postponement, if such a proposal
is made. Notwithstanding the foregoing, any proxy given in connection with the
Special Meeting indicating a vote against approval of the Merger Agreement and
the Charter Amendment may not be used to vote in favor of an adjournment or
postponement of the Special Meeting if the purpose of such adjournment or
postponement is to allow time for the solicitation of additional votes to
approve the Merger Agreement and the Charter Amendment, unless contrary
instructions are expressly provided in such proxy card. The failure to submit a
proxy card (or to vote in person) at the Special Meeting, the abstention from
voting at the Special Meeting and, in the case of shares held in street name,
the failure of the beneficial owner thereof to give specific voting instructions
to the broker holding such shares (broker non-votes), will have the same effect
as a vote against approval of the Merger Agreement and, in connection therewith,
the Charter Amendment.
Any proxy given pursuant to this solicitation may be revoked by the grantor
at any time prior to the voting thereof on the Merger Agreement and, in
connection therewith, the Charter Amendment by filing with the Secretary of
American Federal a written revocation or a duly executed proxy bearing a later
date. A holder of American Federal Common who previously signed and returned a
proxy and who elects to attend the Special Meeting and vote in person may revoke
his or her proxy at any time before it is exercised by giving notice of
21
<PAGE>
such revocation to the Secretary of American Federal at the Special Meeting and
voting in person by ballot at the Special Meeting; however, attendance at the
Special Meeting will not in and of itself constitute a revocation of the proxy.
SOLICITATION OF PROXIES FOR THE SPECIAL MEETING
In addition to solicitation of proxies from stockholders of American Federal
Common by American Federal through mail, proxies also may be solicited by
personal interview, telephone and wire by directors, officers and employees of
American Federal, who will not be specifically compensated for such services.
It is expected that banks, brokerage houses and others will be requested to
forward soliciting material to their principals and obtain authorization for the
execution of proxies. Except as set forth herein, all costs of soliciting
proxies, assembling and mailing this Proxy Statement/Prospectus and all papers
which now accompany or hereafter may supplement the same will be borne by
American Federal and Mid-Missouri as they determine.
EXPENSES FOR PREPARATION OF PROXY STATEMENT/PROSPECTUS
Mid-Missouri and American Federal have agreed to share in the expense of
preparing this Proxy Statement/Prospectus, and Mid-Missouri will bear the entire
cost of printing this Proxy Statement/Prospectus and all Securities and Exchange
Commission ("S.E.C.") and other regulatory filing fees incurred in connection
therewith.
MAILING DATE OF PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, the attached notice of Special Meeting and
the enclosed proxy card are first being sent to stockholders of American Federal
on or about May 15, 1997 (the "Mailing Date").
THE PARTIES
MID-MISSOURI
Mid-Missouri, a Missouri corporation organized in 1993, is a bank holding
company headquartered in Sullivan, Missouri. At December 31, 1996, Mid-Missouri
had consolidated assets of approximately $120.7 million, shareholders' equity of
approximately $9.6 million, and approximately 76 shareholders. The principal
executive offices of Mid-Missouri are located at 318 West Main street, P.O. Box
489, Sullivan, Missouri 63080-0489 (telephone number (573) 468-3191).
AMERICAN FEDERAL
American Federal, a Federal savings and loan association, was organized as a
mutual savings and loan association in 1962 and converted to stock form on
January 6, 1993. American Federal is headquartered in Sullivan, Missouri. The
executive offices of American Federal are across the street from the Subsidiary
Bank. At December 31, 1996, American Federal had total assets of approximately
$18.9 million, stockholders' equity of approximately $3.7 million, and
approximately 100 stockholders. The principal executive offices of
22
<PAGE>
American Federal are located at 20 Hughes Ford Road, Sullivan, Missouri 63080
(telephone number (573) 468-4176).
RELATIONSHIP OF THE PARTIES
Mid-Missouri, Subsidiary Bank and American Federal have had an ongoing
relationship due principally to the service of John W. Waller, as Chairman of
the Board, and James E. McIntosh, as a director, of all three entities. John M.
Brummet, a long-time director of American Federal, was appointed during January,
1997, to serve as a director of Mid-Missouri and Subsidiary Bank. Other than
these relationships and the proposed Merger, however, neither Mid-Missouri nor
Subsidiary Bank has engaged in any material contracts (including loan
participations), arrangements, understandings, or other transactions with
American Federal. Mid-Missouri (together with Subsidiary Bank) and American
Federal have conducted, and continue to conduct, their respective business
operations independently. Baird, Kurtz & Dobson currently provides accounting
services for both Mid-Missouri and American Federal. The law firm of Lewis,
Rice & Fingersh, L.C. currently represents Mid-Missouri and Subsidiary Bank in
connection with the proposed Merger. In the past, Lewis Rice & Fingersh, L.C.
represented American Federal with respect to certain legal matters. The law
firm of Sandberg, Phoenix and von Gontard, P.C. currently represents American
Federal with respect to the proposed Merger. Sandberg, Phoenix and von Gontard,
P.C. has represented Subsidiary Bank in the past and currently represents it in
connection with matters wholly unrelated to the Merger. American Federal has
received a fairness opinion from Norman Backues & Associates, Inc., a copy of
which is included in Appendix D hereto. Mid-Missouri has received a fairness
opinion from Lexington Financial Group, L.L.C., a copy of which is included in
Appendix E hereto. See "THE MERGER AND THE CHARTER AMENDMENT -- Opinions of the
Financial Advisors."
THE MERGER AND THE CHARTER AMENDMENT
GENERAL
This section of the Proxy Statement/Prospectus describes certain aspects of
the Merger and the Charter Amendment, including the principal provisions of the
Merger Agreement. The following information relating to the Merger and the
Charter Amendment is qualified in its entirety by reference to the other
information contained elsewhere in this Proxy Statement/Prospectus, including
the Appendices hereto and the documents incorporated herein by reference. A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated by reference herein. Reference is made thereto for a complete
description of the terms of the Merger. A copy of Section 8 of the American
Federal Charter is attached hereto as Appendix B and is incorporated by
reference herein. A copy of the resolutions to be presented to the stockholders
of American Federal with respect to approval of the Merger Agreement and the
Charter Amendment are attached hereto as Appendix C and are incorporated by
reference herein. Reference is made to such Appendices for a complete
description of the terms of the Merger Agreement and the Charter Amendment. ALL
STOCKHOLDERS OF AMERICAN FEDERAL ARE URGED TO READ APPENDIX A, APPENDIX B AND
APPENDIX C IN THEIR ENTIRETY.
BACKGROUND OF THE MERGER
At its regular meeting on July 9, 1996, the Board of Directors of Mid-
Missouri first formally discussed the possibility of effecting a business
combination involving American Federal and either Mid-Missouri or Subsidiary
Bank in accordance with applicable laws, rules and regulations. The Board of
Directors of Mid-Missouri believed that a combination with American Federal,
whose executive offices are located across the
23
<PAGE>
street from Subsidiary Bank, would provide a number of efficiencies. At such
meeting, the Mid-Missouri board unanimously approved a motion that, following
receipt of any and all federal and state regulatory approvals and all board and
shareholder approvals required by law, Mid-Missouri or Subsidiary Bank effect a
business combination with American Federal wherein shares of Mid-Missouri Common
would be exchanged for shares of American Federal Common on a dollar for dollar
basis based on the capital value of the stock of each institution as of the day
immediately prior to the date of approval of the proposed combination. Shortly
thereafter, management of Mid-Missouri officially approached management of
American Federal with respect to such a business combination. At its regular
meeting on August 7, 1996, the Board of Directors of American Federal approved
resolutions expressing an interest in effecting a business combination involving
Mid-Missouri and authorizing management of American Federal to proceed with the
negotiation of suitable terms and conditions. The Board of Directors of Mid-
Missouri approved similar resolutions at its September 10, 1996 regular meeting.
Since John W. Waller serves on the Mid-Missouri Board of Directors, the
Subsidiary Bank Board of Directors and the American Federal Board of Directors,
the Mid-Missouri and Subsidiary Bank boards of directors selected E. Milt
Branum, Jr., President and Chief Executive Officer of Mid-Missouri and
Subsidiary Bank, to handle the negotiations on behalf of Mid-Missouri and
Subsidiary Bank. The American Federal Board of Directors selected Rita J.
Heady, Executive Vice President of American Federal, to negotiate on behalf of
American Federal.
Following extensive discussions between Mid-Missouri and American Federal,
and their respective legal and financial advisors, the parties agreed to a form
of agreement and plan of merger pursuant to which American Federal would merge
with and into Subsidiary Bank, with Subsidiary Bank being the survivor under its
charter. This form of merger agreement was approved, subject to certain
specified revisions, by the Board of Directors of Mid-Missouri at its regular
meeting on November 12, 1996, and by the Board of Directors of American Federal
at a special meeting on November 15, 1996. The Merger Agreement was executed by
the parties on December 6, 1996. On January 13, 1997, the boards of directors
of Mid-Missouri and Subsidiary Bank, at their respective regular meetings,
approved, ratified and confirmed in all respects the Merger Agreement, as
executed, and the transactions contemplated thereby. On February 5, 1997, the
parties executed a First Amendment to the Merger Agreement extending certain
deadlines and including as a condition to the Merger the approval by the Mid-
Missouri shareholders of an amendment to the company's Articles of Incorporation
increasing the number of authorized shares of Mid-Missouri Common from 200,000
to 300,000 shares in order to provide a sufficient number of shares of Mid-
Missouri Common to be issued in connection with the Merger. This First
Amendment was approved, ratified and confirmed by the boards of directors of
Mid-Missouri and Subsidiary Bank at their respective regular meetings on
February 11, 1997, and by the Board of Directors of American Federal at its
regular meeting on February 5, 1997. The shareholders of Mid-Missouri, by a
vote of 191,010 shares for (representing approximately 95.6% of the Mid-Missouri
Common) and 0 shares against, approved the amendment to the Mid-Missouri
Articles of Incorporation increasing the number of authorized shares at a
special meeting of shareholders duly called and held on February 28, 1997. The
Missouri Secretary of State issued a Certificate of Amendment with respect to
this Amendment to Mid-Missouri's Articles of Incorporation on March 5, 1997,
causing such amendment to become effective. On May 7, 1997, the parties
executed a Second Amendment to the Merger Agreement further extending certain
deadlines. This Second Amendment was approved by the boards of directors of
Mid-Missouri and Subsidiary Bank at their respective regular meetings on April
8, 1997, and by the Board of Directors of American Federal at its regular
meeting on May 7, 1997.
BACKGROUND OF THE CHARTER AMENDMENT
Section 8.A. of the American Federal Charter provides that during the 5-year
period beginning on January 6, 1993 and ending on January 6, 1998, no person
shall directly or indirectly offer to acquire or acquire
24
<PAGE>
the beneficial ownership of more than ten percent (10%) of any class of any
equity security of American Federal except for (i) a transaction in which
American Federal forms a holding company without a change in the respective
beneficial ownership interests of its stockholders other than pursuant to the
exercise of any dissenter and appraisal rights, (ii) the purchase of shares by
underwriters in connection with a public offering, or (iii) the purchase of
shares by a tax-qualified employee stock benefit plan which is exempt from the
approval requirements under Section 574.3(c)(1)(vi) of the regulations of the
O.T.S. In the event shares are acquired in violation of this prohibition, all
shares beneficially owned by any person in excess of ten percent (10%) will not
be counted as shares entitled to vote and will not be voted by any person or
counted as voting shares in connection with any matter submitted to the
stockholders for a vote. Section 8 of the American Federal Charter is attached
hereto in its entirety as Appendix B. Unless repealed, Section 8 would prohibit
the merger proposed herein as such transaction involves an offer to acquire 100%
of the shares of American Federal Common. As discussed above, the Board of
Directors of American Federal has determined that the Merger and the Merger
Agreement, including the Merger Consideration, are fair to, and in the best
interests of, American Federal and its stockholders. As such, in order to
complete the Merger it is necessary to repeal Section 8.A. A copy of the
proposed stockholders resolutions to approve the Merger Agreement and to amend
the American Federal Charter to repeal Section 8.A. are attached hereto as
Appendix C.
REASONS FOR THE MERGER
American Federal.
The Board of Directors of American Federal has determined that the Merger
and the Merger Agreement, including the Merger Consideration (as defined
herein), are fair to, and in the best interests of, American Federal and its
stockholders. The Board of Directors of American Federal believes that a
business combination with a larger financial institution would provide
significant value to all stockholders, enable American Federal to compete more
effectively in its market area and participate in the expanded opportunities for
growth. Accordingly, the Board recommends that stockholders of American Federal
vote FOR approval and adoption of the Merger Agreement providing for the Merger
and, in connection therewith, the Charter Amendment.
Certain members of the management and Board of Directors of American Federal
have interests in the Merger that are in addition to the interests of the
American Federal stockholders generally. See "THE MERGER AND THE CHARTER
AMENDMENT -- Interests of Certain Persons in the Merger."
Mid-Missouri.
As part of its ongoing operations, Mid-Missouri continually is presented
with and seeks out acquisition opportunities to enhance its banking franchise.
The Board of Directors of Mid-Missouri believes the acquisition of American
Federal would be a natural and desirable addition to Mid-Missouri's existing
banking franchise.
OPINIONS OF THE FINANCIAL ADVISORS
Norman Backues & Associates, Inc., American Federal's financial advisor, has
delivered a written opinion to the Board of Directors of American Federal
stating that, as of December 31, 1996, based on the matters set forth in such
opinion, the consideration to be paid by Mid-Missouri pursuant to the Merger
Agreement is fair, from a financial point of view, to the holders of American
Federal Common. A copy of this written opinion, which sets forth the
assumptions made, the procedures followed, the matters considered and the limits
on the review undertaken by Norman Backues & Associates, Inc., is attached as
Appendix D to this
25
<PAGE>
Proxy Statement/Prospectus and the holders of American Federal Common are urged
to read carefully this written opinion in its entirety.
The American Federal Board of Directors retained Norman Backues &
Associates, Inc. based upon its experience and expertise with regard to the
banking industry and merger and acquisition transactions. It is regularly
engaged in the independent valuation of businesses and securities in connection
with mergers, acquisitions, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Pursuant to its engagement with Norman Backues & Associates, Inc., American
Federal agreed to pay that firm an estimated fee of $2,500.
Lexington Financial Group, L.L.C., Mid-Missouri's financial advisor, has
delivered a written opinion to the Board of Directors of Mid-Missouri stating
that, as of December 31, 1996, based on the matters set forth in such opinion,
the consideration to be paid by Mid-Missouri pursuant to the Merger Agreement is
fair, from a financial point of view, to the holders of the common stock of Mid-
Missouri. A copy of the written opinion, which sets forth the assumptions made,
the procedures followed, the matters considered and the limits on the review
undertaken by Lexington Financial Group, L.L.C., is attached as Appendix E to
this Proxy Statement/Prospectus and the holders of American Federal Common are
urged to read carefully this written opinion in its entirety.
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF AMERICAN FEDERAL
RECOMMENDS THAT THE HOLDERS OF AMERICAN FEDERAL COMMON VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT PROVIDING FOR THE MERGER AND, IN CONNECTION
THEREWITH, THE CHARTER AMENDMENT.
26
<PAGE>
MERGER CONSIDERATION
At the effective time of the Merger (the "Effective Time"), each share of
American Federal Common issued and outstanding immediately prior thereto, other
than shares held by any stockholder properly exercising and perfecting his or
her dissenters' rights under applicable federal law, will, by virtue of the
Merger and without any action on the part of the holders thereof, be converted
into the right to receive a combination of cash and shares of common stock, par
value $10.00 per share, of Mid-Missouri ("Mid-Missouri Common"), in an aggregate
amount equal to the per share Closing Book Value (as hereinafter defined) of
American Federal (such aggregate amount of cash and Mid-Missouri Common is
hereinafter referred to as the "Merger Consideration").
As used herein, the term "Closing Book Value" shall mean the amount of
American Federal's consolidated stockholders' equity accounts, exclusive of
preferred stock, REDUCED BY any and all accruals, expenses, charge-offs,
deductions or adjustments to the accounts in connection with the Merger. The
Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the date of the closing of the Merger
(the "Closing Date") occurs in accordance with generally accepted accounting
principles consistently applied.
The Stock Component of the Merger Consideration.
The aggregate number of shares of Mid-Missouri Common constituting the stock
portion of the Merger Consideration (the "Stock Component") will be calculated
as follows:
"Total Assets" of American Federal x .07
----------------------------------------
Per Share "Book Value" of Mid-Missouri Common
For purposes of this calculation, the "Total Assets" will mean the total assets
of American Federal as shown on the books of American Federal as of the last day
of the month immediately preceding the month in which the Closing Date occurs
and the term "Book Value" will mean the amount of the consolidated shareholders'
equity accounts, exclusive of preferred stock, of Mid-Missouri, REDUCED BY any
and all accruals, expenses, charge-offs, deductions or adjustments to the
accounts in connection with the Merger, determined as of the last day of the
month immediately preceding the month in which the Closing Date occurs. The per
share Book Value of Mid-Missouri shall be determined by dividing the Book Value
of Mid-Missouri by the number of shares of Mid-Missouri Common outstanding on
the last day of the month immediately preceding the month in which the Closing
Date occurs.
The Cash Component of the Merger Consideration.
The aggregate amount of cash constituting the cash portion of the Merger
Consideration (the "Cash Component") will equal the difference between the
Merger Consideration minus the aggregate Book Value of the Stock Component as
described immediately above.
Notwithstanding the foregoing, the Stock Component issuable pursuant to the
Merger Agreement will be increased, as necessary, and the amount of the Cash
Component payable will be decreased, as necessary, such that the aggregate Book
Value of the Stock Component, determined as of the Closing Date, will not be
less than forty percent (40%) of the Merger Consideration (after adjustments for
fractional shares).
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The stockholders of American Federal will receive the combination of cash
and Mid-Missouri Common described herein and in the Merger Agreement and will
not be entitled to elect to receive more or less cash or stock.
FRACTIONAL SHARES
No fractional shares of Mid-Missouri Common will be issued and, in lieu
thereof, holders of American Federal Common who would otherwise be entitled to a
fractional share interest of Mid-Missouri Common (after taking into account all
shares of American Federal Common held by such holder) will be paid an amount in
cash (which will be added to, and considered a part of, the Cash Component) in
an amount equal to the product of such fractional share interest and the Book
Value of a share of Mid-Missouri Common. Notwithstanding the foregoing, the
number of whole shares of Mid-Missouri Common issued to each stockholder of
American Federal will be increased, as necessary, and the Cash Component of the
Merger Consideration payable to each stockholder of American Federal will be
decreased, as necessary, such that the aggregate Book Value of the Stock
Component of the Merger Consideration, determined as of the Closing Date, will
be not less than forty percent (40%) of the aggregate Merger Consideration
payable to all stockholders of American Federal.
FORM OF THE MERGER
The Merger Agreement provides that, subject to the satisfaction or waiver
(where permissible) of the conditions set forth therein, at the Effective Time,
American Federal will merge into Subsidiary Bank, and Subsidiary Bank will be
the surviving institution in the Merger. Upon consummation of the Merger,
Subsidiary Bank will continue to be a wholly owned subsidiary of Mid-Missouri,
and the separate corporate existence of American Federal will terminate.
CLOSING DATE; EFFECTIVE TIME
The Merger Agreement provides that the Closing of the Merger will take place
at the close of business on the last business day of the month during which all
of the conditions to the Merger are satisfied or waived (where permissible), or
on such other date thereafter as Mid-Missouri and American Federal may agree.
The Merger Agreement provides that the Merger will become effective upon the
filing for record of a copy of the short-form merger agreement attached to the
Merger Agreement as Exhibit 1.07 (the "Statutory Merger Agreement") in the
offices of the recorder of deeds of Franklin County, Missouri and Crawford
County, Missouri. Assuming that the Merger is approved by the requisite vote of
the stockholders of American Federal and that the other conditions to the Merger
are satisfied or waived (where permissible), it is presently anticipated that
the Merger will be consummated during the second or third quarter of 1997, but
no assurance can be given that such timetable will be met.
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, American Federal has agreed to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement. The Merger
Agreement provides that American Federal may not declare or pay a dividend or
make any other distribution to stockholders, whether in cash, stock or other
property, after December 6, 1996.
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REGULATORY APPROVALS
The Merger.
The Merger is subject to the prior approval of the Federal Deposit Insurance
Corporation (the "F.D.I.C.") and the Missouri Division of Finance (the "Division
of Finance") and it is also subject to prior notice requirements imposed by the
Office of Thrift Supervision (the "O.T.S."). The federal Bank Merger Act
requires that the F.D.I.C. take into consideration the financial and managerial
resources and future prospects of the existing and proposed institutions and the
convenience and needs of the communities they serve. The Bank Merger Act also
prohibits the F.D.I.C. from approving the Merger if it would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the F.D.I.C. finds that the
anticompetitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served.
Under the Bank Merger Act, the Merger may not be consummated until the
thirtieth (30th) day following the date of F.D.I.C. approval, during which time
the United States Department of Justice may challenge the Merger on antitrust
grounds; the Merger may, however, be consummated after the fifteenth (15th) day
following the date of F.D.I.C. approval if the F.D.I.C. has not received any
adverse comments from the United States Department of Justice relating to the
competitive aspects of the transaction, and the Department of Justice has
consented to such shorter waiting period. The commencement of an antitrust
action would stay the effectiveness of the F.D.I.C.'s approval unless a court
specifically orders otherwise.
Under the Missouri Banking Act and the Missouri Savings and Loan Law, the
Merger Agreement, including the Statutory Merger Agreement, must be approved or
disapproved by the Division of Finance within thirty (30) days after filing. If
the Division of Finance approves the Merger Agreement and the Statutory Merger
Agreement, then the stockholders of American Federal must, within sixty (60)
days after such approval, meet to vote on approval of the Merger Agreement,
including the Statutory Merger Agreement, and the transactions contemplated
thereby. Under the Missouri Savings and Loan Law, the Merger must also comply
with all federal statutory and regulatory requirements.
Applications for the required regulatory approvals of the Merger from the
F.D.I.C. and the Division of Finance were filed on March 17, 1997 and March 20,
1997, respectively, and the required notice was provided to the O.T.S on March
21, 1997. The Division of Finance approved the proposed Merger by Order dated
April 18, 1997, and the F.D.I.C. approved such transaction on May 8, 1997. The
notice publication and public comment requirements under the Bank Merger Act
have been satisfied. Despite the foregoing, however, there can be no assurance
as to when and if the Merger will be consummated.
Following consummation of the proposed Merger, the primary regulatory agency
for Mid-Missouri will be the Board of Governors of the Federal Reserve System.
Subsidiary Bank will remain subject to regulation by the Division of Finance and
the F.D.I.C.
The Charter Amendment.
Upon the receipt of approval of the Charter Amendment from the stockholders
of American Federal, American Federal must provide written notice thereof to the
O.T.S. No additional approvals by the O.T.S. or any other regulatory
authorities are required to be obtained in connection with consummation of the
Charter Amendment.
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CONDITIONS TO CONSUMMATION OF THE MERGER AND THE CHARTER AMENDMENT
The Merger.
The Merger is subject to various conditions. Specifically, as set forth in
the Merger Agreement, the obligations of each party to effect the Merger are
subject to the fulfillment or waiver (where permissible) by each of the parties,
at or prior to the Closing Date, of the following conditions: (i) the
representations and warranties of the respective parties to the Merger Agreement
as set forth therein will be true and correct in all material respects on and as
of the Closing Date; (ii) each of the respective parties to the Merger Agreement
will have performed and complied in all material respects with all of its
obligations and agreements required to be performed prior to the Closing Date;
(iii) no party to the Merger Agreement will be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger; (iv) all necessary regulatory
approvals and consents required to consummate the Merger, including the approval
of the Merger Agreement and the Charter Amendment by the stockholders of
American Federal, will have been obtained and all waiting periods in respect
thereof will have expired; (v) each party will have received all required
documents from the other party; (vi) the Registration Statement relating to the
Mid-Missouri Common to be issued pursuant to the Merger will have become
effective, and no stop order suspending the effectiveness of the Registration
Statement will have been issued and no proceedings for that purpose will have
been initiated or threatened by the S.E.C.; and (vii) Mid-Missouri will have
received an opinion of its accountants or counsel, and American Federal will
have received a copy of such opinion, to the effect that if the Merger is
consummated in accordance with the terms set forth in the Merger Agreement, (a)
the Merger will constitute a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); (b) gain, if any,
will be recognized by each holder of shares of American Federal Common who
receives both Mid-Missouri Common and cash, but not in excess of the amount of
cash received; (c) the aggregate tax basis of Mid-Missouri Common received by
each stockholder of American Federal will be the same as the aggregate tax basis
of shares of American Federal Common exchanged therefor decreased by the amount
of cash received by the stockholder and increased by the amount, if any, treated
as a dividend and the amount of gain recognized by the stockholder on the
exchange; and (d) the holding period of the shares of Mid-Missouri Common to be
received by each American Federal stockholder will include the holding period of
the shares of American Federal Common exchanged therefor, provided the shares of
American Federal Common are held as a capital asset as of the Effective Time.
The conditions described in item (iv) above (the receipt of stockholder and
regulatory approvals) may not be waived by any party. Although the remaining
conditions to effect the Merger may be waived by the party entitled to the
benefit thereof, neither Mid-Missouri, Subsidiary Bank nor American Federal
intend to waive any such conditions except in those circumstances where the
Board of Directors of either Mid-Missouri, Subsidiary Bank or American Federal,
as the case may be, deems such waiver to be in the best interests of Mid-
Missouri, Subsidiary Bank or American Federal, as the case may be, and their
respective shareholders.
Applications for the required regulatory approvals of the Merger from the
F.D.I.C. and the Division of Finance were filed on March 17, 1997 and March 20,
1997, respectively, and the required notice was provided to the O.T.S on March
21, 1997. The Division of Finance approved the proposed Merger by Order dated
April 18, 1997, and the F.D.I.C. approved such transaction on May 8, 1997.
Notwithstanding the foregoing, however, there can be no assurance as to when and
if the Merger will be consummated.
No assurance can be provided as to if or when any of the remaining foregoing
conditions precedent to the Merger will be satisfied or waived (where
permissible) by the party permitted to do so. If the Merger is not effected by
July 31, 1997, the Merger Agreement may be terminated by Mid-Missouri,
Subsidiary Bank or American Federal; provided, however, a party who is then in
breach of its obligations or covenants under the
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Merger Agreement in any material respect may not exercise such right of
termination unless the other party is also in breach in any material respect.
See "THE MERGER AND THE CHARTER AMENDMENT -- Termination or Abandonment."
The Charter Amendment.
Amending the American Federal Charter requires that the amendment first be
proposed by the association's Board of Directors and thereafter approved by the
stockholders of American Federal at the Special Meeting by a vote of a majority
of the total votes eligible to be cast at the meeting. At its regular meeting
on March 5, 1997, the Board of Directors of American Federal proposed that the
Charter Amendment be presented to the stockholders of American Federal at the
Special Meeting.
TERMINATION OR ABANDONMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by any party if the Merger is not consummated on or prior July 31,
1997; provided, however, a party who is then in breach of its obligations or
covenants under the Merger Agreement in any material respect may not exercise
such right to terminate unless the other party is in breach in any material
respect; (ii) by mutual written agreement of the parties; (iii) by any party in
the event of a material breach by the other of any of its representations and
warranties or agreements under the Merger Agreement not cured within 30 days
after written notice of such breach is given by the non-breaching party; (iv) by
any party in the event any of the conditions to its obligations are not
satisfied or waived (and not cured within any applicable cure period); (v) by
Mid-Missouri in the event that American Federal becomes a party or subject to
any new or amended written agreement, memorandum of understanding, cease and
desist order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with any federal or state agency charged with
the supervision or regulation of thrifts or banks after the date of the Merger
Agreement which is significant to American Federal's overall business,
operations or financial condition; (vi) by any party by providing written notice
within thirty (30) calendar days after June 30, 1997, if any regulatory
application filed in connection with the Merger should be finally denied or
disapproved by the applicable regulatory authority or if Mid-Missouri fails to
obtain any regulatory approvals required to consummate the Merger on or before
June 30, 1997; and (vii) by any party if the stockholders of American Federal do
not approve the Merger.
DISSENTERS' RIGHTS
The following summary of the rights of American Federal stockholders who
choose to dissent and demand payment for their shares of American Federal Common
does not purport to be a complete statement of the federal law relating to their
rights, and is qualified by reference to the excerpts of the federal law that
have been set forth as Appendix F to this Proxy Statement/Prospectus. Each
stockholder of American Federal who chooses to dissent from the Merger Agreement
should consult with his or her own legal counsel concerning his or her rights
and the specific procedures and available remedies under the federal law.
Holders of American Federal Common who (i) dissent from the Merger, (ii) do
not vote in favor of the Merger, and (iii) meet the procedural requirements
hereinafter summarized and as set forth in Appendix F attached hereto, have the
right to demand payment of the fair or appraised value of such stock. Any
holders of American Federal Common electing to make a demand for the fair or
appraised value of their stock must deliver to Joseph G. Withington, Secretary
of American Federal, at 20 Hughes Ford Road, P.O. Box 250, Sullivan, Missouri
63080, before voting on the Merger, a writing identifying himself or herself and
stating his
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or her intent thereby to demand appraisal of and payment for his or her shares.
Such demand must be in addition to and separate from any proxy or vote against
the Merger. Within ten (10) days after the Effective Time of the Merger,
Subsidiary Bank, as the resulting entity, must (a) give written notice to those
American Federal stockholders who have complied with Title 12 of the federal law
and have not voted in favor of the proposed Merger, of the Effective Time of the
Merger, (b) make a written offer to each such stockholder to pay for dissenting
shares at a specified price deemed by Subsidiary Bank to be the fair value
thereof, and (c) inform such stockholders that they must, within sixty (60) days
of such date, if they disagree with Subsidiary Bank's determination of fair
value, file a petition with the O.T.S. demanding that agency's determination of
fair value and submit to the Exchange Agent (as hereinafter defined) his or her
certificates representing shares of American Federal Common for notation thereon
that an appraisal and payment have been demanded.
ANY FAILURE TO FOLLOW THE DETAILED PROCEDURES SET FORTH IN THE FEDERAL LAW
MAY RESULT IN A STOCKHOLDER OF AMERICAN FEDERAL LOSING ANY RIGHT HE OR SHE MAY
HAVE TO DISSENT FROM THE MERGER AGREEMENT AND DEMAND AN APPRAISAL FOR THE VALUE
FOR HIS OR HER SHARES OF AMERICAN FEDERAL COMMON.
EXCHANGE OF AMERICAN FEDERAL STOCK CERTIFICATES; FRACTIONAL SHARES
The conversion of American Federal Common into the Merger Consideration
(other than any shares as to which dissenters' rights are properly exercised)
will occur by operation of law at the Effective Time. After the Effective Time,
certificates theretofore evidencing shares of American Federal Common (such
certificates, other than certificates held by stockholders exercising their
dissenters' rights, being collectively referred to herein as the "American
Federal Certificates") which may be exchanged for the Merger Consideration will
be deemed, for all corporate purposes other than the payment of dividends and
other distributions on shares of Mid-Missouri Common, to evidence ownership of
and entitlement to receive such Merger Consideration.
As soon as reasonably practicable after the Effective Time, Mid-Missouri,
acting as exchange agent (the "Exchange Agent") will mail a transmittal letter
and instructions to each record holder of a American Federal Certificate
advising such holder of the amount of cash and number of shares of Mid-Missouri
Common such holder is entitled to receive pursuant to the Merger, and of the
procedures for surrendering such American Federal Certificates in exchange for a
certificate for the number of whole shares of Mid-Missouri Common constituting
the Stock Component, and a check for the cash amount such holder is entitled to
receive for the Cash Component. The letter of transmittal will also specify
that delivery will be effected, and risk of loss and title to the American
Federal Certificates will pass, only upon proper delivery of the American
Federal Certificates to the Exchange Agent and will be in such form and have
such other provisions as Mid-Missouri may reasonably specify. STOCKHOLDERS OF
AMERICAN FEDERAL ARE REQUESTED NOT TO SURRENDER THEIR AMERICAN FEDERAL
CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE
RECEIVED. The shares of Mid-Missouri Common constituting the Stock Component of
the Merger Consideration into which American Federal Common will be converted in
the Merger will be deemed to have been issued at the Effective Time. Unless and
until the American Federal Certificates are surrendered, along with a duly
executed letter of transmittal, any other required documents and notification of
the holder's federal taxpayer identification number, dividends which would
otherwise be payable on the shares of Mid-Missouri Common constituting the Stock
Component of the Merger Consideration issuable with respect to such American
Federal Common will not be paid to the holders of such American Federal
Certificates and, in such case, upon surrender of the American Federal
Certificates and a duly executed letter of transmittal, any other required
documents and notification of taxpayer identification number, there will be paid
any dividends on such shares of Mid-Missouri Common which became payable between
the Effective Time and the time of such surrender and notification. No interest
on any such dividends will accrue or be paid.
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REPRESENTATIONS AND WARRANTIES OF AMERICAN FEDERAL, MID-MISSOURI AND SUBSIDIARY
BANK
The Merger Agreement contains various representations and warranties of the
parties thereto. These include, among other things, representations and
warranties by American Federal, except as otherwise disclosed to Mid-Missouri,
as to: (i) its organization and good standing; (ii) its capitalization; (iii)
the due authorization and execution of the Merger Agreement by American Federal;
(iv) subsidiaries, partnerships and joint ventures; (v) the accuracy of the
financial statements of American Federal; (vi) the absence of material adverse
changes in the financial condition, results of operations, business or prospects
of American Federal; (vii) the absence of certain orders, agreements or
memoranda of understanding between American Federal and any federal or state
agency charged with the supervision or regulation of thrifts; (viii) the filing
of tax returns and payment of taxes; (ix) the absence of pending or threatened
litigation or other such actions; (x) agreements with employees, including
employment agreements; (xi) certain reports required to be filed with various
regulatory agencies; (xii) its investment portfolio; (xiii) its loan portfolio;
(xiv) employee matters and ERISA; (xv) title to its properties, the absence of
liens (except as specified) and insurance matters; (xvi) environmental matters;
(xvii) compliance with applicable laws and regulations; (xviii) the absence of
undisclosed liabilities; (xix) brokerage commissions or similar finder's fees in
connection with the Merger; and (xx) the accuracy of information supplied by
American Federal in connection with the Registration Statement, this Proxy
Statement/Prospectus and any other documents to be filed with the S.E.C. or any
banking, thrift or other regulatory authority in connection with the
transactions contemplated by the Merger Agreement.
Mid-Missouri's and Subsidiary Bank's representations and warranties include,
among other things, those as to (i) their organization and good standing; (ii)
their capitalization; (iii) the due authorization and execution of the Merger
Agreement by each of Mid-Missouri and Subsidiary Bank, and the absence of the
need (except as specified) for governmental or third party consents to the
Merger; (iv) the accuracy of Mid-Missouri's financial statements and filings
with the S.E.C.; (v) the absence of material adverse changes in the financial
condition, results of operations, business or prospects of Mid-Missouri on a
consolidated basis; (vi) the absence of material pending or threatened
litigation or other such actions; (vii) certain reports required to be filed
with various regulatory agencies; (viii) compliance with applicable laws and
regulations; (ix) the accuracy of information supplied by Mid-Missouri and
Subsidiary Bank in connection with the Registration Statement, this Proxy
Statement/Prospectus and any other documents to be filed with the S.E.C. or any
banking, thrift or other regulatory authority in connection with the
transactions contemplated by the Merger Agreement; and (x) the absence of
brokerage commissions or similar finder's fees in connection with the Merger.
CERTAIN OTHER AGREEMENTS
Business of American Federal in Ordinary Course. Pursuant to the Merger
-----------------------------------------------
Agreement, American Federal has agreed, among other things, that it will (a) not
declare or pay a dividend or make any other distribution to stockholders after
December 6, 1996, and (b) conduct its business and engage in transactions only
in the usual, regular and ordinary course as previously conducted, and that it
will not, without the prior written consent of Mid-Missouri (which consent shall
not be unreasonably withheld): (i) issue additional shares of American Federal
Common or other capital stock, options, warrants or other rights to subscribe
for or purchase shares of American Federal Common, or any other capital stock or
any other securities convertible into or exchangeable for any capital stock of
American Federal; (ii) directly or indirectly redeem, purchase or otherwise
acquire American Federal Common or any other capital stock of American Federal;
(iii) effect a reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change in any capital stock or otherwise
reorganize or recapitalize; (iv) change its charter or certificate or articles
of incorporation or association, as the case may be, or bylaws; (v) grant any
increase (other than ordinary and normal increases
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consistent with past practices) in the compensation payable or to become payable
to directors, officers or salaried employees, grant any stock options or, except
as required by law, adopt or change any bonus, insurance, pension, or other
employee plan, payment or arrangement made to, for or with any such directors,
officers or employees; (vi) borrow or agree to borrow any amount of funds except
for borrowing in the ordinary course of business from the Federal Home Loan Bank
Advances; (vii) make or commit to make any new loan or letter of credit or any
new or additional discretionary advance under any existing line of credit, in
excess of $100,000 (excepts for such extensions of credit secured by single
family, non-agricultural residential property of one acre or less), or that
would increase the aggregate credit outstanding to any one borrower or group of
affiliated borrowers to more than $100,000; (viii) purchase or otherwise acquire
any investment security for its own account having an average remaining maturity
greater than five years or any asset-backed securities other than those issued
or guaranteed by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation;
(ix) increase or decrease the rate of interest paid on time deposits or
certificates of deposit except in accordance with past practices; (x) enter into
any agreement, contract or commitment out of the ordinary course of business
having a term in excess of three months other than letters of credit, loan
agreements, and other lending, credit and deposit agreements and documents made
in the ordinary course of business; (xi) mortgage, pledge, subject to lien or
charge or otherwise encumber any of its assets or properties except in the
ordinary course of business; (xii) cancel, accelerate or waive any material
indebtedness, claims or rights owing to American Federal except in the ordinary
course of business; (xiii) sell or otherwise dispose of any real property or any
material amount of tangible or intangible personal property; (xiv) foreclose or
otherwise take title to or possess any real property, other than single family,
non-agricultural residential property of one acre or less, without first
obtaining a phase one environmental report which indicates that the property is
free of pollutants, contaminants or hazardous or toxic waste materials; (xv)
commit any act or fail to do any act which will result in a material breach of
any agreement, contract or commitment which will materially adversely affect the
business, financial condition or earnings of American Federal; (xvi) violate any
law, statute, rule, governmental regulation or order which will materially
adversely affect the business, financial condition or earnings of American
Federal; (xvii) purchase any real or personal property or make any capital
expenditure in excess of $20,000; (xviii) change accounting principles or
practices, or the method of applying such principles or practices; or (xix)
engage in any transaction or take any action that would render untrue, in any
material respect, any of the representations and warranties made by American
Federal in the Merger Agreement, if such representations or warranties were
given as of the date of such transaction or action.
Additional American Federal Reserves, Accruals, Charges and Expenses. The
--------------------------------------------------------------------
Merger Agreement provides that Mid-Missouri and American Federal will consult
and cooperate with each other prior to the Effective Time to determine the
amount and the timing for recognizing for financial accounting purposes the
expenses of the Merger and the restructuring charges related to or to be
incurred in connection with the Merger. At the request of Mid-Missouri,
American Federal has agreed to establish and take such reserves and accruals as
Mid-Missouri reasonably shall request so as to conform American Federal's loan,
accrual, reserve and other accounting policies to Mid-Missouri's policies, and
shall establish and take such accruals, reserves and changes in order to
implement such policies in respect of excess facilities and equipment capacity,
severance costs, litigation matters, write-off or write-down of various assets
and other appropriate accounting adjustments. American Federal will maintain
and keep all of its benefit plans (including, but not limited to, defined
contribution plans and deferred compensation plans) fully funded, and will, to
the extent any such plan may not be fully or adequately funded, make such
contributions as are necessary to fully fund any such plan.
Other American Federal Agreements. In addition, American Federal has agreed
---------------------------------
to: (i) give Mid-Missouri prompt written notice of any occurrence, or impending
or threatened occurrence, of any event or condition which would cause or
constitute a failure of any condition precedent to any party's obligation to
effect the Merger or breach of any of American Federal's representations or
agreements in the Merger Agreement, or of the occurrence of any matter or event
known to and directly involving American Federal (not including
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changes in conditions that affect the thrift industry generally) that is
materially adverse to the business, operations, properties, assets or condition
(financial or otherwise) of American Federal; (ii) use its best efforts to
obtain all necessary consents with respect to any material leases, licenses,
contracts, instruments and rights which require the consent of another person
for their transfer or assumption pursuant to the Merger; (iii) use its best
efforts to perform and fulfill all conditions and obligations to be performed or
fulfilled under the Merger Agreement and to effect the Merger; and (iv) permit
Mid-Missouri reasonable access to American Federal's properties and to disclose
and make available all books, documents, papers and records relating to assets,
stock ownership, properties, operations, obligations and liabilities in which
Mid-Missouri may have a reasonable and legitimate interest in furtherance of the
transactions contemplated by the Merger Agreement.
Mid-Missouri's Agreements. Pursuant to the Merger Agreement, Mid-Missouri
-------------------------
has agreed, as applicable, among other things, to: (i) file all regulatory
applications required in order to consummate the Merger and to keep American
Federal reasonably informed as to the status of such applications; (ii) file the
Registration Statement with the S.E.C. and use its best efforts to cause the
Registration Statement to become effective; (iii) timely file all documents
required to obtain all necessary permits and approvals under applicable state
securities laws; (iv) prepare and file any other filings required under the
Securities Exchange Act of 1934, as amended, relating to the Merger and related
transactions; (v) promptly notify American Federal in writing should Mid-
Missouri have knowledge of any event or condition which would cause or
constitute a breach of any of its representations or agreements contained in the
Merger Agreement; and (vi) use its best efforts to perform and fulfill all
conditions and obligations to be performed or fulfilled under the Merger
Agreement and to effect the Merger.
NO SOLICITATION
The Merger Agreement provides that, unless and until the Merger Agreement
has been terminated, American Federal will not solicit or encourage, or hold any
discussions or negotiations with or provide any information to, any person in
connection with any proposal from any person relating to the acquisition of all
or a substantial portion of the business, assets or stock of American Federal.
American Federal is required to promptly advise Mid-Missouri of its receipt of,
and the substance of, any such proposal or inquiry, including the name of the
other party or parties.
WAIVER AND AMENDMENT
The conditions of the Merger Agreement may only be waived by notice to the
other party waiving such condition. The failure of any party to require
performance of any provision in the Merger Agreement does not affect the party's
right to enforce the same at a later time. The Merger Agreement may not be
amended or modified except by a written document duly executed by American
Federal, Mid-Missouri and Subsidiary Bank.
FEDERAL INCOME TAX CONSEQUENCES
The discussion set forth under this heading is a reflection of the
preliminary tax opinion dated May 7, 1997, delivered to Mid-Missouri by its
counsel, Lewis, Rice & Fingersh, L.C. A copy of such preliminary tax opinion is
attached as Appendix G to this Proxy Statement/Prospectus and the holders of
American Federal Common are urged to read carefully this preliminary tax opinion
in its entirety.
35
<PAGE>
The Merger has been structured to qualify as a reorganization under Section
368(a) of the Code. Subject to the required delivery of the Representations (as
hereinafter defined and discussed), and as set forth in the preliminary tax
opinion of Lewis, Rice & Fingersh, L.C. attached hereto as Appendix G, except
for stockholders perfecting their dissenters' rights, and cash received
constituting the Cash Component of the Merger Consideration, holders of shares
of American Federal Common will recognize no gain or dividend income on the
receipt of Mid-Missouri Common in the Merger. Additionally, their aggregate
basis in the shares of Mid-Missouri Common received in the Merger will be the
same as their aggregate basis in their shares of American Federal Common
converted in the Merger decreased by the amount of cash received by the
stockholder and increased by the amount, if any, treated as a dividend and the
amount of gain, if any, recognized by the stockholder on the exchange. Provided
the shares surrendered are held as capital assets, the holding period of the
shares of Mid-Missouri Common received by them will include the holding period
of their shares of American Federal Common exchanged therefor. Cash received as
the Cash Component of the Merger Consideration and cash received by stockholders
exercising their dissenters' rights will be treated as a distribution in full
payment of such interests, or shares surrendered in exercise of dissenters'
rights, resulting in capital gain or ordinary income, as the case may be,
depending upon each stockholder's particular situation. Subject to the required
delivery of the Representations (as hereinafter defined and discussed), and as
set forth in the preliminary tax opinion of Lewis, Rice & Fingersh, L.C.
attached hereto as Appendix G, Mid-Missouri, American Federal and Subsidiary
Bank should each be a "party to a reorganization" within the meaning of Section
368(b) of the Code and no gain should be recognized by Mid-Missouri, American
Federal or Subsidiary Bank by reason of the Merger.
Pursuant to Sections 6.01(h) and 6.02(g) of the Merger Agreement,
consummation of the Merger is conditioned upon receipt by Mid-Missouri of an
opinion of Mid-Missouri's accountant or counsel, to the effect that if the
Merger is consummated in accordance with the terms set forth in the Merger
Agreement: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; (ii) gain or income, if any, realized by each holder
of shares of American Federal Common who receives both Mid-Missouri Common and
cash in exchange for his or her shares of American Federal Common, will be
recognized, but not in excess of the amount of cash received; (iii) the basis of
shares of Mid-Missouri Common received by a stockholder of American Federal will
be the same as the basis of his or her shares of American Federal Common
exchanged therefor decreased by the amount of cash received by the stockholder
and increased by the amount, if any, treated as a dividend and the amount of
gain, if any, recognized by the stockholder in the exchange; and (iv) the
holding period of the shares of Mid-Missouri Common received by such
stockholders will include, in each instance, the holding period of the shares of
American Federal Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time. The preliminary tax opinion attached
hereto as Appendix G is subject to certain assumptions and based on the delivery
of certain representations of each of Mid-Missouri, American Federal and certain
holders of American Federal Common (the "Representations"). Further, the
preliminary tax opinion is based on current law, which could be amended,
revoked, or modified with or without retroactive effect, in a manner which would
change such opinion. If the Representations, as described above, are not
delivered in connection with the closing of the Merger, the required final tax
opinion to Mid-Missouri may not be delivered, which delivery is a condition to
the closing of the proposed Merger.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO AMERICAN FEDERAL STOCKHOLDERS, WITHOUT REGARD TO
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH STOCKHOLDER'S TAX SITUATION AND
STATUS. EACH AMERICAN FEDERAL STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
36
<PAGE>
RESALE OF MID-MISSOURI COMMON
Notwithstanding the foregoing discussion with respect to the tax opinion,
the shares of Mid-Missouri Common issued pursuant to the Merger will be freely
transferable under the Securities Act of 1933, as amended (the "Securities
Act"), except for shares issued to any American Federal shareholder who may be
deemed to be an "affiliate" of American Federal or Mid-Missouri for purposes of
Rule 145 under the Securities Act. The Merger Agreement provides that each such
affiliate will enter into an agreement with Mid-Missouri providing that such
affiliate will not transfer any shares of Mid-Missouri Common received in the
Merger except in compliance with the Securities Act. This Proxy
Statement/Prospectus does not cover resales of shares of Mid-Missouri Common
received by any person who may be deemed to be an affiliate of American Federal.
Persons who may be deemed to be affiliates of American Federal generally include
individuals who, or entities which, control, are controlled by or are under
common control with American Federal and will include directors and certain
executive officers of American Federal and may include principal stockholders of
American Federal.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As expressly discussed under this heading and under the heading "Management
and Operations After the Merger" below (See "INFORMATION ABOUT AMERICAN FEDERAL
- - Management and Operations After the Merger"), certain members of American
Federal's management and Board of Directors have interests in the Merger that
are in addition to, and separate from, the interests of stockholders of American
Federal generally. For information about the percentage of American Federal
Common owned by the directors and executive officers of American Federal, see
"INFORMATION ABOUT AMERICAN FEDERAL -- Security Ownership of Certain Beneficial
Owners and Management." None of the directors or executive officers of American
Federal would own, on a pro forma basis giving effect to the Merger, more than
26% of the issued and outstanding shares of Mid-Missouri Common.
Insurance; Indemnification. Pursuant to Section 5.04 of the Merger
--------------------------
Agreement, American Federal has obtained a one (1) year, One Million Dollar
($1,000,000) Officers and Directors Liability Bond, which is renewable annually
for additional one (1) year terms for a period of five (5) years, to indemnify
the present and former directors, officers, employees and agents of American
Federal against any liability arising out of or related to actions or omissions
occurring on or prior to the Effective Time, to the extent that such
indemnification is then permitted under the laws of the United States and by
American Federal's Federal Stock Charter as in effect on the date of the Merger
Agreement.
ACCOUNTING TREATMENT
The Merger will be accounted for by Mid-Missouri under the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations", as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
combined company will not include results of operations of American Federal
prior to the Effective Time. See "PRO FORMA FINANCIAL DATA."
37
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Subsidiary Bank will be the surviving bank in the Merger. The Board of
Directors of Subsidiary Bank will continue following the Merger. The Subsidiary
Bank Board and the Mid-Missouri Board each currently include three individuals
who are presently directors of American Federal: John W. Waller, James E.
McIntosh and John M. Brummet. These directors will continue to serve the
Subsidiary Bank and Mid-Missouri Boards following consummation of the Merger.
The remaining members of the American Federal Board do not presently, and will
not, serve on either the Subsidiary Bank Board or the Mid-Missouri Board.
John W. Waller is presently Chairman of Mid-Missouri and Subsidiary Bank and
Chairman and President of American Federal. Mr. Waller will continue as
Chairman of Mid-Missouri and Subsidiary Bank following consummation of the
proposed Merger. James E. McIntosh is presently Treasurer of Mid-Missouri and
Vice President, Assistant Secretary and Assistant Treasurer of American Federal.
Mr. McIntosh will continue as Treasurer of Mid-Missouri following consummation
of the proposed Merger. Rita J. Heady, Executive Vice President and Managing
Officer of American Federal, will become an executive officer of Mid-Missouri
and Subsidiary Bank following consummation of the proposed Merger. No other
officers of American Federal will continue as executive officers of either
Subsidiary Bank or Mid-Missouri following consummation of the proposed Merger.
None of the officers of Mid-Missouri, Subsidiary Bank or American Federal have,
or will have (as applicable), written employment agreements with any of such
institutions.
Following consummation of the Merger, the present executive office of
American Federal, which is owned by American Federal and is located directly
across the street from the executive offices of Mid-Missouri and Subsidiary
Bank, will not be maintained as a branch office of Subsidiary Bank and no branch
activities will thereafter be conducted at that location. The Board of
Directors and management of Mid-Missouri have not yet determined whether Mid-
Missouri and/or Subsidiary Bank will utilize the present executive offices of
American Federal or lease or sell the facility. The majority of the space in
the building owned by American Federal and in which American Federal maintains
its executive offices is presently leased to non-related businesses. Following
consummation of the proposed Merger, Subsidiary Bank will continue to operate
its main office facility located at 318 West Main Street, Sullivan, Missouri,
its drive in facility located at Fisher and Springfield Streets, Sullivan,
Missouri, and its full service branch located at 1 Meramec Plaza, Sullivan,
Missouri. No additional facilities will be operated by Subsidiary Bank
immediately following, and in connection with, the proposed Merger.
38
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet as of
December 31, 1996, and the pro forma combined condensed statement of income for
the year ended December 31, 1996, give effect to the Merger based on the
historical consolidated financial statements of Mid-Missouri and Subsidiary Bank
and the historical consolidated financial statements of American Federal under
the assumptions and adjustments set forth in the accompanying notes to the pro
forma financial statements.
The pro forma financial statements have been prepared by the management of
Mid-Missouri and American Federal based upon their respective financial
statements. The following pro forma combined condensed balance sheet and
condensed statements of income include:
(a) Mid-Missouri's historical consolidated financial information, which has
been designated herein as "Mid-Missouri."
(b) American Federal's historical consolidated financial information, which
has been designated herein as "American Federal."
(c) The combined statements of Mid-Missouri and American Federal which have
been designated herein as "Pro Forma."
The pro forma statements may not be indicative of the results that actually
would have occurred if the Merger had been in effect on the dates indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the historical consolidated financial statements and
notes thereto of Mid-Missouri and American Federal incorporated by reference
herein in this Proxy Statement/Prospectus. As described on page 1 of this Proxy
Statement/Prospectus, there are a number of factors which may cause the actual
results to differ materially from those provided herein. See "FORWARD LOOKING
STATEMENTS."
39
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Mid- American Pro Forma
Missouri Federal Adjustments Combined
---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash $ 3,764 $ 921 $ -- $ 4,685
Interest-bearing deposits -- 495 -- 495
Investment securities
Available for sale, at fair value 23,498 218 (2239) (1) 21,477
Held to maturity, at cost 16,202 8,985 (20) (1) 25,167
Loans receivable, net 72,609 7,831 50 (1) 80,490
Real estate required through foreclosure, net -- -- -- --
Stock in Federal Home Loan Bank -- 156 -- 156
Office properties and equipment, net 2,019 125 155 (1) 2,299
Deferred tax asset 177 -- -- 177
Excess of cost over fair value of assets acquired 672 -- 650 (1) 1,322
(3)
Accrued income and other assets 1,801 191 -- 1,992
-------- ------- ------- --------
120,742 18,922 (1,404) 138,260
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits 9,515 -- -- 9,515
Savings deposits 34,296 3,972 -- 38,268
Time deposits 51,944 11,034 -- 62,978
Borrowed money 14,910 56 (56) (2) 14,910
Deferred tax liability -- -- 120 (1) 142
22
Accrued expenses and other liabilities 504 128 -- (2) 632
-------- ------- ------- --------
Total liabilities 111,169 15,190 86 126,445
-------- ------- ------- --------
Stockholders equity:
Common stock 2,000 152 (152) (1) 2,312
312 (1)
Additional paid-in capital 5,827 1,304 2 (2) 7,757
(1,304) (1)
1,087 (1)
841 (1)
Retained earnings, subject to certain restriction 1,889 2,182 (2,182) (1) 1,889
Unrealized gain (loss) on assets available-for-sale
securities (143) 126 (126) (1) (143)
Unamortized ESOP shares -- (32) 32 (2) --
Treasury stock at cost: -- -- -- --
-------- ------- ------- --------
Total stockholders' equity 9,573 3,732 (1,490) 11,815
-------- ------- ------- --------
120,742 18,922 (1,404) 138,260
======== ======= ======= ========
</TABLE>
See Notes to Pro Forma Condensed Balance Sheet
(1) To record acquisition of American Federal by Mid-Missouri. Entries assume
Liquidation of securities to fund cash payment to American Federal
stockholders.
(2) To record termination of American Federal ESOP Plan in conjunction with
the Merger.
40
<PAGE>
(3) In order to calculate the amount of goodwill as reflected hereon, the
following assumptions were made:
Estimated Total Purchase Price
------------------------------
Cash paid to American Federal stockholders $2,239,000
(152,087 shares @ $14.72/share)
Shares of American Federal outstanding 152,087
Exchange Ratio x .2051
-------
Shares of Mid-Missouri to be issued 31,193
Estimated "fair market value" per $ 71.79
-------
share of Mid-Missouri Common
2,240,000 2,240,000
----------
Total Consideration $4,479,000
==========
The estimated value per share of Mid-Missouri Common was determined by
management of Mid-Missouri and is based upon prices of similar institutions
sold in Missouri, including published sources of such transactions. The price
takes into consideration Mid-Missouri's relative size, capital structure and
earnings compared to other financial institutions. Subsequently, the fairness
opinion of Norman Backues & Associates, Inc. estimated the fair value of a
share of Mid-Missouri common to be $72.00.
(4) Allocation of Purchase Price
----------------------------
Total estimated Merger Consideration $4,479,000
==========
Net assets of American Federal at
historical book value $3,732,000
Adjustments to:
Record loans at fair value 50,000
Reduce ESOP debt 56,000
Record investments at fair value (22,000)
Record real estate at fair value 155,000
Adjust deferred income taxes (142,000)
Goodwill 650,000
----------
$4,479,000
=========
NOTES TO PRO FORMA CONDENSED BALANCED SHEET
The accompanying pro forma condensed consolidated financial statements were
derived from the historical financial records of Mid-Missouri and American
Federal and should be read in conjunction with the historical financial
statements of Mid-Missouri and American Federal filed herewith.
41
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Mid- American Pro Forma
Missouri Federal Adjustments Combined
---------- -------------- -------------------- --------------
<S> <C> <C> <C> <C>
Interest and Dividend Income $ 8,163 $ 1,380 $(134) $ 9,409
Interest Expense 3,915 752 - 4,667
-------- -------- -------- --------
Net Interest Income 4,248 628 (134) 4,742
Provision for loan losses 0 0 - -0-
-------- -------- -------- --------
Net Interest Income after 4,248 628 (134) 4,742
provision for loan losses
Noninterest income 874 21 93 802
Noninterest expense 3,550 503 (140) 3,913
-------- -------- -------- --------
Income (loss) before income taxes 1,572 146 (87) 1,631
Income tax expense 459 44 2 505
-------- -------- -------- --------
Net income 1,113 102 (89) 1,126
======== ======== ======== ========
Net income available to 1,113 102 (89) 1,126
common shareholders ======== ======== ======== ========
Net income per common share 5.57 .67 (.38) 4.87
======== ======== ======== ========
Average shares outstanding 200,000 152,087 231,189 231,189
======== ======== ======== ========
See Notes to Pro Forma Combined Condensed Statement of Income.
To record on a pro forma basis, the effects of the Merger on the Statement of
Income including (in thousands):
Income Adjustments Interest lost on investment securities sold $(136)
- ------------------ Accretion of discount on investment securities $ 2
Total Income Adjustments -----
$(134)
Expenses Eliminated Director fees eliminated due to elimination of American Federal's Board of Directors
- -------------------
$ 32
Employee Stock Ownership Plan expenses eliminated due to plan
termination $ 57
Building and equipment expenses eliminated due to the anticipated sale of the building located at 20
Hughes Ford Road and the retirement of equipment $ 51
--
Total reduction in expenses $ 140
----
Expenses Incurred Amortization over 7 years of excess of acquisition cost $ 93
- ----------------- over fair value of assets acquired -----
Net increase in income before income taxes (87)
Less tax effects $ 2
-----
(89)
=====
</TABLE>
42
<PAGE>
DESCRIPTION OF MID-MISSOURI CAPITAL STOCK
On February 28, 1997, the shareholders of Mid-Missouri approved a
resolution amending Mid-Missouri's Articles of Incorporation to increase the
number of authorized shares of Mid-Missouri Common from 200,000 to 300,000
shares in order to have a sufficient number of shares to satisfy the terms of
the Merger Agreement. The Missouri Secretary of State issued a Certificate of
Amendment with respect to this amendment to the Mid-Missouri Articles of
Incorporation on March 5, 1997, causing such amendment then to become effective.
Accordingly, the Articles of Incorporation of Mid-Missouri currently authorize
the issuance of 300,000 shares of Mid-Missouri Common.
As of December 31, 1996, 200,000 shares of Mid-Missouri Common were issued
and outstanding.
The following is a brief description of the terms of the Mid-Missouri
Common.
MID-MISSOURI COMMON
Dividend Rights. Mid-Missouri may, from time to time, declare dividends to
---------------
the holders of Mid-Missouri Common, who will be entitled to share equally in any
such dividends.
Voting Rights. Each share of Mid-Missouri Common has the same relative
-------------
rights and is identical in all respects with every other share of Mid-Missouri
Common. The holders of Mid-Missouri Common possess exclusive voting rights in
Mid-Missouri. Each holder of shares of Mid-Missouri Common is entitled to one
vote for each share held of record on all matters submitted to a vote of holders
of shares of Mid-Missouri Common, except that in all elections of directors,
shareholders of Mid-Missouri have cumulative voting rights.
Preemptive Rights. Holders of Mid-Missouri Common do not have preemptive
-----------------
rights with respect to any additional shares of Mid-Missouri Common which may be
issued.
Liquidation Rights. In the event of a liquidation, dissolution or winding
------------------
up of Mid-Missouri, each holder of shares of Mid-Missouri Common would be
entitled to receive, after payment of all debts and liabilities of Mid-Missouri,
a pro rata portion of all assets of Mid-Missouri available for distribution to
holders of Mid-Missouri Common.
Assessment and Redemption. Shares of Mid-Missouri Common will be, when
-------------------------
issued, fully paid and nonassessable.
Transfer Agent and Registrar. Mid-Missouri is the transfer agent and
----------------------------
registrar for the Mid-Missouri Common.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of Mid-Missouri Common are governed by the
General and Business Corporation Law of Missouri (the "Missouri Corporate Law"),
the state of Mid-Missouri's incorporation, and by Mid-Missouri's Articles of
Incorporation, Bylaws and other corporate documents. The rights of holders of
shares of American Federal Common are governed by the laws of the United States
(the "Federal Law") and by American Federal's Federal Stock Charter ("Charter"),
First Amended By-laws ("Bylaws") and other corporate documents. The rights of
holders of shares of American Federal Common differ in certain respects from the
rights which they would have as shareholders of Mid-Missouri. A summary of
43
<PAGE>
the material differences between the respective rights of holders of American
Federal Common and Mid-Missouri Common is set forth herein.
SHAREHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Business Combinations. The Missouri Corporate Law provides that unless a
---------------------
corporation's articles of incorporation or bylaws provide otherwise, certain
business combinations including mergers require the approval of the holders of
at least two-thirds of the outstanding shares entitled to vote on the subject
transaction. The Mid-Missouri Bylaws and Articles of Incorporation do not amend
the rights granted by Missouri Corporate Law.
Federal Law provides that any merger, consolidation, or the transfer of all
or substantially all of the assets of, or the assumption of all or substantially
all of the liabilities of, a federal savings and loan association must be
approved by the affirmative vote of the holders of two-thirds of such
association's voting shares. The American Federal Bylaws and Charter do not
amend the right granted by the Federal Law.
The rights of shareholders of Mid-Missouri and of stockholders of American
Federal are not materially different in these respects.
Removal of Directors. The Missouri Corporate Law provides that, unless
--------------------
otherwise provided in a corporation's articles of incorporation or bylaws, one
or more directors or the entire board of directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares then
entitled to vote in an election of the directors. Directors may be removed only
at a meeting called expressly for that purpose. If a corporation's articles of
incorporation or bylaws provide for cumulative voting in the election of
directors and if less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors or, if there are classes of directors, at an election of the
class of directors of which he or she is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the articles of incorporation, any references to a vote of the
holders of outstanding shares are to outstanding shares of that class and not to
the vote of the outstanding shares as a whole. Any director of a corporation
may be removed for cause by an action of a majority of the entire board of
directors if the director fails to meet the qualifications stated in the
corporation's articles of incorporation or bylaws for election as a director or
is in breach of any agreement between such director and the corporation relating
to such director's services as a director or employee of the corporation.
Notice of the proposed removal by the directors must be given to all directors
of a corporation prior to action thereon. The Mid-Missouri Bylaws and Articles
of Incorporation provide shareholders with cumulative voting rights in the
election of directors and do not amend the corresponding rights granted by
Missouri Corporate Law.
American Federal's Bylaws provide that at a meeting of stockholders called
expressly for the purpose of removing a director, any director may be removed
for cause by a majority vote of the shares entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part.
Because of the differences between Missouri Corporate Law and American
Federal's Bylaws, it may be easier for a shareholder of Mid-Missouri to remove a
director without cause than it is for a stockholder of American Federal.
44
<PAGE>
Amendments to Articles of Incorporation/Charter. Under the Missouri
-----------------------------------------------
Corporate Law, a corporation may amend its articles of incorporation upon
receiving the affirmative vote of the holders of a majority of its voting shares
and the affirmative vote of the holders of a majority of the outstanding shares
of each class entitled to vote thereon as a class; provided, however, that if
the corporation's articles of incorporation or bylaws provide for cumulative
voting in the election of directors, the number of directors of the corporation
may not be decreased to less than three by amendment to the corporation's
articles of incorporation when the number of shares voting against the proposal
for decrease would be sufficient to elect a director if the shares were voted
cumulatively at an election of three directors; and provided, further, that a
proposed amendment which provides that Section 351.407 of the Missouri Corporate
Law does not apply to "control share acquisitions" of shares of a corporation
requires the affirmative vote of the holders of two-thirds of such corporation's
voting shares. See "COMPARISON OF SHAREHOLDER RIGHTS -- Takeover Statutes."
Article XII of the Articles of Incorporation of Mid-Missouri provides that
Mid-Missouri may amend, alter, change or repeal provisions of its Articles of
Incorporation in the manner provided by law.
American Federal's Charter provides that, except as provided in Section 5
thereof (relating to capital stock designations), no amendment, addition,
alteration, change or repeal of the Charter may be made unless it is first
proposed by the Board of Directors, then preliminarily approved by the O.T.S.
(which preliminary approval may be granted by the O.T.S. pursuant to regulations
specifying preapproved charter amendments), and thereafter approved by the
stockholders by a majority of the total votes eligible to be cast at a legal
meeting. Any amendment, addition, alteration, change or repeal so acted upon
will be effective upon filing with the O.T.S. in accordance with regulatory
procedures or on such other date as the O.T.S. may specify in its preliminary
approval.
The Missouri Corporate Law and provisions of Mid-Missouri Articles of
Incorporation make it easier for the shareholders of Mid-Missouri to amend the
Articles of Incorporation than it is for the shareholders of American Federal to
amend its Charter. In addition, it may be easier for shareholders of Mid-
Missouri to amend their Articles of Incorporation because, unlike American
Federal, an amendment does not require O.T.S. approval.
VOTING RIGHTS
Under the Missouri Corporate Law, unless otherwise provided in the articles
of incorporation, each outstanding share is entitled to one vote on each matter
submitted to a vote at a meeting of the shareholders. However, the Missouri
Corporate Law provides that, unless the articles of incorporation or bylaws
provide otherwise, each shareholder is entitled to cumulative voting when
electing directors, which means that each shareholder has the right to cast as
many votes in the aggregate equal to the number of votes held by such person
multiplied by the number of directors to be elected at the election, and the
person may cast the whole number of votes for one candidate or distribute them
in any manner he or she desires.
Mid-Missouri Bylaws provide that at all meetings of the shareholders each
share is entitled to one vote on each matter submitted to a vote except that
they provide for cumulative voting with regard to the election of directors.
Holders of shares of American Federal Common are entitled to one vote per
share in all matters to be voted upon by the stockholders generally. In
addition, stockholders of American Federal are entitled to cumulate their votes
in the election of directors; provided, however, that for a period of five years
from the date of conversion of the American Federal from mutual to stock form
(which occurred on January 6,
45
<PAGE>
1993, and will end on January 6, 1998, the "5-Year Post-Conversion Period"),
stockholders are not permitted to cumulate their votes for election of
directors.
Until January 6, 1998, the expiration of the 5-Year Post-Conversion Period
American Federal stockholders are denied cumulative voting which would make it
more difficult for minority stockholders of American Federal to elect one or
more directors than it would be for stockholders of Mid-Missouri.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
The Missouri Corporate Law provides that special meetings of the
shareholders may be called by the board of directors of the corporation or by
any other persons authorized by the articles of incorporation or bylaws of the
corporation. The Bylaws of Mid-Missouri provide that a special meeting of
shareholders may be called by (i) the Chairman of the Board; (ii) the President;
(iii) resolution of Mid-Missouri Board of Directors whenever deemed necessary;
or (iv) the holders of not less than one-fifth of all of the holders by giving
signed written notice fixing the date and time of such meeting. The business
transacted at any such special meeting will be confined to the purpose or
purposes specified in the notice therefor and the matters germane thereto.
American Federal's Bylaws provide that special meetings of the stockholders
of American Federal may be called at any time, for any purpose or purposes,
unless otherwise prescribed by the regulations of the O.T.S., by the Chairman of
the Board, the President or a majority of the Board of Directors, and must be
called by the Chairman of the Board, the President or the Secretary upon the
written request of the holders of not less than 10% of all of the outstanding
capital stock of American Federal entitled to vote at the meeting. Pursuant to
American Federal's By-laws, any action required to be taken at a meeting of the
stockholders, or any other action which may be taken at a meeting of
stockholders, may be taken without a meeting if all of the stockholders entitled
to vote with respect to the subject matter consent in a writing setting forth
the action so taken. However, during the 5-Year Post-Conversion Period, special
meetings of stockholders relating to changes in control of American Federal or
amendments to the Charter may only be called upon the direction of the Board of
Directors.
The Missouri Corporate Law provides that any action required or permitted to
be taken at a meeting of shareholders may be taken without a meeting if a
consent, in writing, setting forth the action taken is signed by the holders of
all of the shares entitled to vote on the subject matter.
Until expiration of the 5-Year Post-Conversion Period, it may be more
difficult for stockholders of American Federal to call a special meeting than
for Mid-Missouri shareholders.
DISSENTERS' RIGHTS
Under the Missouri Corporate Law, a shareholder of a corporation is entitled
to receive payment for the fair value of his or her shares if such shareholder
dissents from a sale or exchange of substantially all of the property and assets
of the corporation or a merger or consolidation to which such corporation is a
party. A shareholder is also entitled to receive payment for the fair value of
his or her shares if such shareholder dissents from according voting rights to
"control shares" in a control share acquisition, as further described herein.
Because Mid-Missouri is not merging directly with American Federal, Mid-Missouri
shareholders will not be entitled to assert such rights in connection with the
Merger.
Under the Federal Law, holders of American Federal Common who (i) dissent
from the Merger, (ii) do not vote in favor of the Merger, and (iii) meet the
procedural requirements, have the right to demand
46
<PAGE>
payment of the fair or appraised value of their stock. Any holders of American
Federal Common electing to make a demand for the fair or appraised value of
their stock must deliver to American Federal, before voting on the Merger, a
writing identifying himself or herself and stating his or her intent thereby to
demand appraisal of and payment for his or her shares. See "THE MERGER" -
Dissenters' Rights".
The rights of shareholders of Mid-Missouri and those of American Federal are
not materially different in these respects.
TAKEOVER STATUTES
The Missouri Corporate Law contains provisions regulating a broad range of
business combinations, such as a merger or consolidation, between a Missouri
corporation which is a "resident domestic corporation", as defined in the
statute, with shares of its stock registered under the federal securities laws
or that makes an election by appropriate provisions in its articles of
incorporation to be subject to the provisions of this statute, and an
"interested shareholder" (which is defined as any owner of 20% or more of the
corporation's stock) for five years after the date on which such shareholder
became an interested shareholder, unless, among other things, the stock
acquisition which caused the person to become an interested shareholder was
approved in advance by the corporation's board of directors. This so-called
"five year freeze" provision is effective even if all the parties should
subsequently decide that they wish to engage in a business combination. The
Missouri Corporate Law also contains a "control share acquisition" provision
which effectively denies voting rights to shares of a Missouri corporation
acquired in control share acquisitions unless a resolution granting such voting
rights is approved at a meeting of shareholders by affirmative majority vote of
(i) all outstanding shares entitled to vote at such meeting voting by class if
required by the terms of such shares; and (ii) all outstanding shares entitled
to vote at such meeting voting by class if required by the terms of such shares,
excluding all interested shares. A control share acquisition is one by which a
purchasing shareholder acquires more than one-fifth, one-third, or a majority,
under various circumstances, of the voting power of the stock of an "issuing
public corporation." An "issuing public corporation" is a Missouri corporation
with: (i) one hundred or more shareholders; (ii) its principal place of
business, principal office or substantial assets in Missouri; and (iii) either
(a) more than 10% of its shareholders are resident in Missouri, (b) more than
10% of its shares are owned by Missouri residents, or (c) 10,000 shareholders
are resident in Missouri. Mid-Missouri has less than one hundred shareholders
and therefore does not meet the statutory definition of an "issuing public
corporation." Finally, if a control share acquisition should be made of a
majority or more of the corporation's voting stock, and those shares are granted
full voting rights, shareholders are granted dissenters' rights.
The Charter of American Federal provides that for during the 5-Year Post-
Conversion Period, no person shall directly or indirectly offer to acquire or
acquire the beneficial ownership of more than ten percent (10%) of any class of
any equity security of American Federal except for (i) a transaction in which
American Federal forms a holding company without a change in the respective
beneficial ownership interests of its stockholders other than pursuant to the
exercise of any dissenter and appraisal rights, (ii) the purchase of shares by
underwriters in connection with a public offering, or (iii) the purchase of
shares by a tax-qualified employee stock benefit plan which is exempt from the
approval requirements under Section 574.3(c)(1)(vi) of the regulations of the
O.T.S. In the event shares are acquired in violation of this prohibition, all
shares beneficially owned by any person in excess of ten percent (10%) will not
be counted as shares entitled to vote and will not be voted by any person or
counted as voting shares in connection with any matter submitted to the
stockholders for a vote.
47
<PAGE>
The differences between the Missouri Corporate Law and the American Federal
Charter, make it more difficult to effect an unsolicited business combination
with Mid-Missouri than it is to effect an unsolicited business combination with
American Federal.
LIABILITY OF DIRECTORS; INDEMNIFICATION
Section 351.355(1) and (2) of the Missouri Corporate Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful, except that, in the case of an action or suit by or in the
right of the corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which the action or
suit was brought determines upon application that such person is fairly and
reasonably entitled to indemnity for proper expenses. Section 351.355 of the
Missouri Corporate Law further provides that, to the extent that a director,
officer, employee or agent of the corporation has been successful in the defense
of any such action, suit or proceeding or any claim, issue or matter therein, he
or she shall be indemnified against expenses, including attorney's fees,
actually and reasonably incurred in connection with such action, suit or
proceeding. Section 351.355 also provides that a Missouri corporation may
provide additional indemnification to any person indemnifiable under subsection
(1) or (2) thereof, provided such additional indemnification is authorized by
the corporation's articles of incorporation or an amendment thereto or by a
shareholder-approved by-law or agreement, and provided further that no person
shall thereby be indemnified against conduct which was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct. Mid-
Missouri's Articles of Incorporation and Bylaws contain these indemnification
provisions.
A Missouri corporation also has the power to purchase and maintain insurance
on behalf of any person against any liability asserted against such a person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of the Missouri
Corporate Law. Mid-Missouri's Bylaws authorize the Corporation to purchase and
maintain insurance on behalf of directors.
Pursuant to the Federal Law, federal savings associations are required to
indemnify its directors, officers and employees against legal and other expenses
incurred in defending lawsuits brought against them by reason of the performance
of their official duties. Indemnification may be made to such person only if
final judgment on the merits is in his favor or, in the case of (i) settlement;
(ii) final judgment against him; or (iii) final judgment in his favor, other
than on the merits, if a majority of the directors of the savings bank
determines that he was acting in good faith within the scope of his employment
or authority as he could reasonably have perceived it under the circumstances
and for a purpose he could have reasonably believed under the circumstances was
in the best interest of the savings bank or its shareholders. If a majority of
the directors of the savings bank concludes that, in connection with an action
any person ultimately may become entitled to indemnification, the directors may
authorize payment of reasonable costs and expenses arising from defense or
settlement of such action.
48
<PAGE>
While the indemnification laws and provisions applicable to Mid-Missouri and
American Federal are different from the perspective of officers and directors of
the respective organizations, such laws and provisions are not materially
different from the perspective of the shareholders thereof.
LIMITATION OF LIABILITY OF DIRECTORS
The Missouri Corporate Law provides that a Missouri corporation may include
any provision in its articles of incorporation that is not inconsistent with the
law, but does not specifically prohibit or allow a provision limiting the
liability of directors in the articles of incorporation of a Missouri
corporation. Beyond the indemnification of directors discussed above, Mid-
Missouri's Bylaws also provide that a director will not be liable for (i)
dividends legally declared, distributions legally made to shareholders, or any
other action taken in reliance in good faith upon financial statements
represented to him to be correct by the Chairman of the Board, the President or
the officer of the corporation in charge of the books of account, or certified
by an accountant to fairly represent the financial condition of the corporation;
or (ii) determining in good faith the amount available for dividends or
distributions by considering the assets to be of their book value.
The Federal Law provides that a Federal corporation may include any
provision in its articles of incorporation which is not inconsistent with the
Federal Law, including any provision which under the Federal Law is required or
permitted to be set forth in the bylaws which the incorporators elect to set
forth in the articles of incorporation for the regulation of the internal
affairs of the corporation. The Federal Miscellaneous Corporation Laws Act
provides that a corporation may limit the liability of its directors by
provision in its articles of incorporation; provided, however, such provision
may not limit the liability of a director to the extent the director is found
liable for (i) breach of his or her duty of loyalty to the company or its
shareholders, (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of the law, (iii) a transaction
from which the director received an improper benefit, or (iv) an act or omission
for which liability is expressly provided for by statute. American Federal's
Charter does not contain such a provision limiting the liability of directors.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
The Missouri Corporate Law provides that in exercising business judgment in
consideration of acquisition proposals, a Missouri corporation's board of
directors may consider the following factors, among others: (i) the
consideration being offered; (ii) the existing political, economic, and other
factors bearing on securities prices generally, or the corporation's securities
in particular; (iii) whether the acquisition proposal may violate any applicable
laws; (iv) social, legal and economic effects on employees, suppliers, customers
and others having similar relationships with the corporation, and the
communities in which the corporation conducts its businesses; (v) the financial
condition and earning prospects of the person making the acquisition proposal;
and (vi) the competence, experience and integrity of the person making the
acquisition proposal.
The Federal Law does not contain provisions comparable to those described
above.
49
<PAGE>
INFORMATION ABOUT MID-MISSOURI
BUSINESS OF MID-MISSOURI
Mid-Missouri was organized in December 1993, as a Missouri corporation.
Mid-Missouri is a bank holding company headquartered in Sullivan, Missouri.
Mid-Missouri's principal offices are located at 318 West Main Street, Sullivan,
Missouri. Mid-Missouri, through Subsidiary Bank, its wholly-owned Missouri
state chartered bank, is primarily engaged in commercial banking and providing
trust services. Mid-Missouri and Subsidiary Bank had, at December 31, 1996,
consolidated total assets of approximately $120.7 million. Subsidiary Bank is
engaged in the general banking business of accepting funds for deposit, making
loans, renting safe deposit boxes and performing such other banking services as
are usual and customary in banks of similar size and character. Subsidiary Bank
offers real estate, commercial and consumer loans. Customers of Subsidiary Bank
are offered regular checking, interest-bearing checking, money market, savings,
certificates of deposit and IRA accounts. Customers of Subsidiary Bank are also
offered the limited trust services of its trust department. The responsibility
for management of Subsidiary Bank remains with the officers and directors
thereof. Mid-Missouri provides Subsidiary Bank with assistance and service in
auditing, record keeping, tax planning, trust operations, new business
development, lending, regulatory compliance and human resources management.
Mid-Missouri/Subsidiary Bank owns the main office facility located at 318
West Main Street, Sullivan, Missouri, the drive-in facility located at Fisher
and Springfield Streets, Sullivan, Missouri, and the full service branch located
at 1 Meramec Plaza, Sullivan, Missouri. Mid-Missouri/Subsidiary Bank do not own
or lease any other materially important physical properties.
Neither Mid-Missouri nor Subsidiary Bank has been or is currently involved
in any bankruptcy, receivership or similar proceedings. Neither Mid-Missouri
nor Subsidiary Bank has engaged in any material reclassifications, mergers
(other than the proposed Merger) or consolidations, or acquired or disposed of
any material amount of assets otherwise than in the ordinary course of business.
There has been no material changes in the method of the conduct of the business
of Mid-Missouri and Subsidiary Bank.
Neither Mid-Missouri nor Subsidiary Bank is involved in any material pending
legal proceedings, other than ordinary routine litigation incidental to their
respective businesses.
The following table indicates the principal occupation or employment for the
past five years, age, other directorships, and the year first elected as a
director of Mid-Missouri with respect to each director of Mid-Missouri.
Information with respect to the business experience of each director of Mid-
Missouri has been furnished by such director or has been obtained from the
records of Mid-Missouri. Each director of Mid-Missouri serves a one-year term
and is elected by the shareholders at each annual meeting. No director of
Mid-Missouri has entered into any arrangement or understanding between him and
any other person pursuant to which he was elected as a director of Mid-Missouri.
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
- ------------------------------------------------------- -----
John W. Waller (76) 1959
Attorney
Chairman of the Board, Mid-Missouri;
Chairman of the Board, American Federal;
Chairman of the Board, Farmers & Merchants Bank
of St. Clair.
50
<PAGE>
Name, Age, Principal Occupation and Other Directorships Since
- ------------------------------------------------------- -----
E. Milt Branum, Jr. (55) 1991
President and CEO, Mid-Missouri;
President and CEO, Subsidiary Bank;
Director, Subsidiary Bank.
Gordian J. Mathias (81) 1949
Vice, President, Mid-Missouri;
Director, Subsidiary Bank.
James E. McIntosh (83) 1966
Investor; Tresurer, Mid-Missouri;
Vice President, Asst. Secretary, Asst. Treasurer,
American Federal;
Director, Subsidary Bank;
Director, American Federal.
Edward Burke (78) 1966
Attorney;
Vice President, Mid-Missouri;
Director, Subsidiary Bank.
Norman Rubenstein (77) 1966
Chairman of the Board, family manufacturing business;
Vice President, Mid-Missouri;
Director, Subsidiary Bank.
Albert Schlueter (58) 1988
Attorney, LaTourette, Schlueter, Ebling & Byme;
Vice President, Mid-Missouri;
Director, Subsidiary Bank.
Edward C. Wallis (61)
Retired Owner, Bourbon Roller Mill (farm feed store); 1988
Vice President, Mid-Missouri;
Director, Subsidiary Bank.
T. Scott Waller (39) 1995
Operations Officer, Farmers & Merchants Bank of St. Clair;
Voce President, Mid-Missouri;
Director, Subsidiary Bank and Farmers & Merchants Bank of St. Clair;
John M. Brummet (75) 1997
Vice President, American Federal;
Director, Subsidiary Bank and American Federal.
51
<PAGE>
The following table sets forth information concerning the remuneration paid or
accrued in 1996, 1995 and 1994 for E. Milt Branum, the President Chief Executive
Officer of Mid-Missouri. None of the other executive officers of Mid-Missouri
received total annual salary and bonuses exceeding One Hundred Thousand Dollars
($100,000) during the fiscal year ending December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
====================================================================================================
ANNUAL LONG TERM ALL
COMPENSATION COMPENSATION OTHER
COMPENSATION
----------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS
----------------
($) ($) Securities ($)
Underlying Options
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E. MILT BRANUM (55) 1996 $98,000 $15,194 N/A $-0-
President, Chief Executive Officer and
Director of Mid-Missouri and Subsidiary 1995 90,600 13,591 N/A $-0-
Bank
1994 86,000 4,270 N/A $-0-
- ----------------------------------------------------------------------------------------------------
</TABLE>
Mid-Missouri does not maintain stock option, stock appreciation right, long-term
incentive deferred compensation or similar plans and no stock options, stock
appreciation rights, long-term incentive awards or similar benefits are issued
or granted by Mid-Missouri to its directors, executive officers or employees.
Neither Mid-Missouri nor Subsidiary Bank has an employment agreement with any of
their respective executive officers or other employees.
Mid-Missouri and Subsidiary Bank have had and expect to have in the future,
loans and other banking transactions in the ordinary course of business with a
number of its officers and directors and their associates. Such transactions
were made and will be made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and did not and will not
involve more than normal risk of collectibility or present other unfavorable
features.
Directors of Mid-Missouri receive no fees for their service on the board of
directors of Mid-Missouri. Directors of Subsidiary Bank receive $350.000 per
regular meeting, with a limit of 12 such meetings annually. Board committee
members receive $100.00 per committee meeting, other than John W. Waller and E.
Milt Branum, Jr. who receive no compensation for committee meeting service.
There are no other arrangements pursuant to which any director of
Mid-Missouri/Subsidiary Bank was compensated during fiscal year 1996 for service
as such .
Neither Mid-Missouri nor Subsidiary Bank has a Compensation Committee
responsible for establishing compensation. Salaries and bonuses for executive
officers (other than E. Milt Branum, Jr.) and employees of Mid-Missouri and
Subsidiary Bank are determined by the action of the respective boards of
directors of such entities at large upon recommendation of Mr. E. Milt Branum,
Jr., the President and Chief Executive Officer of each such entity. Mr. Branum's
recommendations in turn are based on (i) the report of an independent personnel
review firm engaged by Mid-Missouri and Subsidiary Bank annually to evaluate
salary and bonus levels of all executive officers and employees, (ii) experience
levels of incumbents and present facts and circumstances with respect to each,
and (iii) competitive compensation date. This information is available to and
discussed with the other members of the boards of directors of Mid-Missouri and
Subsidiary Bank as such boards determine salaries and bonuses.
The salary and bonus paid annually to E. Milt Branum, President and Chief
Executive Officer of Mid-Missouri and Subsidiary Bank, is determined by the
other members of the respective boards of directors of these entities. Mr.
Branum does not participate in such deliberations. Mr. Branum's compensation for
fiscal year 1996 was increased due to the positive performance of Mid-Missouri
and Subsidiary Bank during such period.
Mid-Missouri has a non-contributory defined pension plan covering all employees
who meet the eligibility requirements. To be eligible, an employee must be 21
years of age and have completed one year of continuous service. The plan
provides benefits based on the career earnings of each participant. Mid-
Missouri's funding policy is to make the minimum annual contribution that is
required by applicable regulations, plus such amounts as Mid-Missouri may
determine to be appropriate from time to time. See Note 10 to the Consolidated
Financial Statements of Mid-Missouri set forth herein under the heading
"FINANCIAL STATEMENTS FOR MID-MISSOURI AND AMERICAN FEDERAL" for more particular
financial information regarding the pension plan maintained by Mid-Missouri.
During the previous calendar year, Subsidiary Bank has had commercial
transactions in the ordinary course of business with companies with which
certain of Mid-Missouri's directors are affiliated. No significant business or
personal relationships with the subsidiaries of Mid-Missouri existed by virtue
of a person's position in Mid-Missouri or in Subsidiary Bank, or ownership
interest in Mid-Missouri.
52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MID-MISSOURI
The following discussion and analysis is intended to review the significant
factors affecting the financial condition and results of operations of Mid-
Missouri for the three (3) year period ended December 31, 1996. It provides
shareholders with a more comprehensive review than is otherwise apparent from
the financial statements alone. Reference should be made to those statements
and to the selected financial data presented elsewhere in this Proxy
Statement/Prospectus for an understanding of the following review.
FOR THE THREE (3) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------
FINANCIAL CONDITION
Mid-Missouri experienced substantial growth with total assets increasing
$17,871,000 or 17.4% from $102,871,000 on December 31, 1995 to $120,742,000 on
December 31, 1996. Mid-Missouri realized a significant increase in deposits and
securities sold under agreements to repurchase due to special marketing and
promotion designed to provide funds for growth. In addition, Mid-Missouri
increased federal funds purchased and borrowings with the Federal Home Loan Bank
to meet loan demand and short term liquidity needs.
Mid-Missouri had minimal growth with total assets increasing only $968,000
from $101,903,000 on December 31, 1994 to $102,871,000 on December 31, 1995.
Mid-Missouri realized a significant decrease in deposits due to competitive
factors and a shift of funds to securities sold under agreements to repurchase.
In addition, a shift in assets occurred between federal funds sold and loans as
Mid-Missouri funded significant loan growth.
LOANS
The loan portfolio constitutes the major earning asset of most banks and
typically offers the best alternative for obtaining the maximum interest spread
above the cost of funds.
Loans increased $11,215,000 or 18.1% from $61,906,000 on December 31, 1995, to
$73,121,000 on December 31, 1996. The increase was primarily related to real
estate loans, which increased $8,970,000 in 1996, and was supplemented by a
$2,895,000 increase in commercial loans. The growth in loans reflects increased
marketing efforts in communities adjacent to Sullivan, Missouri (i.e., within 20
miles). Additionally, the allowance for possible loan losses decreased $88,000
from $600,000 at December 31, 1995 to $512,000 at December 31, 1995, even though
loans increased $11,215,000. This decrease reflects the continued strong loan
quality and low delinquencies experienced by Mid-Missouri.
Loans increased $4,625,000 or 8.1% from $57,281,000 on December 31, 1994, to
$61,906,000 on December 31, 1995. The increase was primarily related to real
estate loans, which increased $6,650,000 in 1995 and was offset by a $2,799,000
decrease in commercial loans. Additionally, the allowance for loan losses
increased only $1,000 from $599,000 at December 31, 1994 to $600,000 at December
31, 1995, even though loans increased $4,625,000. This small increase reflects
the continued strong loan quality and low delinquencies experienced by Mid-
Missouri.
The following table presents loans outstanding at December 31, 1996 and 1995,
as well as a maturity schedule of loans for December 31, 1996.
53
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $10,270 14.05% $ 7,375 11.91%
Real Estate-
Construction 2,526 3.45 1,720 2.78
Real Estate-mortgage 53,625 73.34 45,461 73.44
Installment loans to
individuals 6,700 9.16 7,350 11.87
------- ------ ------- ------
Total loans $73,121 100.00% $61,906 100.00%
======= ====== ======= ======
<CAPTION>
1996
AMOUNT DUE
----------
1 YEAR OR LESS GREATER THAN 1 YEAR THROUGH 5 AFTER 5 YEARS
----------------- ------------------------------- -----------------
FIXED VARIABLE FIXED VARIABLE FIXED VARIABLE
------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 4,354 $ 5,102 $ 1,034 $ - $ 11 $ -
Real Estate $16,652 $23,495 $11,848 $2,218 $1,977 $ -
Consumer $ 3,137 $ 229 $ 3,054 $ - $ 10 $ -
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan losses provides a reserve against which loan
losses are charged as those losses become evident. Management determines the
appropriate level of the allowance for loan losses on a quarterly basis. These
analyses take into consideration management's evaluation of the loan portfolio,
as well as prevailing and anticipated economic conditions and historical losses
by loan category.
Management's quarterly analysis of the allowance for loan losses specifically
considers past due loans and loans classified as nonaccrual, watch list,
substandard, doubtful and loss. In evaluating the provision for 1996,
management specifically considered the characteristics of the substantial loan
growth, nonaccrual loans, delinquent loans and other classifications of loans.
Important criteria considered included (a) the majority of the loan growth
related to 1- to 4-family residential mortgages which have historically had very
low charge-off rates, (b) substantially all of the nonaccrual balance was
adequately collateralized and did not relate to growth loans, (c) a substantial
portion of the commercial loan growth related to customers with known credit
quality, (d) overall loan delinquencies were down, and (e) there have been no
changes in loan underwriting policies. After considering these criteria and
applying Mid-Missouri's loan loss reserve methodology, management determined
that no provision for loan losses was necessary for 1996. Following are tables
setting forth the activity for loan losses and the allocation of the allowance
for possible loan losses, along with certain ratios for non-performing loans and
total loans in 1996 and 1995.
54
<PAGE>
<TABLE>
<CAPTION>
ALLOWANCES FOR POSSIBLE LOAN LOSSES
1996 1995
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning $ 600 $ 599
Loans charged off:
Commercial & financial 16 -
Residential real estate - -
Consumer 121 55
------- -------
Total charge-offs 137 55
Recoveries:
Commercial & financial (7) (11)
Residential real estate (12) -
Consumer (30) (45)
------- -------
Total recoveries (49) (56)
Net loans charged off 88 (1)
Provision for possible loans lossses
charged against income - -
------- -------
Balance at end of peforming loans $ 512 $ 600
======= =======
Allowance total loan 0.70% 0.97%
Allowance/non-performing loans 148.84% 161.73%
Net charge-offs/Average loans .13% -
The following table sets forth the allocation of the allowance for loan losses
for the indicated categories of loans.
<CAPTION>
1996 1995
----- ----
PERCENT OF PERCENT OF
LOANS LOANS
RESERVE IN EACH RESERVE IN EACH
BALANCE CATEGORY BALANCE CATEGORY
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Commercial, financial
and agricult $172 14.05% $ 223 11.91%
Real Estate-
Construction 13 3.45 9 2.78
Real Estate-mortgage 268 73.34 227 73.44
Installment loans
individuals 59 9.16 141 11.87
Unallocated - 00.00 - 00.00
------- -------
Total loans $512 100.00% $ 600 100.00%
======= ========== ======= ==========
</TABLE>
55
<PAGE>
RISK ELEMENTS IN A LOAN PORTFOLIO; INTEREST RECOGNITION
Risk elements in a loan portfolio includes loans accounted for on a non-
accrual basis, accruing loans that are contractually past due ninety days or
more as to interest or principal payments, troubled debt restructurings, loans
where there are serious doubts as to the ability of the borrower to comply with
the present loan repayment terms, other real estate and significant industry
concentrations (such as real estate, energy or agricultural loans).
Non-performing assets are defined as loans delinquent 90 or more days, non-
accrual loans, restructured loans, and foreclosed assets. Such assets do not
necessarily represent future losses to Mid-Missouri since underlying collateral
can be sold, and the financial condition of the borrowers may improve.
Mid-Missouri's policy is to discontinue accruing interest on loans when
principal or interest is due and remains unpaid for 90 days or more, unless the
loan is well secured and in the process of collection. The Subsidiary Bank
would have recognized additional interest income of approximately $14,000 and
$5,000, respectively, if contractual interest on non-accrual loans had been
recognized.
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans $ 159 $ 55
Loans past due 90 days or more $ 185 $ 316
Total non-performing loans $ 344 $ 371
Foreclosed loans $ - $ 2
Total non-performing assets $ 344 $ 373
</TABLE>
INVESTMENTS
The Subsidiary Bank's holdings of short-term investments and scheduled
maturities of investment securities serve as a source of liquidity to meet
depositor and borrower fund requirements.
Investments in available-for-sale securities increased $11,876,000, or 102.2%,
from $11,622,000 on December 31, 1995 to $23,498,000 on December 31, 1996. Mid-
Missouri's available-for-sale investments in U.S. Treasury and Agency securities
increased $6,335,000 in 1996, while also adding $5,960,000 in state and
political obligations. Investments in held-to-maturity investments decreased
$5,834,000, principally in investments in U.S. government agency securities.
The decrease in held-to-maturity investments resulted from maturities which were
either reinvested in loans or investments classified as available-for-sale.
Excess deposits not used to fund loan growth were invested in available-for-sale
securities as Mid-Missouri provided more flexibility and liquidity to fund
future growth and expansion.
Investments in available-for-sale securities decreased $877,000, or 7.0%, from
$12,499,000 on December 31, 1994 to $11,622,000 on December 31, 1995. Mid-
Missouri's available-for-sale investments in U.S. Treasury and Agency securities
decreased $3,655,000 in 1995, which was offset by a $2,779,000 increase in Mid-
Missouri's available-for-sale investments in mortgage-backed securities. The
investments were liquidated to meet loan demand and fund declines in saving
deposits, NOW and money market deposits. Federal funds sold were also
liquidated to meet loan demand.
56
<PAGE>
The following table presents the composition of investment securities
allocated between held-to-maturity and available-for-sale. Weighted average
yields by investment type are also presented for December 31,1996.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ---------
CARRYING CARRYING
AMOUNT YIELD AMOUNT
------------ --------- --------
<S> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury $ 2,960 5.07% $ 3,992
U.S. Government agencies and corporations 3,595 5.93% 7,668
State and political subdivisions 5,474 5.42% 5,454
Mortgage-backed securities 4,173 5.47% 4,923
------- -------
Total investments held to maturity $16,202 5.48% $22,037
======= =======
AVAILABLE FOR SALE:
U.S. Treasury $ 2,239 5.90% $ 3,625
U.S. Government agencies and corporations 10,851 6.68% 3,130
State and political subdivisions 5,960 5.01% -
Mortgage-backed securities 4,366 6.20% 4,787
Other investments 82 0.00% 80
------- -------
Total investments available for sale $23,498 6.06% $11,622
======= =======
The following table shows the maturities and yields of investment securities as
of December 31, 1996.
<CAPTION>
APPROXIMATE
AMORTIZE FAIR
COST VALUE YIELD
------- ----- ------
<S> <C> <C> <C>
In one year or less $ 4,001 $ 4,010 5.68%
After one year through five years 15,707 15,847 6.27%
After five through ten years 5,297 5,289 5.53%
After ten years 6,001 5,990 5.48%
Not due on a single date 8,666 8,774 5.84%
------- -------
Total $39,672 $39,910 5.87%
======= ======= ======
</TABLE>
57
<PAGE>
DEPOSITS
The deposit base provides the major source for interest earning assets.
Deposits increased $9,287,000 or 10.7%, from $86,468,000 on December 31, 1995 to
$95,755,000 on December 31, 1996. The increase resulted from a $11,471,000
increase in time deposits, which was offset by a $1,928,000 decrease in savings,
NOW and money market deposits as customers shifted funds to higher yielding
deposit products. The deposit increase was also motivated by increased
marketing efforts in Sullivan and surrounding communities. Further funding was
provided by a $3,934,000 increase in securities sold under agreements to
repurchase as several large deposit customers opened repurchase agreement
accounts. Also, federal funds purchased and other borrowings increased
$4,100,000 as Mid-Missouri used Federal Home Loan Bank borrowings to fund
certain loan originations and used federal funds purchased to fund short term
liquidity needs caused by Mid-Missouri's rapid growth.
Deposits decreased $2,311,000 or 2.6%, from $88,779,000 on December 31, 1994
to $86,468,000 on December 31, 1995. The decrease resulted from a $6,672,000
decrease in savings, NOW and money market deposits, which was offset by a
$4,673,000 increase in other time deposits as customers shifted funds to higher
yielding deposit products. This was motivated to some extent by special
promotions in time deposit products. Further funding was provided by a
$1,942,000 increase in securities sold under agreements to repurchase as several
large deposit customers opened accounts under repurchase agreements.
Maturity of time deposits $100,000 and greater at December 31, 1996 is
illustrated below:
<TABLE>
<CAPTION>
MATURITY OF TIME DEPOSIT MORE THAN $100,000
-------------------------------------------
PERCENT
1996 OF TOTAL
---- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Three months or less $ 5,529 49.78%
Over three through six months 4,333 39.01
Over six months through twelve 1,245 11.21
Over twelve months 0 0.00
------- ------
Total $11,107 100.00%
======= ======
</TABLE>
RESULTS OF OPERATIONS
1996 Compared to 1995.
Net income for 1996 amounted to $1,113,000 or $5.57 per share. This
represents an increase of $54,000 or $.27 per share over 1995 net income of
$1,059,000 or $5.30 per share. The increase resulted from increases in net
interest income which were partially offset by increases in operating expenses.
The net interest income increased $116,000 or 2.8% in 1996. This resulted
from a significant increase in income from loans which was offset by a higher
cost of deposits. The net interest margin declined from 4.18% to 4.08%.
Interest income increased $427,000 or 5.5% from $7,736,000 in 1995 to $8,163,000
in 1996. Interest expense increased $311,000 or 8.6% in 1996 from a balance of
$3,604,000 in 1995 to $3,915,000 in 1996. Interest expense on deposits
increased $107,000, while the remaining increase in interest expense of $204,000
was related to repurchase
58
<PAGE>
agreements and other borrowings. Also, in 1996, non-interest expenses increased
$89,000 as virtually all categories experienced increases due to growth and
inflation.
1995 Compared to 1994.
Net income for 1995 amounted to $1,059,000 or $5.30 per share. This
represents an increase of $392,000 or $1.97 per share over 1994 net income of
$667,000 or $3.33 per share. The increase resulted from increases in net
interest income and non-interest income which were partially offset by increases
in operating expenses. Also, a large loss realized on the sale of investment
securities in 1994 did not reoccur in 1995.
Net interest income increased $224,000 or 5.7% in 1995. This resulted
from a significant increase in loans which was offset by a higher cost of
deposits. Net interest margin declined from 4.51% to 4.18%. Interest income
increased $1,174,000 or 17.9% from $6,562,000 in 1994 to $7,736,000 in
1995. Interest expense increased $949,000 or 35.7% in 1995 from a balance
of $2,655,000 in 1994 to $3,604,000 in 1995. Interest expense on deposits
increased $854,000, which accounted for 90.0% of the interest expense
increase. Gain on investment securities transactions amounted to $10,000 in
1995, which represents an increase of $428,000 over the $418,000 loss on
investment securities transactions in 1994. Also, in 1995, non-interest
expenses increased $333,000 primarily due to increased salaries and
employee benefits.
The following tables demonstrate the changes in the components of
interest income and interest expense.
59
<PAGE>
<TABLE>
<CAPTION>
1996 1995
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE
--------- --------- -------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Loans $ 67,968 61.49% $6,030 8.87% $ 59,408 56.62% $5,339 8.99%
Taxable securities 28,745 26.01 1,730 6.02% 33,507 31.93% 2,056 6.14%
Nontaxable securities 7,106 6.43 379 5.33% 4,527 4.31% 261 5.77%
Federal funds sold 420 0.38 24 5.71% 1,348 1.28% 80 5.93%
-------- ------- ------ ------- ------ ------
Total interest earning assets $104,239 94.30 $8,163 7.83% $ 98,790 94.15% $7,736 7.83%
====== ======
Non-interest bearing assets
Cash & DFB $ 3,159 2.86 $ 2,948 2.81
Premises & Equipment 1,983 1.79 1,885 1.80
Other Assets 1,831 1.66 1,968 1.88
Reserve for loan losses (678) (0.61) (664) (0.63)
-------- ------- ------- ------
Total Assets $110,534 100.00% $104,927 100.00%
======== ======= ======== =======
Interest-bearing liabilities
NOW accounts $ 21,352 19.32% $ 484 2.27% $ 22,957 21.88% $ 556 2.42%
Savings accounts 11,849 10.72 302 2.55% 13,489 12.86 401 2.97%
Money market accounts 1,843 1.67 63 3.42% 2,024 1.93 62 3.06%
Time deposits 45,449 41.12 2,548 5.61% 41,498 39.55 2,271 5.47%
Short-term borrowings 10,468 9.47 518 4.95% 6,230 5.94 314 5.04%
-------- ------- ------ ------- ------ ------
Total interest-bearing liabilities 90,961 82.29 $3,915 4.30% 86,198 82.15 $3,604 4.18%
====== ======
Non-interest bearing liabilities
Demand deposits 9,893 8.95 9,849 9.39
Other liabilities 522 0.47 508 0.48
-------- ------- -------- -------
Total liabilities 101,376 91.71 96,555 92.02
Stockholders' equity 9,158 8.29 8,372 7.98
-------- ------- -------- -------
Total liabilities and
Stockholders' equity $110,534 100.00% $104,927 100.00%
======== ======= ======== =======
Net interest income $4,248 $4,132
Interest rate spread 3.53% 3.65%
Net interest margin 4.08% 4.18%
</TABLE>
60
<PAGE>
Net interest income is affected by the volume and rate of both interest-
earning assets and interest bearing liabilities. The following table
illustrates the dollar effect and rate changes for the different categories of
interest-earning assets and interest bearing liabilities and the resultant
change in interest income and interest expense. Non-performing loans are
included in the following table.
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 COMPARED TO
1995 INCREASE 1994 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
------------------ ------------------
VOLUME RATE RATE/VOL VOLUME RATE RATE/VOL
------ ---- -------- -------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans $ 769 $ (68) $ (10) $ 724 $ 350 $ 60
Taxable Securities (292) (39) 6 2 (32) -
Nontaxable Securities 149 (20) (11) 46 (1) -
Federal funds sold (55) (3) 2 8 15 2
----- ------ ------ ------ ------ ---
Total interest income 571 (130) (13) 780 332 62
INTEREST PAID ON:
NOW accounts $ (39) $ (36) $ 2 $ 10 $ (20) $ -
Savings accounts (49) (57) 7 (41) (4) -
Money market accounts (6) 7 (1) 3 5 -
Time deposits 216 55 5 417 370 113
Short-term borrowings 214 (6) (4) 17 73 6
----- ------ ------ ------ ------ ------
Total interest expense 336 (37) 9 406 424 119
Net interest income $ 235 $ (93) $ (22) $ 374 $ (92) $(57)
===== ====== ====== ====== ====== ======
Net income as a percent of average assets and average equity for the last two
years was:
<CAPTION>
RETURN ON AVERAGE ASSETS RETURN ON AVERAGE EQUITY
------------------------ ------------------------
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income 1.03% 1.01% 12.23% 12.66%
Dividends declared by Mid-Missouri Holding Company for the past two years were:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend Payout Ratio 35.93% 28.32%
Equity to Asset Ratio 7.93% 8.57%
</TABLE>
CAPITAL
During 1996 Mid-Missouri increased retained earnings $713,000 through the
retention of earnings. The change in unrealized depreciation of investments
held as available-for-sale also decreased capital by $13,000. Capital as a
percent of total assets was 7.93% at December 31, 1996 compared to 8.57% at
December 31, 1995. Book value per share was $47.86 at December 31, 1996
compared to $44.37 at December 31, 1995.
61
<PAGE>
During 1995, Subsidiary Bank increased retained earnings $759,000 through the
retention of earnings. The change in unrealized depreciation of investments
held as available-for-sale increased capital by $245,000. Capital as a percent
of total assets was 8.57% at December 31, 1995 compared to 7.78% at December 31,
1994. Book value per share was $44.37 at December 31, 1995 compared to $39.35
at December 31, 1994.
LIQUIDITY
The central objectives of liquidity management are to ensure that Subsidiary
Bank has ready access to sufficient funds to meet maturing obligations and
existing commitments to enable Subsidiary Bank to withstand fluctuations in
deposit levels and to provide for customers' credit needs. Liquidity management
is viewed from both asset and liability perspectives. The basic concept is the
amount of assets maturing within certain time frames should relate to the amount
of liabilities maturing within the same period. This procedure enables
Subsidiary Bank to monitor its liquidity requirements, thereby facilitating the
meeting of obligations as they mature and, at the same time, allowing Subsidiary
Bank to respond to shifts in interest rates. Management believes that during
the current period of economic uncertainty and interest rate volatility, this
flexibility is imperative in maintaining liquidity and acceptable profit
margins. Management has historically maintained an adequate liquidity position
and will endeavor to do so in the future.
The following table provides information on short-term borrowing which the
bank uses to fund short-term liquidity needs.
<TABLE>
<CAPTION>
MAXIMUM
END OF YEAR OUTSTANDING
OUTSTANDING WEIGHTED AT ANY AVERAGE WEIGHTED
AT END OF YEAR AVERAGE RATE MONTH END OUTSTANDING AVERAGE RATE
-------------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1996
CATEGORY:
Federal Home Loan Bank $1,000,000 6.07% $5,000,000 $ 969,399 6.01%
Federal Funds Purchased $3,150,000 5.72% $3,150,000 $ 642,345 5.72%
Securities Sold under Repurchase
Plan $3,206,548 5.10% $3,206,548 $3,133,781 5.10%
Sweep Accounts $7,553,838 4.60% $7,553,838 $5,722,480 4.60%
1995
CATEGORY:
Federal Home Loan Bank $ - N/A $2,300,000 $ 69,126 5.72%
Federal Funds Purchased $ 50,000 6.20% $2,300,000 $ 268,288 6.20%
Securities Sold under Repurchase
Plan $3,139,257 5.25% $3,427,075 $3,253,685 5.25%
Sweep Accounts $3,687,120 4.50% $4,072,230 $2,707,927 4.54%
</TABLE>
Mid-Missouri actively manages its assets and liabilities through coordinating
the levels of interest rate sensitive assets and liabilities to minimize changes
in net interest income despite changes in market interest rates. Mid-Missouri
defines interest rate sensitive assets and liabilities as any instrument that
can be repriced within 180 days, either because the instrument will mature
during the period or because it carries a variable interest rate. Changes in
net interest income occur when interest rates on loans and investments change in
a different time period from that of changes in interest rates on liabilities,
or when the mix and volume of interest-earning assets and interest-bearing
liabilities change. The interest rate sensitivity gap represents the dollar
amount of difference between rate sensitive assets and rate sensitive
liabilities within a given time period ("GAP"). A GAP ratio is determined by
dividing rate sensitive assets by rate sensitive liabilities. A ratio of 1.0
indicates a matched position, in which case the effect on net interest income
due to interest rate movement would be minimized.
Mid-Missouri's strategy with respect to asset-liability management is to
maximize net interest income while limiting Mid-Missouri's exposure to risks
associated with volatile interest rates. As a general rule, Mid-Missouri's
policy is to maintain a GAP position as a percent of total assets within a range
from +20% to -20% in the 12 month time period.
62
<PAGE>
At December 31, 1996, Mid-Missouri was liability sensitive (rate sensitive
liabilities in excess of rate sensitive assets) for the next 12 months, based on
contractual maturities and asset payment assumptions. This means that Mid-
Missouri's assets reprice more slowly than its deposits. In a declining
interest rate environment, the interest cost of Mid-Missouri's deposits and
other liabilities may be expected to fall faster than the interest received on
its earning assets, thus increasing the net interest spread. In an increasing
interest rate environment just the opposite may be expected to occur, in which
case the interest cost for deposits and other liabilities would increase faster
than interest received on earning assets, therefore decreasing the net interest
spread.
The following table provides information on the interest rate sensitivity of
Subsidiary Bank.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
(DOLLARS IN THOUSANDS)
OVER THREE
THREE THROUGH OVER ONE
MONTHS TWELVE THROUGH FIVE OVER FIVE
OR LESS MONTHS YEARS YEARS TOTAL
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Investment securities $ 775 $ 3,226 $15,813 $19,886 $ 39,700
Federal Funds Sold
Loans 21,591 31,378 18,154 1,998 73,121
Mortgage loans held for sale - - - - -
--------------------------------------------------------------
Total interest rate sensitive assets $ 22,366 $ 34,604 $33,967 $21,884 $112,821
==============================================================
INTEREST-BEARING LIABILITIES
Interest-bearing demand deposits $ 4,627 $ 4,627 $ 9,254 $ 4,627 $ 23,136
Savings deposits 2,232 2,232 2,232 4,464 11,159
Time deposits 20,385 23,636 7,923 51,944
Short-term debt 13,911 13,911
Long-term debt 1,000 1,000
--------------------------------------------------------------
Total rate sensitive liabilities $ 41,155 $ 30,495 $20,409 $ 9,091 $101,150
==============================================================
INTEREST SENSITIVITY GAP
Periodic (18,789) 4,109 13,558 12,793 11,671
Cumulative (18,789) (14,680) (1,122) 11,671
==============================================================
Cumulative GAP to total assets -15.56% -12.16% -0.93% 9.67%
RATIO OF INTEREST-SENSITIVE ASSETS TO
INTEREST-SENSITIVE LIABILITIES
Periodic 54.35% 113.47% 166.43% N/A
Cumulative 54.35% 79.51% 98.78% 111.54%
</TABLE>
63
<PAGE>
EFFECTS IN INFLATION
Inflation continues to affect Mid-Missouri as it does other businesses.
Overhead costs for personnel, occupancy, and equipment tend to track inflation
closely. The ability of Mid-Missouri to offset the effects of inflation on its
operations must come from prudent management of its asset/liability mix, expense
control, and realistic pricing of services.
64
<PAGE>
INFORMATION ABOUT AMERICAN FEDERAL
BUSINESS OF AMERICAN FEDERAL
American Federal was organized in 1962 as a federally chartered mutual savings
association. In 1993 American Federal was converted to a stock company.
American Federal accepts deposits and makes short term loans to individuals to
acquire, improve or refinance 1-to-4 family residential dwellings and unimproved
land loans. Most loans are made to borrowers located in Franklin County,
Missouri particularly in the vicinity of Sullivan, Missouri.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF AMERICAN FEDERAL
The following discussion and analysis is intended to review the significant
factors affecting the financial condition and results of operations of American
Federal for the three (3) year period ended December 31, 1996. It provides
shareholders with a more comprehensive review than is otherwise apparent from
the financial statements alone. Reference should be made to those statements
and to the selected financial data presented elsewhere in this Prospectus for an
understanding of the following review.
FOR THE THREE (3) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------
FINANCIAL CONDITION
American Federal experienced a minimal decrease in total assets as they
decreased $395,000 from $19,317,000 on December 31, 1995 to $18,922,000 on
December 31, 1996. Even with a minimal decline in size, American Federal
experienced a significant increase in loan demand which was funded by maturities
of investment securities.
In 1995, American Federal had minimal growth with total assets increasing only
$238,000 from $19,079,000 on December 31, 1994 to $19,317,000 on December 31,
1995. American Federal also realized minimal loan and deposit growth due to
competitive factors. A shift in assets occurred between interest-bearing
certificates in other financial institutions and held-to-maturity securities as
the certificates matured and the proceeds were reinvested in higher-yielding
U.S. government agencies.
LOANS
The loan portfolio constitutes the largest earning asset of most banks and
typically offers the best alternative for obtaining the maximum interest spread
above the cost of funds.
Net loans increased $691,000 or 9.7% from $7,140,000 on December 31, 1995, to
$7,831,000 on December 31, 1996. The increase was primarily related to real
estate mortgage loans as the real estate market remained strong due to a low
interest rate environment. Additionally, the allowance for possible loan losses
remained the same as American Federal continued to experience strong asset
quality and low delinquency rates.
In 1995, loans remain constant with the prior year as new loans were offset by
the reduction of existing loans due to payoffs or refinancing with outside
competitors. The allowance for loan losses remained the same as American
Federal continued to experience strong loan quality and low delinquencies.
The following table presents gross loans outstanding at December 31,
1996 and 1995. As well as a maturity schedule of loans for December 31,
1996.
65
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $ - 0.00% $ - 0.00%
Real Estate-
Construction - 0.00 - 0.00
Real Estate-mortgage 7,888 98.64 7,200 98.51
Installment loans to
individuals 109 1.36 109 1.49
--- ---- --- ----
Gross loans 7,997 100.00% 7,309 100.00%
====== ======
Less: Allowance for
loan losses (50) (50)
Undisbursed loans (44) (54)
Deferred loan fees (72) (65)
------ ------
Net Loans $7,831 $7,140
====== ======
<CAPTION>
1996
----
AMOUNT DUE
----------
1 YEAR OR LESS GREATER THAN 1 YEAR THROUGH 5 AFTER 5 YEARS
-------------- ----------------------------- -------------
<S> <C> <C> <C>
1-4 family residential
mortgages 1,336 6,492 60
Loans secured by
deposits 47 62
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan loses provides a reserve against which loan
losses are charged as those losses become evident. Management determines the
appropriate level of the allowance for loan losses on a quarterly basis. These
analysis take into consideration management's evaluation of the loan portfolio,
as well as prevailing and anticipated economic conditions and historical losses
by loan category.
Following are tables setting forth the activity for loan losses and the
allocation of the allowance for possible loan losses, along with certain ratios
for non-performing loans and total loans in 1996 and 1995.
66
<PAGE>
<TABLE>
<CAPTION>
ALLOWANCES FOR POSSIBLE LOAN LOSSES
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period $50 $50
Loans charged off:
Commercial & financial 0 0
Residential real estate 0 0
Consumer 0 0
--- ---
Total charge-offs 0 0
Recoveries:
Commercial & financial 0 0
Residential real estate 0 0
Consumer 0 0
--- ---
Total recoveries 0 0
Net loans charged off 0 0
Provision for possible loan losses
charged against income 0 0
--- ---
Balance at end of period $50 $50
=== ===
Allowance/total loans 0.63% 0.68%
Allowance/non-performing loans 156.25% 60.24%
Net charge-offs/average loans - -
The following table sets forth the allocation of the allowance for loan losses
for the indicated categories of loans.
<CAPTION>
1996 1995
---- ----
PERCENT OF PERCENT OF
LOANS LOANS
RESERVE IN EACH RESERVE IN EACH
BALANCE CATEGORY BALANCE CATEGORY
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $ - 0.00% $ - 0.00%
Real Estate-
Construction - 0.00 - 0.00
Real Estate-mortgage - 98.64 - 98.51
Installment loans to
individuals - 1.36 - 1.49
Unallocated 50 0.00% 50 0.00%
--- ------ ----- ------
Total loans $50 100.00% $ 50 100.00%
=== ====== ===== ======
</TABLE>
67
<PAGE>
RISK ELEMENTS IN A LOAN PORTFOLIO; INTEREST RECOGNITION
Risk elements in a loan portfolio includes loans accounted for on a non-
accrual basis, accruing loans that are contractually past due ninety days or
more as to interest or principal payments, troubled debt restructurings, loans
where there are serious doubts as to the ability of the borrower to comply with
the present loan repayment tiers, other real estate and significant industry
concentrations (such as real estate, energy or agricultural loans).
Non-performing assets are defined as loans delinquent 90 or more days, non-
accrual loans, restructured loans, and foreclosed assets. Such assets do not
necessarily represent future losses to American Federal since underlying
collateral can be sold, and the financial condition of the borrowers may
improve. The following table sets forth the detail of non-performing assets.
American Federal Savings & Loan's policy is to discontinue accruing interest
on loans when principal or interest is due and remains unpaid for 90 days or
more, unless the loan is well secured and in the process of collection.
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans $ 0 $ 0
Loans past due 90 days or more 32 83
----- -----
Total non-performing loans 32 83
----- -----
Foreclosed assets 0 0
----- -----
Total non-performing assets $ 32 $ 83
===== =====
</TABLE>
INVESTMENTS
American Federal's holdings of short-term investments and scheduled maturities
of investment securities serve as a source of liquidity to meet depositor and
borrower fund requirements.
Overall, investments decreased $1,418,000 or 13.4% from $10,620,000 on
December 31, 1995 to $9,202,000 on December 31, 1996. American Federal's
investment in U.S. government Treasury and Agency Securities designated as held-
to-maturity decreased dramatically as American Federal funded its loan growth
and increased its investment in mortgage-backed securities.
Investment in held-to-maturity securities, principally U.S. government
agencies, increased $689,000, or 7.1%, from $9,772,000 on December 31, 1994 to
$10,461,000 on December 31, 1995. The increase was funded by interest-bearing
certificates in other financial institutions which decreased $685,000 in 1995.
The change in investment strategy was caused by the current interest rate
environment which offered higher-yielding investment opportunities in the U.S.
government agencies.
68
<PAGE>
The following table presents the composition of investment securities
allocated between held-to-maturity and available-for-sale. Weighted average
yields by investment type are also presented for December 31,1996.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
AMOUNT YIELD AMOUNT
------ ------ -------
<S> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury $ 395 5.87% $ 894
U.S. Government agencies and corporations 3,766 6.59% 5,042
State and political subdivisions 437 5.87% 539
Mortgage-backed securities 4,386 6.75% 3,986
------ -------
Total investments held to maturity $8,984 6.68% $10,461
====== =======
AVAILABLE FOR SALE:
U.S. Treasury $ - 0.00% $ -
U.S. Government agencies and corporations - 0.00% -
State and political subdivisions - 0.00% -
Mortgage-backed securities - 0.00% -
Other investments 218 0.00% 159
------ -------
Total investments available for sale $ 218 0.00% $ 159
====== =======
The following table shows the maturities and yields of investment securities as
of December 31, 1996.
<CAPTION>
APPROXIMATE
AMORTIZE FAIR
COST VALUE YIELD
-------- ---------- -----
<S> <C> <C> <C>
In one year or less $ 399 $ 400 6.48%
After one year through five years 1,762 1,768 6.35%
After five through ten years 2,236 2,232 6.69%
After ten years 202 201 8.27%
Not due on a single date 4,398 4,581 6.75%
------ ------
Total $8,997 $9,182 6.68%
====== ======
</TABLE>
69
<PAGE>
DEPOSITS
The deposit base provides a major source of funds for interest earning assets.
Deposits decreased $461,000 or 3.0%, from $15,467,000 on December 31, 1995 to
$15,006,000 on December 31, 1996. American Federal also continued to experience
a shift from savings deposits to higher-yielding time deposits as customers
sought higher-yielding deposit products.
Deposits also remained constant as they grew only $97,000 or .6% to
$15,370,000 on December 31, 1994 to $15,467,000 on December 31, 1995. The
increase resulted from a $1,023,000 decrease in savings deposits, which was
offset by a $1,120,000 increase in time deposits as customers shifted funds to
higher-yielding deposit products. This shift was motivated to some extent by
special rate promotions of time deposit products.
Maturity of time deposits $100,000 and greater at December 31, 1996 is
illustrated below.
<TABLE>
<CAPTION>
MATURITY OF TIME DEPOSIT LESS THAN $100,000
-------------------------------------------
PERCENT
1996 OF TOTAL
---- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Three months or less $ 329 38.84%
Over three through six months 0 0.00
Over six months through twelve 0 0.00
Over twelve months 518 61.16
----- ------
Total $ 847 100.00%
===== ======
</TABLE>
Results of Operations
1996 Compared to 1995.
Net income for 1996 amounted to $102,000 or $.67 per share. This represented
a decrease of $29,000 or $.19 per share from 1995 net income of $131,000 or $.86
per share. The decrease resulted from a decline in net interest income and an
increase in noninterest expense.
Overall, net interest income decreased $43,000 or 6.3% in 1996 as American
Federal's net interest margin declined to 3.36%. This was a result of a small
increase in interest income and higher interest expense caused by the high cost
of time deposits. Interest expense increased $43,000 or 6.1% from $708,000 in
1995 to $751,000 in 1996. An increase in noninterest expense of $23,000
principally related to the one time special deposit insurance assessment of
$99,000, offset by decreases in salaries and other expenses.
1995 Compared to 1994.
Net income for 1995 was $131,000 or $.86 per share. This represented a
decrease of $91,000 or $.60 per share from 1994 net income of $223,000 or $1.46
per share. The decrease resulted from a decline in net interest income as
interest expense increased dramatically due to customers moving savings deposits
to higher-yielding time deposits while loan yields declined slightly due to a
lower interest rate environment.
70
<PAGE>
Overall, the net interest margin decreased $151,000 or 18.4% in 1995.
Interest income decreased $64,000 or 4.4% from $1,443,000 in 1994 to $1,379,000
in 1995. Interest expense increased $87,000 or 14.0% in 1995 from a balance of
$621,000 in 1994 to $708,000 in 1995. Noninterest expenses and noninterest
income remained consistent with 1994.
The following table demonstrates the changes in the components of interest
income and interest expense:
<TABLE>
<CAPTION>
1996 1995
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE
------- --------- -------- -------- --------- --------- -------- -------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Loans $ 7,566 39.28% $ 646 8.54% $ 6,999 36.45% $ 597 8.53%
Taxable securities 9,915 51.48 676 6.82% 10,573 55.06 725 6.86%
Nontaxable securities 488 2.53 30 6.15% 385 2.00 25 6.49%
Federal funds sold 556 2.89 28 5.04% 509 2.65 32 6.29%
------- ------- ------ ---- ------- ------
Total interest earning
assets 18,525 96.18 1,380 7.45% 18,466 96.16 1,379 7.47%
Non-interest bearing assets
Cash & DFB 171 0.89 192 1.00
Premises & Equipment 134 0.70 146 0.76
Other Assets 480 2.49 450 2.34
Reserve for loan losses (50) (0.26) (50) (0.26)
------- ------- ------ ------
Total Assets $19,260 100.00% $19,204 100.00%
======= ======= ======= ======
Interest-bearing
liabilities
NOW accounts $ - $ - $ - 24.13% $ -
Savings accounts 4,144 21.52% 135 3.26% 4,633 150 3.24%
Money market accounts - - - 56.10 -
Time deposits 11,216 58.23 616 5.49% 10,773 0.51 558 5.18%
Short-term borrowings 75 0.39 7 9.33% 97 9 9.28%
------- ------- ------ -------- ------
Total interest-bearing
liabilities 15,435 80.14 758 * 4.91% 15,503 80.73 717 * 4.62%
Non-interest bearing
liabilities
Demand deposits - 0.00 - 0.00
Other liabilities 117 0.61 100 0.52
------- ------- ----- -------
Total liabilities 15,552 80.75 15,603 81.25
------- ------
Stockholders' equity 3,708 19.25 3,601 18.75
------- ------- -------- -------
Total liabilities and
Stockholders' equity $19,260 100.00% $19,204 100.00%
======= ====== ======= ======
Net interest income $ 622 * $ 662 *
======= ======
Interest rate spread 2.54% 2.85%
Net interest margin 3.36% 3.58%
</TABLE>
71
<PAGE>
* Included in the other borrowings is debt for American Federal's ESOP plan.
The interest expense was classified as other operating expenses for financial
statement purposes.
Net interest income is affected by the volume and rate of both interest-
earning assets and interest bearing liabilities. The following table
illustrates the dollar effect and rate changes for the different categories of
interest-earning assets and interest bearing liabilities and the resultant
change in interest income and interest expense. Non-performing loans are
included in the following table.
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 COMPARED TO
1995 INCREASE 1994 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
VOLUME RATE RATE/VOL VOLUME RATE RATE/VOL
-------------- ------------- --------- ------------------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans $ 48 $ 1 $ 0 $ (24) $ (29) $ 1
Taxable Securities (45) (4) 0 (21) 13 0
Nontaxable Securities 6 (1) 0 (2) (1) 0
Federal funds sold 3 (6) (1) (10) 14 (4)
---- ------- ------ ----- ----- ---
Total interest income 12 (10) (1) (57) (3) (3)
INTEREST PAID ON:
NOW accounts 0 0 0 0 0 0
Savings accounts (16) 1 0 (36) 14 (3)
Money market accounts 0 0 0 0 0 0
Time deposits 23 34 1 6 105 1
Short-term borrowings (2) 0 0 (1) 3 0
---- ------- ------ ----- ----- ---
Total interest expense 5 35 1 (31) 122 (2)
Net interest income $ 7 $ (45) $ - $ (26) $(125) $(1)
==== ======= ====== ===== ===== ===
Net income as a percent of average assets and average equity for the last two
years was:
<CAPTION>
RETURN ON AVERAGE ASSETS RETURN ON AVERAGE EQUITY
------------------------ ------------------------
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income 0.53% 0.68% 2.75% 3.63%
Dividends declared by American Federal for the past two years were:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend Payout Ratio 123.87% 69.47%
Equity to Asset Ratio 19.72% 18.98%
</TABLE>
72
<PAGE>
CAPITAL
Stockholder's equity increased by $65,000 in 1996 primarily as a result of
unrealized gains on available-for-sale securities and ESOP transactions.
Capital as a percent of total assets was 19.72% at December 31, 1996 compared to
18.98% at December 31, 1995. Book value per share was $24.54 at December 31,
1996 compared to $24.11 at December 31, 1995.
During 1995, American Federal increased retained earnings $40,000 through the
retention of earnings. Unrealized appreciation of investments held as
available-for-sale and ESOP transactions also increased capital $82,000 overall.
Capital as a percent of total assets was 18.98% at December 31, 1995 compared to
18.57% at December 31, 1994. Book value per share was $24.11 at December 31,
1995 compared to $23.30 at December 31, 1994.
LIQUIDITY
The central objectives of liquidity management are to ensure that American
Federal has ready access to sufficient funds to meet maturing obligations and
existing commitments to enable American Federal to withstand fluctuations in
deposit levels and to provide for customers' credit needs. Liquidity management
is viewed from both asset and liability perspectives. The basic concept is the
amount of assets maturing within certain time frames should relate to the amount
of liabilities maturing within the same period. This procedure enables American
Federal to monitor its liquidity requirements, thereby facilitating the meeting
of obligations as they mature and, at the same time, allowing American Federal
to respond to shifts in interest rates. Management believes that during the
current period of economic uncertainty and interest rate volatility, this
flexibility is imperative in maintaining liquidity and acceptable profit
margins. Management has historically maintained an adequate liquidity position.
EFFECTS IN INFLATION
Inflation continues to affect American Federal as it does other businesses.
Overhead costs for personnel, occupancy, and equipment tend to track inflation
closely. The ability of American Federal to offset the effects of inflation on
its operations must come from prudent management of its asset/liability mix,
expense control, and realistic pricing of services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 1997, the names and addresses
of each beneficial owner of more than five percent (5%) of American Federal
Common known to the board of directors of American Federal, reflecting the
amount and nature of such beneficial ownership, the names of each director and
executive officer of American Federal, the number of shares of American Federal
Common owned beneficially by each director and executive officer, and the number
of shares of American Federal Common owned beneficially by all directors and
executive officers as a group. None of the shareholders listed herein would
own, on a pro forma basis giving effect to the Merger, more than 26% of the
issued and outstanding shares of Mid-Missouri Common.
73
<PAGE>
<TABLE>
<CAPTION>
SHARES OF AMERICAN FEDERAL
NAME AND ADDRESS/(1)/ COMMON PERCENT OF CLASS
BENEFICIALLY OWNED
- -------------------------- -------------------------- -----------------------
<S> <C> <C>
John W. Waller 20,272/(2)/ 13.3%
101 County Lane
Sullivan, MO 63080
James E. McIntosh 20,156/(2)/ 13.2%
P.O. Box 246
Sullivan, MO 63080
Rita J. Heady 20,156/(2)/ 13.2%
Route 1, Box 406
Sullivan, MO 63080
Paul Blesi 6,480 4.3%
John M. Brummet 6,480 4.3%
Joseph G. Withington 5,480 3.6%
Directors and officers as a group 51,672/(3)/ 34.0%
(6 persons)
</TABLE>
__________________________
/(1)/ Addresses are provided only with respect to each beneficial owner of
more than five percent (5%) of American Federal Common known to the
Board of Directors of American Federal.
/(2)/ Includes 13,676 shares of American Federal Common owned by the
association's Employee Stock Ownership Plan (the "ESOP") for which Mr.
Waller, Mr. McIntosh and Ms. Heady are trustees. These ESOP shares
have been allocated to the accounts of the ESOP participants and thus
are deemed issued and outstanding for corporate purposes. These shares
are entitled to and shall be converted into the right to receive the
Merger Consideration on the same basis as all other shares of American
Federal Common issued and outstanding on the Record Date.
/(3)/ This total includes the 13,676 shares of American Federal Common owned
by the association's Employee Stock Ownership Plan for which Mr.
Waller, Mr. McIntosh and Ms. Heady are trustees, which number of
shares is counted only once in calculating the total number of shares
of American Federal Common owned by directors and officers as a group.
FAMILY RELATIONSHIPS
Mr. John Waller is the Chairman of the Board of each of Mid-Missouri,
Subsidiary Bank and American Federal. Mr. Waller's son, T. Scott Waller, is a
director and Vice President of Mid-Missouri and a director of Subsidiary Bank.
There are no other family relationships among the executive officers and/or
directors of Mid-Missouri, Subsidiary Bank or American Federal. See
"INFORMATION ABOUT AMERICAN FEDERAL -- Security Ownership of Certain Beneficial
Owners and Management."
74
<PAGE>
LEGAL OPINION
The legality of the securities offered hereby will be passed upon by Lewis,
Rice & Fingersh, L.C. Members of the Lewis, Rice & Fingersh, L.C. and attorneys
employed by them owned, directly or indirectly, as of December 31, 1996, no
shares of Mid-Missouri Common.
EXPERTS
INDEPENDENT AUDITORS FOR MID-MISSOURI
The consolidated financial statements of Mid-Missouri at December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
have been audited by Baird, Kurtz & Dobson, independent certified public
accountants, as set forth in their report herein, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
INDEPENDENT AUDITORS FOR AMERICAN FEDERAL
The financial statements of American Federal at December 31, 1996 and 1995 and
for each of the years in the three-year period ended December 31, 1996, have
been audited by Baird, Kurtz & Dobson, independent certified public accountants,
as stated in their report appearing herein, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
PRESENCE AT SPECIAL MEETING
Representatives of Baird, Kurtz & Dobson are expected to be present at the
Special Meeting with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
The annual meeting of Mid-Missouri was held on January 13, 1997. Shareholder
proposals for the annual meeting of Mid-Missouri shareholders to be held in
January of 1998 should be received at Mid-Missouri's executive office at 318
West Main St., P.O. Box 489, Sullivan, Missouri 63080, no later than September
of 1997, in order to be considered for inclusion in the 1998 proxy statement.
Upon receipt of any such proposal, Mid-Missouri will determine whether or not
to include such proposal in the proxy statement and proxy in accordance with the
S.E.C.'s regulations governing the solicitation of proxies.
_______________________________
75
<PAGE>
FINANCIAL STATEMENTS FOR MID-MISSOURI AND AMERICAN FEDERAL
FS-1
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
ACCOUNTANTS' REPORT
AND CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
FS-2
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
DECEMBER 31, 1996, 1995 AND 1994
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT ACCOUNTANTS' REPORT......................................1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets......................................................2
Statements of Income................................................3
Statements of Changes in Stockholders' Equity.......................5
Statements of Cash Flows............................................6
Notes to Financial Statements.......................................8
</TABLE>
FS-3
<PAGE>
Independent Accountants' Report
-------------------------------
Board of Directors
Mid-Missouri Holding Company, Inc.
Sullivan, Missouri
We have audited the accompanying consolidated balance sheets of MID-MISSOURI
HOLDING COMPANY, INC., as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MID-MISSOURI
HOLDING COMPANY, INC. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
In 1994, the Company changed its method of accounting for investment
securities as discussed in Note 13.
BAIRD, KURTZ & DOBSON
St. Louis, Missouri
February 7, 1997
FS-4
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash and due from banks $ 3,764,390 $ 3,518,862
Available-for-sale securities 23,497,514 11,621,924
Held-to-maturity securities 16,202,182 22,036,516
Other investments 595,680 584,580
Loans 72,609,368 61,306,410
Bank premises and equipment 2,019,415 1,899,840
Deferred income taxes 176,656 159,742
Accrued interest receivable 1,010,406 880,192
Excess of cost over fair value of net assets
acquired, at amortized cost 671,914 724,613
Prepaid expenses and other assets 194,584 138,925
------------ ------------
Total Assets $120,742,109 $102,871,604
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Non-interest bearing demand deposits $ 9,515,251 $ 9,771,768
Savings, NOW and money market deposits 34,295,398 36,223,434
Time deposits, $100,000 and over 11,107,323 8,868,945
Other time deposits 40,836,656 31,604,036
------------ ------------
Total Deposits 95,754,628 86,468,183
Federal funds purchased 3,150,000 50,000
Other borrowings from the Federal
Home Loan Bank 1,000,000 -
Securities sold under agreements
to repurchase 10,760,386 6,826,377
Accrued interest, taxes and other
expenses 504,223 654,000
------------ ------------
Total Liabilities 111,169,237 93,998,560
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $10 par value; authorized,
issued and outstanding 200,000 shares 2,000,000 2,000,000
Retained earnings 7,715,961 7,002,827
Unrealized depreciation on investment
securities, net of income taxes of
$89,576 and $81,246 (143,089) (129,783)
------------ ------------
Total Stockholders' Equity 9,572,872 8,873,044
------------ ------------
Total Liabilities and Stockholders'
Equity $120,742,109 $102,871,604
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
FS-5
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $6,030,197 $5,338,474 $4,204,589
Investment securities - taxable 1,729,896 2,055,954 2,085,586
Investment securities - non-taxable 378,753 260,832 217,159
Federal funds sold 24,006 81,146 55,517
---------- ---------- ----------
Total Interest Income 8,162,852 7,736,406 6,562,851
---------- ---------- ----------
INTEREST EXPENSE
Deposits 3,397,326 3,290,094 2,436,461
Federal funds purchased and securities sold
under agreements to repurchase 459,483 310,249 212,385
Other borrowings 58,281 3,954 6,125
---------- ---------- ----------
3,915,090 3,604,297 2,654,971
---------- ---------- ----------
NET INTEREST INCOME 4,247,762 4,132,109 3,907,880
PROVISION FOR LOAN LOSSES - - -
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,247,762 4,132,109 3,907,880
---------- ---------- ----------
OTHER OPERATING INCOME
Service charges on deposits 612,263 530,195 353,484
Net realized gains (losses) on sales of
available-for-sale securities 8,297 10,135 (418,019)
Other income 253,413 324,890 188,216
---------- ---------- ----------
Total Other Operating Income 873,973 865,220 123,681
---------- ---------- ----------
OTHER OPERATING EXPENSES
Salaries 1,404,243 1,414,449 1,239,666
Employee benefits 260,064 249,166 234,681
Data processing expense 272,513 244,981 250,142
Occupancy expense 130,057 115,055 79,903
Other expenses 1,482,559 1,436,569 1,323,253
---------- ---------- ----------
Total Other Operating Expenses 3,549,436 3,460,220 3,127,645
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
FS-6
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME, CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES $1,572,299 $1,537,109 $ 903,916
PROVISION FOR INCOME TAXES 459,139 478,000 237,031
---------- ---------- ----------
NET INCOME $1,113,160 $1,059,109 $ 666,885
========== ========== ==========
NET INCOME PER SHARE $ 5.57 $ 5.30 $ 3.33
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
FS-7
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL (DEPRECIATION)
COMMON PAID-IN RETAINED ON INVESTMENT
STOCK CAPITAL EARNINGS SECURITIES, NET TOTAL
------------- ---------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994 $ 400,000 $ 600,000 $ 6,826,833 $ - $ 7,826,833
Cumulative effect at
January 1, 1994 of
change in accounting
for investment
securities, net of income
taxes $406,399 - - - 649,182 649,182
Net income - - 666,885 - 666,885
Cash dividends paid
$1.25 per share - - (250,000) - (250,000)
Change in unrealized
depreciation on investment
securities, net of income
taxes of $640,723 - - - (1,023,492) (1,023,492)
------------- --------- ----------- --------------- -----------
BALANCE, DECEMBER 31,
1994 400,000 600,000 7,243,718 (374,310) 7,869,408
Reclassification pursuant to
merger of Bank with Mid-
Missouri Holding Company, Inc. 1,600,000 (600,000) (1,000,000) - -
Net income - - 1,059,109 - 1,059,109
Cash dividends paid
$1.50 per share - - (300,000) - (300,000)
Change in unrealized
depreciation on investment
securities, net of income
taxes of $153,078 - - - 244,527 244,527
------------- --------- ----------- --------------- -----------
BALANCE, DECEMBER 31,
1995 2,000,000 - 7,002,827 (129,783) 8,873,044
Net income - - 1,113,160 - 1,113,160
Cash dividends paid
$ 2.00 per share - - (400,026) - (400,026)
Change in unrealized
depreciation on investment
securities, net of income
taxes of $8,330 - - - (13,306) (13,306)
------------- --------- ----------- --------------- -----------
BALANCE, DECEMBER 31,
1996 $2,000,000 $ - $ 7,715,961 $ (143,089) $ 9,572,872
============= ========= =========== =============== ===========
</TABLE>
See Notes to Consolidated Financial Statements
FS-8
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,113,160 $ 1,059,109 $ 666,885
Items not requiring (providing) cash:
Depreciation 227,527 211,803 153,240
Amortization of organization costs 7,500 5,200 -
Amortization of excess of cost over fair value of
net assets acquired 52,699 48,865 10,052
Realized loss on impairment of held-to-maturity
securities 56,000 - -
Net amortization of premiums on
investments securities 56,976 156,607 105,355
Net realized (gains) losses on sales of available-
for-sale securities (9,144) (10,135) 418,019
Deferred income taxes 9,000 9,084 2,737
Loss on sale of bank premises and equipment - - 25,874
Changes in:
Accrued interest receivable (130,214) (70,355) 67,504
Prepaid expenses and other assets (36,936) 26,453 (126,196)
Accrued interest, taxes and other expenses (149,777) 283,373 (223,203)
------------ ------------ -----------
Net cash provided by operating activities 1,196,791 1,720,004 1,100,267
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits
with banks - - 99,000
Net increase in loans (11,301,091) (4,366,676) (5,577,761)
Net increase in other investments (11,100) (2,100) (582,480)
Purchase of bank premises and equipment (347,102) (255,075) (226,838)
Proceeds from sales of available-for-sale securities 2,499,873 - 16,393,185
Proceeds from maturities, calls and paydowns of
held-to-maturity securities 6,086,466 1,218,001 36,367
Proceeds from maturities, calls and paydowns of
available-for-sale securities 5,719,746 12,613,882 2,957,453
Purchase of held-to-maturity securities (281,315) (2,383,632) (1,621,778)
Purchase of available-for-sale securities (20,237,168) (10,317,183) (9,207,319)
Acquisition of branch, net of cash acquired - - (437,487)
Other - (40,523) 7,241
------------ ------------ -----------
Net cash provided by (used in)
investing activities (17,871,691) (3,533,306) 1,839,583
------------ ------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements
FS-9
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in time deposits $11,470,999 $ 4,672,869 $ 2,757,917
Net increase (decrease) in demand, savings, NOW
and money market deposits (2,184,554) (6,983,535) 2,471,534
Net increase (decrease) in federal funds purchased 3,100,000 50,000 (4,925,000)
Net increase in other borrowings from the Federal
Home Loan Bank 1,000,000 - -
Net increase (decrease) in securities sold under
agreements to repurchase 3,934,009 1,942,005 764,983
Dividends paid (400,026) (300,000) (250,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 16,920,428 (618,661) 819,434
----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS 245,528 (2,431,963) 3,759,284
CASH AND DUE FROM BANKS,
BEGINNING OF YEAR 3,518,862 5,950,825 2,191,541
----------- ----------- -----------
CASH AND DUE FROM BANKS,
END OF YEAR $ 3,764,390 $ 3,518,862 $ 5,950,825
=========== =========== ===========
</TABLE>
See Notes to Consolidated Statements
FS-10
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION AND NATURE OF OPERATIONS
- ---------------------------------------------------------
Mid-Missouri Holding Company, Inc. (Company) is a one bank holding company
which on May 3, 1995, acquired the Bank of Sullivan (Bank) through a tax free
exchange of 100% of the stock of the Bank and the Company. The acquisition has
been accounted for in a manner similar to a pooling of interests. The Company's
activities through December 31, 1996 are comprised solely of the organization
and acquisition of the Bank.
The Bank is primarily engaged in providing a full range of banking and
mortgage services to individual and corporate customers in Sullivan, Missouri.
The Bank is subject to competition from other financial institutions. The Bank
also is subject to the regulation of certain federal and state agencies and
undergoes periodic examinations by those regulatory authorities.
The Bank's loans are primarily with customers in Sullivan, Missouri and
surrounding counties. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their contracts is
dependent upon the economic well-being of these communities.
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FS-11
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
USE OF ESTIMATES, CONTINUED
- ---------------------------
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses
and the valuation of foreclosed assets held for sale, management obtains
independent appraisals for significant properties.
Management believes that the allowances for losses on loans and the valuation
of foreclosed assets held for sale are adequate. While management uses
available information to recognize losses on loans and foreclosed assets held
for sale, changes in economic conditions may necessitate revision of those
estimates in future years. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses on loans and valuation of foreclosed assets held for sale.
Such agencies may require the Bank to recognize additional losses based on their
judgments of information available to them at the time of their examination.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- -----------------------------------------
Available-for-sale securities, which include any security for which the Bank
has no immediate plans to sell, but which may be sold in the future, are carried
at fair value. Realized gains and losses, based on the amortized cost of the
specific security, are included in other income. Unrealized gains and losses
are recorded, net of related income tax effects, in stockholders' equity.
Premiums and discounts are amortized and accreted, respectively, to interest
income using the level-yield method over the period to maturity.
Held-to-maturity securities, which include any security for which the Bank has
the positive intent and ability to hold until maturity, are carried at
historical cost adjusted for amortization of premiums and accretion of
discounts. Premiums and discounts are amortized and accreted, respectively, to
interest income using the level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
FS-12
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
LOANS
- -----
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-offs are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans and unamortized premiums or discounts on
purchased loans.
ALLOWANCES FOR LOAN LOSSES
- --------------------------
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is
maintained at a level considered adequate to provide for potential loan losses,
based on management's evaluation of the loan portfolio, as well as on prevailing
and anticipated economic conditions and historical losses by loan category.
General allowances have been established, based upon the aforementioned factors,
and allocated to the individual loan categories. Allowances are accrued on
specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes certain loans that are delinquent 90 days or more (and meet the Bank's
criteria for non-accrual status) and certain other loans identified by
management. Excluded from consideration of impaired loans are smaller-balance
homogenous loans, such as consumer loans and residential mortgages, which are
collectively evaluated for impairment. Non-accrual loans are loans in which
principal or interest is past due 90 days or more and the loan is not well
secured and not in the process of collection. When a loan is placed on non-
accrual status accrual of interest is discontinued, and interest accrued and
unpaid is removed. Interest is recognized for nonaccrual loans only upon
receipt, and only after all principal amounts are current according to the terms
of the contract.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
- -----------------------------------------------------
The excess of purchase price over the net assets of the branch acquired is
being amortized on a straight-line basis over a period of 15 years.
FS-13
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
FORECLOSED ASSETS HELD-FOR-SALE
- -------------------------------
Assets acquired by foreclosure or in settlement of debt and held for sale are
valued at fair value as of the date of foreclosure and a related valuation
allowance is provided for estimated costs to sell the assets. Management
evaluates the value of foreclosed assets held for sale periodically and
increases the valuation allowance for any subsequent declines in estimated fair
value. Changes in the valuation allowance are charged or credited to other
expenses.
BANK PREMISES AND EQUIPMENT
- ---------------------------
Bank premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is charged to expense using the straight-line method over the
estimated useful lives of the assets.
CASH EQUIVALENTS
- ----------------
The Bank considers all liquid investments with original maturities of three
months or less to be cash equivalents.
INCOME TAXES
- ------------
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
RECLASSIFICATIONS
- -----------------
Certain reclassifications have been made to the 1994 financial statements to
conform to the 1995 and 1996 financial statement presentation. These
reclassifications had no effect on net earnings.
EARNINGS PER SHARE
- ------------------
Earnings per share is computed based on the weighted average number of shares
outstanding during the year, which totaled 200,000 during 1996, 1995 and 1994.
FS-14
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES
The amortized cost and approximate fair value of available-for-sale securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 2,239,086 $ 1,286 $ (1,314) $ 2,239,058
State & political subdivisions 5,994,427 5,688 (39,869) 5,960,246
U.S. Government agencies
and corporations 10,742,098 112,741 (4,067) 10,850,772
Mortgage-backed securities 4,392,937 17,838 (45,337) 4,365,438
Other investments 101,580 - (19,580) 82,000
----------- -------- --------- -----------
$23,470,128 $137,553 $(110,167) $23,497,514
=========== ======== ========= ===========
DECEMBER 31, 1995
--------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
U.S. Treasury $ 3,605,550 $ 19,807 $ - $ 3,625,357
U.S. Government agencies
and corporations 3,004,052 125,467 - 3,129,519
Mortgage-backed securities 4,789,229 - (2,181) 4,787,048
Other investments 101,580 - (21,580) 80,000
----------- -------- --------- -----------
$11,500,411 $145,274 $ (23,761) $11,621,924
=========== ======== ========= ===========
</TABLE>
FS-15
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
Maturities of available-for-sale securities at December 31, 1996:
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
One year or less $ 751,761 $ 751,638
After one through five years 11,303,718 11,410,003
After five through ten years 2,660,684 2,654,840
After ten years 4,259,448 4,233,595
Not due on a single maturity date 4,494,517 4,447,438
----------- -----------
$23,470,128 $23,497,514
=========== ===========
</TABLE>
The amortized cost and approximate fair value of held-to-maturity
securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 2,959,522 $ 52,733 $ - $ 3,012,255
U.S. Government agencies
and corporations 3,595,514 53,083 (39,889) 3,608,708
State and political subdivisions 5,474,477 1,681 (12,042) 5,464,116
Mortgage-backed securities 4,172,669 154,434 - 4,327,103
----------- ----------- ----------- -----------
$16,202,182 $ 261,931 $ (51,931) $16,412,182
=========== =========== =========== ===========
DECEMBER 31, 1995
-----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 3,992,356 $ 60,757 $ (3,498) $ 4,049,615
U.S. Government agencies
and corporations 7,667,496 97,058 (41,513) 7,723,041
State and political subdivisions 5,454,189 98,392 - 5,552,581
Mortgage-backed securities 4,922,475 162,679 - 5,085,154
----------- ----------- ----------- -----------
$22,036,516 $ 418,886 $ (45,011) $22,410,391
=========== =========== =========== ===========
</TABLE>
FS-16
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
Maturities of held-to-maturity securities at December 31, 1996:
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
One year or less $3,249,004 $ 3,258,121
After one through five years 4,402,531 4,436,854
After five through ten years 2,635,856 2,634,186
After ten years 1,742,122 1,755,918
Not due on a single maturity date 4,172,669 4,327,103
----------- -----------
$16,202,182 $16,412,182
=========== ===========
</TABLE>
Securities pledged as collateral, to secure public deposits and for other
purposes, at December 31, 1996 and 1995, totaled:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Amortized cost $13,141,817 $17,633,544
Approximate fair value $13,031,345 $17,579,748
</TABLE>
FS-17
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
Proceeds from calls of debt securities were $3,010,423 for 1996 resulting in
gross gains of $9,143 and gross losses of $846. Proceeds from sales of debt
securities were $698,425 for 1995, resulting in gross gains of $10,135.
Proceeds from sales of debt securities were $16,393,185 for 1994, resulting in
gross gains of $281,837 and gross losses of $699,856.
As of December 31, 1995, the Company redesignated held-to-maturity securities
with an aggregate amortized cost of $998,633 and net unrealized gains of $17,786
to the available-for-sale portfolio. The redesignation was prompted by the
announcement by the Financial Accounting Standards Board to allow a one-time
redesignation and reflects management's revised expectations of liquidity needs.
NOTE 3: LOANS
Composition of the loan portfolio as of December 31, 1996 and 1995, is as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Real estate - mortgage $53,624,764 $45,460,977
Real estate - construction 2,526,476 1,720,084
Commercial loans 10,270,389 7,375,131
Consumer and other loans 6,699,659 7,349,771
----------- -----------
73,121,288 61,905,963
Less allowance for loan losses 511,920 599,553
----------- -----------
$72,609,368 $61,306,410
=========== ===========
</TABLE>
Impaired loans totaled $11,074 and $28,475 at December 31, 1996 and 1995,
respectively. An allowance for loan losses of $5,537 and $14,237 relates to
impaired loans of $11,074 and $28,475, at December 31, 1996 and 1995.
Interest of $1,484 and $5,157 was recognized on average impaired loans of
$5,537 and $56,921 for 1996 and 1995, respectively. No interest was recognized
on impaired loans on a cash basis during 1996 and 1995.
FS-18
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 3: LOANS, Continued
A summary of the transactions in the allowance for loan losses account for the
years ended December 31, 1996, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Balance, beginning of year $599,553 $598,556 $646,001
Provision charged to expense - - -
Loans charged off, net of recoveries
of $49,316 (1996), $56,594 (1995)
and $83,055 (1994) (87,633) 997 (47,445)
-------- -------- --------
Balance, end of year $511,920 $599,553 $598,556
======== ======== ========
</TABLE>
NOTE 4: BANK PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost at December
31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Buildings and improvements $2,225,860 $2,068,640
Equipment 1,640,905 1,451,023
---------- ----------
3,866,765 3,519,663
Less accumulated depreciation 1,847,350 1,619,823
---------- ----------
$2,019,415 $1,899,840
========== ==========
</TABLE>
FS-19
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 5: INCOME TAXES
The provision for income taxes includes these components:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Taxes currently payable $ 450,139 $468,916 $234,294
Deferred income taxes 9,000 9,084 2,737
--------- -------- --------
$ 459,139 $478,000 $237,031
========= ======== ========
</TABLE>
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ 535,000 $522,000 $307,000
Increase (decrease) resulting from:
Non-taxable interest income (111,000) (78,000) (66,000)
State income taxes - net of federal
tax benefit 36,000 39,000 16,000
Other (861) (5,000) (19,969)
--------- -------- --------
Actual tax provision $ 459,139 $478,000 $237,031
========= ======== ========
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the December 31, 1996 and 1995 balance sheets were:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $124,124 $157,479
Unrealized depreciation on
investment securities 89,576 81,246
Other 49,569 12,250
-------- --------
263,269 250,975
Deferred tax liabilities:
Accumulated depreciation (52,762) (54,725)
Other (33,851) (36,508)
-------- --------
Net deferred tax asset $176,656 $159,742
======== ========
</TABLE>
FS-20
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 6: RISK CONCENTRATION - FEDERAL FUNDS
From time to time, the Bank has excess deposits or a need for additional
funds. Excess deposits are loaned to other banks as federal funds sold, which
represent overnight lending to other member banks of the Federal Reserve System.
Additional funds are borrowed from other member banks as federal funds
purchased, which represent overnight borrowing.
At December 31, 1996 and 1995, $3,150,000 and $50,000 of federal funds
purchased and sold, respectively, related to one bank in the St. Louis, Missouri
area.
NOTE 7: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase consist of U.S. treasury and
U.S. agency securities with book values of $12,833,092 and $10,865,052 and fair
values of $12,894,192 and $10,982,978 at December 31, 1996 and 1995,
respectively. Accrued interest receivable on these securities was $228,411 and
$55,814 at December 31, 1996 and 1995, respectively.
The Bank enters into sales of securities under agreements to repurchase.
Repurchase agreements are treated as financings, and the obligations to
repurchase securities sold are reflected as a liability in the statement of
financial condition. The securities underlying the agreements are book-entry
securities. At December 31, 1996 and 1995, these agreements had a weighted-
average interest rate of 4.9% and matured within 90 days.
At December 31, 1996 and 1995, all of the agreements were agreements to
repurchase the same securities. Securities sold under agreements to repurchase
averaged $8,856,262 and $5,961,612 during 1996 and 1995, respectively, and the
maximum amount outstanding at any month-end during 1996 and 1995, was
$10,760,386 and $6,826,377, respectively.
NOTE 8: OTHER BORROWINGS
At December 31, 1996, the Bank had a $1,000,000 loan from the Federal Home
Loan Bank. (FHLB). The loan is secured by a blanket assignment of 1-4 family
home mortgage loans and bears interest at a rate of 6.07%. The loan matures on
November 20, 2001.
FS-21
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 9: OFF-BALANCE-SHEET AND CREDIT RISK
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include lines-of-credit, commitments to extend
credit and standby letters of credit. The Bank's maximum exposure to credit
loss under lines of credit, commitments to extend credit and standby letters of
credit is represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent potential credit risk:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Lines of credit $7,521,573 $7,882,407
Commitments to extend credit $1,561,179 $ 777,102
Standby letters of credit $ 527,910 $ 319,073
</TABLE>
The Bank requires collateral to support financial instruments when it is
deemed necessary. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained upon extension of credit
is based on management's credit evaluation of the counterparty. Collateral
held varies, but may include income-producing commercial properties; accounts
receivable; property, plant and equipment; and inventory.
Commitments to extend credit and lines of credit are agreements to lend to a
customer so long as there is no violation of any condition established in the
lending contract. Lines of credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since some of the
commitments may expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing agreements. Management
does not anticipate any material losses as a result of these transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
At December 31, 1996, all of the Bank's credit commitments expire at various
times through 2025.
FS-22
<PAGE>
MID-MISSOURI COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 10: PENSION PLAN
The Company has a non-contributory defined benefit pension plan covering all
employees who meet the eligibility requirements. To be eligible, an employee
must be 21 years of age and have completed one year of continuous service. The
plan provides benefits based on the career earnings of each participant. The
Company's funding policy is to make the minimum annual contribution that is
required by applicable regulations, plus such amounts as the Company may
determine to be appropriate from time to time.
Net pension cost for the Company's defined benefit pension plan consisted of
the following components for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned) $ 47,000 $ 51,000 $ 46,000
Interest cost on projected 37,000 38,000 37,000
benefit obligation
Actual return on plan assets (24,000) (24,000) (26,000)
Net amortization and deferral (14,000) (39,000) (6,000)
-------- -------- --------
$ 46,000 $ 26,000 $ 51,000
======== ======== ========
</TABLE>
Assumptions used by the Company in the determination of pension plan
information consisted of the following as of December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Discount rate 7.50% 7.50% 7.50%
Rate of increase in compensation 4.00% 4.00% 4.00%
levels
Expected long-term rate of return 7.50% 7.50% 7.50%
on plan assets
</TABLE>
The following table sets forth the plan's funded status and amounts recognized
in the accompanying balance sheets as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $(336,000) $(354,000)
========= =========
</TABLE>
FS-23
<PAGE>
MID-MISSOURI HOLDING COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<S> <C> <C>
Accumulated benefits $(350,000) $(369,000)
========= =========
Projected benefits $(534,000) $(539,000)
Plan assets at fair value 341,000 345,000
--------- ---------
Projected benefit obligation (193,000) (194,000)
in excess of plan assets
Unrecognized net loss 50,000 45,000
Unrecognized net obligation 143,000 149,000
--------- ---------
being recognized over 25 years
Prepaid pension assets (or pension $ 0 $ 0
========= =========
liability) recognized in balance
sheet
</TABLE>
NOTE 11: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1996, 1995 and 1994, the Bank had loans totaling $2,395,016,
$1,976,887 and $3,228,343, respectively, to employees, officers, directors,
principal stockholders and affiliated companies. In management's opinion, such
loans were made in the ordinary course of business, and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons.
The following is a summary of loan transactions involving principal
stockholders, directors and executive officers for the year ended December 31,
1996:
<TABLE>
<S> <C>
Balance, beginning of the year $ 820,601
Loan originations 759,200
Loan payments (181,050)
----------
Balance, end of year $1,398,751
==========
</TABLE>
FS-24
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 1995 AND 1994
NOTE 12: REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that it
may declare without prior regulatory approval. At December 31, 1996,
approximately $2,117,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
The Bank is also subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the
Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's category.
The Bank is subject to certain restrictions on the amount of dividends that it
may declare without prior regulatory approval. December 31, 1996, approximately
$1,800,000 of retained earnings were available for dividend declaration without
prior regulatory approval.
FS-25
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 1995 AND 1994
NOTE 12: REGULATORY MATTERS, Continued
The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
---------------- ----------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital
(to Risk Weighted Assets) $9,620,548 14.0% $5,482,000 8.0% $6,852,500 10.0%
Tier I Capital
(to Risk Weighted Assets) $9,008,628 13.1% $2,741,000 4.0% $4,111,500 6.0%
Tier I Capital
(to Average Assets) $9,008,628 8.1% $4,448,475 4.0% $5,560,594 5.0%
AS OF DECEMBER 31, 1995
Total Capital
(to Risk Weighted Assets) $8,919,230 15.1.% $4,735,760 8.0% $5,919,700 10.0%
Tier I Capital
(to Risk Weighted Assets) $8,219,677 13.9% $2,367,880 4.0% $3,551,820 6.0%
Tier I Capital
(to Average Assets) $8,219,677 7.8% $4,223,631 4.0% $5,279,539 5.0%
</TABLE>
NOTE 13: ADOPTION OF FINANCIAL ACCOUNTING STANDARDS NO. 115
At January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115 regarding investments in debt and equity securities. As
described in Note 1, this statement created two categories of securities based
upon management's intent. Securities meeting the criteria for the "available-
for-sale" category were adjusted to their fair values as of January 1, 1994,
with a corresponding valuation reserve, net of income taxes, reported in
stockholders' equity. The cumulative effect of adopting SFAS 115 at January 1,
1994, was to increase stockholders' equity by $649,182.
FS-26
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 14: ACQUISITION
In October 1994, the Bank acquired substantially all of the assets and
liabilities of the Sullivan branch of Meramec State Bank for $1,519,007 in cash.
The acquisition was accounted for as a purchase by recording the assets and
liabilities acquired at their estimated fair values. The operations of the Bank
for the years ended December 31, 1996, 1995 and 1994, include the operations of
the acquired branch subsequent to the acquisition date. Had the acquisition
occurred at the beginning of the year, 1994 revenues would have increased by
approximately $866,000 and there would have been no material effect on net
income and earnings per share.
NOTE 15: OTHER EXPENSES
Other expenses include the following. Individual expenses exceeding 1% of
total revenue are shown separately.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
FDIC Insurance $ 24,773 $ 124,013 $ 191,927
Depreciation expense 162,939 159,570 149,570
Stationary and Printing 105,214 103,791 118,826
Legal and Professional Fees 155,798 141,567 154,929
Other 1,033,835 907,628 708,001
---------- ---------- ----------
$1,482,559 $1,436,569 $1,323,253
========== ========== ==========
</TABLE>
FS-27
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 16: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
NONCASH INVESTING ACTIVITIES
----------------------------
Other assets acquired
through repossession $ 1,867 $ 2,100 $ 65,300
========== ========== ===========
On October 1, 1994, the Bank
purchased substantially
all of the assets and
liabilities of the Sullivan
branch of Meramec State Bank.
In conjunction with the
acquisition, liabilities were
assumed as follows:
Cost of assets acquired $ - $ - $13,056,315
Cash paid - - (1,519,007)
---------- ---------- -----------
Liabilities assumed $ - $ - $11,537,308
========== ========== ===========
ADDITIONAL CASH PAYMENT INFORMATION
-----------------------------------
Interest paid $3,873,141 $3,549,076 $ 2,563,391
Income taxes paid $ 518,312 $ 357,947 $ 553,543
</TABLE>
NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND CASH EQUIVALENTS
- -------------------------
For these short-term instruments, the carrying amount approximates fair value.
FS-28
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
AVAILABLE-FOR-SALE SECURITIES
- -----------------------------
Fair values for available-for-sale securities, which also are the amounts
recognized in the balance sheets, equal quoted market prices, if available. If
quoted market prices are not available, fair values are estimated based on
quoted market prices of similar securities.
HELD-TO-MATURITY SECURITIES
- ---------------------------
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
LOANS
- -----
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with
similar characteristics were aggregated for purposes of the calculations. The
carrying amount of accrued interest approximates its fair value.
DEPOSITS
- --------
The fair value of demand deposits, savings accounts, NOW accounts, and certain
money market deposits is the amount payable on demand at the reporting date
(i.e., their carrying amount). The fair value of fixed-maturity time deposits
is estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities. The carrying
amount of accrued interest payable approximates its fair value.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWINGS
- -------------------------------------------------------------------
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
FS-29
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF CREDIT
- -------------------------------------------------------------------
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed-
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair value of letters of
credit and lines of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table presents estimated fair values of the Bank's financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which method involves significant judgments by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, the Bank does not know
whether the fair values shown below represent values at which the respective
financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------
CARRYING FAIR
AMOUNT VALUE
----------------- -----------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 3,764,390 $ 3,764,390
Available-for-sale securities $23,497,514 $23,497,514
Held-to-maturity securities $16,202,182 $16,412,182
Loans, net of allowance for loan loses $72,609,368 $79,199,000
Financial liabilities:
Deposits $95,754,628 $91,933,000
Federal funds purchased and securities sold
under agreements to repurchase $14,910,386 $14,910,386
Unrecognized financial instruments
(net of contract amount):
Commitments to extend credit $ - $ -
Letters of credit $ - $ -
Lines of credit $ - $ -
</TABLE>
FS-30
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF CREDIT, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------
CARRYING FAIR
AMOUNT VALUE
----------------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 3,518,862 $ 3,518,862
Available-for-sale securities $11,621,924 $11,621,924
Held-to-maturity securities $22,036,516 $22,410,391
Loans, net of allowance for loan loses $61,306,410 $61,200,687
Financial liabilities:
Deposits $86,468,183 $86,526,000
Federal funds purchased and securities sold
under agreements to repurchase $ 6,876,377 $ 6,876,377
Unrecognized financial instruments
(net of contract amount):
Commitments to extend credit $ - $ -
Letters of credit $ - $ -
Lines of credit $ - $ -
</TABLE>
FS-31
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 18: PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information of Mid-Missouri Holding Company, Inc. (Parent
Company only) are as follows:
CONDENSED BALANCE SHEET
- -----------------------
<TABLE>
<CAPTION>
ASSETS
------
1996 1995
---------- ----------
<S> <C> <C>
Cash and due from banks $ 7,596 $ 22,756
Investment in Bank of Sullivan 9,537,453 8,814,507
Other assets 27,823 35,781
---------- ----------
Total Assets $9,572,872 $8,873,044
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Total Liabilities $ - $ -
---------- ----------
Stockholders' Equity $9,572,872 $8,873,044
========== ==========
CONDENSED STATEMENT OF INCOME
- -----------------------------
Dividends from Bank of Sullivan $ 410,463 $ 365,000
Operating expenses 33,580 6,463
---------- ----------
Earnings before undistributed earnings
of subsidiary 376,883 358,537
Undistributed earnings of subsidiary
(Bank of Sullivan) 736,277 700,572
---------- ----------
Less: pre-acquisition earnings
of subsidiary - (290,940)
---------- ----------
Net Income $1,113,160 $ 768,169
========== ==========
</TABLE>
FS-32
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 18: PARENT COMPANY FINANCIAL INFORMATION, Continued
CONDENSED 1996 STATEMENT OF CASH FLOWS
- --------------------------------------
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net income $1,113,160 $ 768,169
Items not requiring (providing) cash:
Equity in undistributed earnings of subsidiary (736,277) (409,632)
Amortization 7,500 5,200
Other 483 (458)
---------- ---------
Net cash provided by operating activities 384,866 363,279
---------- ---------
Cash Flows From Investing Activities
Payment of organization costs - (40,523)
---------- ---------
Net cash used in investing activities - (40,523)
---------- ---------
Cash Flows From Financing Activities
Dividends paid (400,026) (300,000)
---------- ---------
Net cash used in financing activities (400,026) (300,000)
---------- ---------
Increase in cash and due from banks (15,160) 22,756
Cash and due from banks, beginning of year 22,756 -
---------- ---------
Cash and due from banks, end of year $ 7,596 $ 22,756
========== =========
</TABLE>
As discussed in Note 1, Mid-Missouri Holding Company acquired Bank of Sullivan
during 1995.
FS-33
<PAGE>
MID-MISSOURI HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 19: SUBSEQUENT EVENT
MERGER
- ------
Mid-Missouri Holding Company, Inc. (Mid-MO) with its wholly-owned subsidiary,
Bank of Sullivan (BOS), have entered into a plan of merger with American Federal
Savings and Loan Association of Sullivan (AFSL) with BOS and Mid-MO being the
surviving entities. The shareholders of AFSL will exchange 100% of their stock
in exchange for cash and stock of Mid-MO. The transaction is subject to the
approval of the shareholders and federal and state regulatory agencies.
FS-34
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN
ASSOCIATION OF SULLIVAN
ACCOUNTANTS' REPORT
AND FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
FS-35
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
DECEMBER 31, 1996, 1995 AND 1994
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT ACCOUNTANTS' REPORT...................................... 1
FINANCIAL STATEMENTS
Balance Sheets..................................................... 2
Statements of Income............................................... 3
Statements of Stockholders' Equity................................. 4
Statements of Cash Flows........................................... 7
Notes to Financial Statements...................................... 8
</TABLE>
FS-36
<PAGE>
Independent Accountants' Report
-------------------------------
Board of Directors
American Federal Savings and Loan
Association of Sullivan
Sullivan, Missouri
We have audited the accompanying balance sheets of AMERICAN FEDERAL SAVINGS
AND LOAN ASSOCIATION OF SULLIVAN as of December 31, 1996 and 1995, and the
related statements of income, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Association's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMERICAN FEDERAL SAVINGS AND
LOAN ASSOCIATION OF SULLIVAN as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
In 1994, the Association changed its method of accounting for the Employee
Stock Ownership Plan (ESOP) as discussed in Note 8 and its method of accounting
for investment securities as discussed in Note 10.
BAIRD, KURTZ & DOBSON
St. Louis, Missouri
January 10, 1997
FS-37
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
------
1996 1995
---------- -----------
<S> <C> <C>
Cash $ 93,936 $ 213,744
Federal Home Loan Bank overnight deposits 827,051 419,361
---------- -----------
Total cash and cash equivalents 920,987 633,105
Interest-bearing certificates in other
financial institutions 495,000 397,000
Available-for-sale securities 217,562 158,562
Held-to-maturity securities 8,984,654 10,461,124
Loans, net 7,831,021 7,139,846
Premises and equipment 125,587 138,875
Accrued interest receivable 145,099 185,336
Federal Home Loan Bank stock 155,700 152,700
Prepaid expenses and other assets 46,314 50,438
---------- -----------
Total Assets $18,921,924 $19,316,986
=========== ===========
</TABLE>
See Notes to Financial Statements
FS-38
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Savings deposits $15,006,346 $15,466,780
Accrued interest payable 89,638 89,090
Other liabilities 38,644 16,000
Long-term borrowing 55,544 78,811
----------- -----------
Total Liabilities 15,190,172 15,650,681
----------- -----------
Stockholders' Equity
Common stock, $1 par value; authorized
and issued 152,087 shares 152,087 152,087
Additional paid-in capital 1,304,458 1,265,774
Retained earnings 2,181,641 2,205,888
Unearned ESOP shares (32,434) (47,444)
Unrealized appreciation on available-for-sale securities,
net of income taxes of $80,000 and $57,000, in
1996 and 1995, respectively 126,000 90,000
----------- -----------
3,731,752 3,666,305
----------- -----------
$18,921,924 $19,316,986
=========== ===========
</TABLE>
FS-39
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 645,995 $ 596,894 $ 648,627
Investment securities 351,777 415,375 398,806
Mortgage-backed securities 313,518 289,246 279,234
Other 68,366 77,683 116,590
---------- ---------- ----------
Total Interest Income 1,379,656 1,379,198 1,443,257
INTEREST EXPENSE
Deposits 751,475 708,487 621,442
---------- ---------- ----------
NET INTEREST INCOME 628,181 670,711 821,815
PROVISION FOR LOAN LOSSES - - -
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 628,181 670,711 821,815
---------- ---------- ----------
NON-INTEREST INCOME
Rental income 21,000 21,000 22,200
Other 123 119 95
---------- ---------- ----------
Total Non-Interest Income 21,123 21,119 22,295
---------- ---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 213,375 238,671 242,226
Occupancy expense 50,878 57,300 62,937
Insurance expense 143,152 46,918 49,636
Other operating expenses 95,786 137,583 133,606
---------- ---------- ----------
Total Non-Interest Expense 503,191 480,472 488,405
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 146,113 211,358 355,705
PROVISION FOR INCOME TAXES 44,525 80,000 133,000
---------- ---------- ----------
NET INCOME $ 101,588 $ 131,358 $ 222,705
========== ========== ==========
NET INCOME PER SHARE $ .67 $ .86 $ 1.46
========== ========== ==========
</TABLE>
See Notes to Financial Statements
FS-40
<PAGE>
See Notes to Financial Statements
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF SULLIVAN
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL UNEARNED ON AVAILABLE-
COMMON PAID-IN RETAINED ESOP FOR-SALE
STOCK CAPITAL EARNINGS SHARES SECURITIES, NET TOTAL
-------- ---------- ----------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1996 $152,087 $1,265,774 $2,205,888 $(47,444) $ 90,000 $3,666,305
Net income - - 101,588 - - 101,588
Dividend paid,
$.83 per share - - (125,835) - - (125,835)
Change in unrealized
appreciation on
available-for-sale
securities, net of
income taxes of
$23,000 - - - - 36,000 36,000
Excess of fair value
over cost of ESOP
shares released - 38,684 - - - 38,684
Cost of ESOP shares
released, net of tax - - - 15,010 - 15,010
-------- ---------- ---------- -------- --------------- ----------
BALANCE,
DECEMBER 31, 1996 $152,087 $1,304,458 $2,181,641 $(32,434) $ 126,000 $3,731,752
======== ========== ========== ======== =============== ==========
</TABLE>
See Notes to Financial Statements
FS-41
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF SULLIVAN
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL UNEARNED ON AVAILABLE-
COMMON PAID-IN RETAINED ESOP FOR-SALE
STOCK CAPITAL EARNINGS SHARES SECURITIES, NET TOTAL
-------- ---------- ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1995 $152,087 $1,234,348 $2,165,782 $(61,948) $54,000 $3,544,269
Net income - - 131,358 - - 131,358
Dividend paid,
$.60 per share - - (91,252) - - (91,252)
Change in unrealized
appreciation on
available-for-sale
securities, net of
income taxes of
$23,000 - - - - 36,000 36,000
Excess of fair value
over cost of ESOP
shares released - 31,426 - - - 31,426
Cost of ESOP shares
released, net of tax - - - 14,504 - 14,504
-------- ---------- ---------- -------- --------------- ----------
BALANCE,
DECEMBER 31, 1995 $152,087 $1,265,774 $2,205,888 $(47,444) $90,000 $3,666,305
======== ========== ========== ======== =============== ==========
</TABLE>
See Notes to Financial Statements
FS-42
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF SULLIVAN
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL UNEARNED ON AVAILABLE-
COMMON PAID-IN RETAINED ESOP FOR-SALE
STOCK CAPITAL EARNINGS SHARES SECURITIES, NET TOTAL
-------- ---------- ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1994 $152,087 $1,203,609 $2,027,408 $(76,135) $ - $3,306,969
Cumulative effect of
change in accounting for
available-for-sale
securities, net of income
taxes of $33,000 - - - - 53,000 53,000
Net income - - 222,705 - - 222,705
Dividend paid,
$.60 per share - - (84,331) - - (84,331)
Change in unrealized
appreciation on
available-for-sale
securities, net of
income taxes of
$1,000 - - - - 1,000 1,000
Excess of fair value
over cost of ESOP
shares released - 30,739 - - - 30,739
Cost of ESOP shares
released, net of tax - - - 14,187 - 14,187
-------- ---------- ---------- -------- --------------- ----------
BALANCE,
DECEMBER 31, 1994 $152,087 $1,234,348 $2,165,782 $(61,948) $54,000 $3,544,269
======== ========== ========== ======== =============== ==========
</TABLE>
See Notes to Financial Statements
FS-43
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 101,588 $ 131,358 $ 222,705
Items not requiring (providing) cash:
Depreciation 17,527 22,620 26,533
Amortization (accretion) of premiums and discounts (42,131) (9,546) 13,493
Deferred income taxes (1,732) (3,472) (2,364)
Deferred loan fees 6,582 4,163 (6,471)
ESOP compensation expense 61,426 53,402 52,236
Changes in:
Accrued interest receivable 40,237 (14,118) 4,955
Prepaid expenses and other assets 4,124 (1,876) (742)
Accrued interest payable 548 24,297 (6,623)
Other liabilities (6,356) (18,777) (58,709)
----------- ----------- -----------
Net cash provided by operating activities 181,813 188,051 245,013
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans (697,757) (10,718) 631,915
Net (increase) decrease in interest-bearing certificates
in other financial institutions (98,000) 685,000 99,000
Proceeds from call or maturities of held-to-maturity securities 2,000,000 4,450,000 1,075,000
Purchases of held-to-maturity securities (103,000) (5,143,000) (905,000)
Principal payments on mortgage-backed securities 763,960 655,784 1,063,351
Purchase of mortgage-backed securities (1,145,359) (645,679) (1,348,013)
Purchase of equipment (4,239) (4,970) (27,871)
----------- ----------- -----------
Net cash provided by (used in) investing activities 715,605 (13,583) 588,382
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term borrowings (23,267) (19,703) (19,703)
Dividends paid (125,835) (91,252) (84,331)
Net increase (decrease) in certificates of deposit (223,412) 1,120,021 (653,542)
Net decrease in savings deposits (237,022) (1,023,492) (698,727)
----------- ----------- -----------
Net cash used in financing activities (609,536) (14,426) (1,456,303)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 287,882 160,042 (622,980)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 633,105 473,063 1,095,971
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 920,987 $ 633,105 $ 473,063
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
FS-44
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
- --------------------
American Federal Savings and Loan Association of Sullivan is a federally-
chartered stock savings and loan association primarily engaged in residential
mortgage lending. The Association is subject to competition from other
financial institutions. The Association is also subject to the regulations of
certain federal agencies and undergoes periodic examinations by those regulatory
authorities.
The Association's loans are primarily with customers in Sullivan, Missouri and
surrounding counties. Although the Association has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor their
contracts is dependent upon the economic well-being of these communities.
CONVERSION TO STOCK ASSOCIATION
- -------------------------------
In 1993, the Association converted from a federally-chartered mutual
association to a federally-chartered stock association. Subsequent to the
conversion, savings deposit account holders and borrowers do not have voting
rights in the Association. Voting rights are vested exclusively with the
stockholders of the Association. Savings deposit account holders continue to be
insured by the Savings Association Insurance Fund. A liquidation account was
established at the time of conversion in an amount equal to the total net worth
of the Association as of the date of the latest balance sheet contained in the
final offering circular. Each eligible deposit account holder is entitled to a
proportionate share of this account in the event of a complete liquidation of
the Association, and only in such event. This share will be reduced if the
account holder's savings deposit falls below the amount on the dates of record
and will cease to exist if the account is closed. The liquidation account will
never be increased despite any increase after conversion in the related savings
deposit of an account holder. The Association may not declare or pay a cash
dividend, or purchase any of its stock, if the effect would be to reduce the net
worth of the Association below the amount of its liquidation account or below
its minimum regulatory capital.
FS-45
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses.
Management believes that the allowance for losses on loans is adequate. While
management uses available information to recognize losses on loans, changes in
economic conditions may necessitate revision of this estimate in future years.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Association's allowance for losses
on loans. Such agencies may require the Association to recognize additions to
the allowance based on their judgement of information available to them at the
time of their examination.
CASH AND CASH EQUIVALENTS POLICY
- --------------------------------
The Association considers all liquid investments with original maturities of
three months or less to be cash equivalents. At December 31, 1996 and 1995,
cash equivalents consisted primarily of Federal Home Loan Bank overnight
deposits.
Regulations require the Association to maintain an amount in cash and U.S.
Government and other approved securities equal to 5.0% of savings deposits (net
of loans on savings deposits), plus short-term borrowings.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- -----------------------------------------
Available-for-sale securities, which include any security for which the
Association has no immediate plan to sell but which may be sold in the future,
are carried at fair value. Realized gains and losses, based on the amortized
cost of the specific security, are included in other income. Unrealized gains
and losses are recorded, net of related income tax effects, in stockholders'
equity. Premiums and discounts are amortized and accreted, respectively, to
interest income using the level-yield method over the period to maturity.
FS-46
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OR OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
INVESTMENTS IN DEBT AND EQUITY SECURITIES, CONTINUED
- ----------------------------------------------------
Held-to-maturity securities, which include any security for which the
Association has the positive intent and ability to hold until maturity, are
carried at historical cost adjusted for amortization of premiums and accretion
of discounts. Premiums and discounts are amortized and accreted, respectively,
to interest income using the level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
LOANS
- -----
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-offs are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs.
ALLOWANCE FOR LOAN LOSSES
- -------------------------
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is
maintained at a level considered adequate to provide for potential loan losses,
based on management's evaluation of the loan portfolio, as well as on prevailing
and anticipated economic conditions and historical losses by loan category.
General allowances have been established, based upon the aforementioned factors,
and allocated to the individual loan categories. Allowances are accrued on
specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the time such
amounts are delinquent 90 days. Interest is recognized for nonaccrual loans
only upon receipt, and only
FS-47
<PAGE>
after all principal amounts are current according to the terms of the contract.
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
ALLOWANCE FOR LOAN LOSSES
- -------------------------
The allowance for loan losses is maintained at an amount considered adequate
to provide for potential losses. The provision for loan losses is based on
periodic analysis of the loan portfolio by management. In this regard,
management considers numerous factors including, but not necessarily limited to,
general economic conditions, loan portfolio composition, prior loss experience
and independent appraisals. General economic conditions considered include the
local real estate economy, inflation, local employment rates and local business
development.
LOAN ORIGINATION FEES
- ---------------------
Loan fees and certain direct loan origination costs are deferred, and the net
fee or cost is recognized in interest income using the level-yield method over
the life of the loan.
FORECLOSED ASSETS HELD FOR SALE
- -------------------------------
Assets acquired by foreclosure or in settlement of debt and held for sale are
valued at fair value as of the date of foreclosure and a related valuation
allowance is provided for estimated costs to sell the assets. Management
evaluates the value of foreclosed assets held for sale periodically and
increases the valuation allowance for any subsequent declines in estimated fair
value. Changes in the valuation allowance are charged or credited to other
expense.
PREMISES AND EQUIPMENT
- ----------------------
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight line method over the
estimated useful lives of the assets.
INCOME TAXES
- ------------
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
FS-48
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
EARNINGS PER SHARE
- ------------------
Earnings per share is computed based on the weighted average number of shares
outstanding during the year, which totaled 152,087 during 1996, 1995 and 1994.
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of available-for-sale securities
are as follows:
<TABLE>
<CAPTION>
1996
-------------------------------------
GROSS APPROXIMATE
AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
----------- ----------- -----------
<S> <C> <C> <C>
Equity securities $11,562 $206,000 $217,562
=========== =========== ===========
<CAPTION>
1995
--------------------------------------
GROSS APPROXIMATE
AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
----------- ----------- ------------
<S> <C> <C> <C>
Equity securities $11,562 $147,000 $158,562
=========== =========== ============
</TABLE>
F-49
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
The amortized cost and approximate fair value of held-to-maturity securities
are as follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES
- ----------------------------
Certificates backed
by GNMA $1,851,099 $ 21,766 $ (20,990) $1,851,875
Certificates backed
by FNMA 1,161,520 3,087 (21,292) 1,143,315
Certificates backed
by FHLMC 1,373,767 20,121 (26,068) 1,367,820
---------- --------- ---------- ----------
Total Mortgage
Backed Securities 4,386,386 44,974 (68,350) 4,363,010
---------- --------- ---------- ----------
OTHER SECURITIES
- ----------------
U.S. treasury obligations 395,406 3,241 (3,834) 394,813
Obligations of U.S.
government agencies 3,765,558 29,830 (35,900) 3,759,488
Obligations of states and
political subdivisions 437,304 11,192 (1,801) 446,695
---------- --------- ---------- ----------
Total Other Securities 4,598,268 44,263 (41,535) 4,600,996
---------- --------- ---------- ----------
$8,984,654 $ 89,237 $(109,885) $8,964,006
========== ========= ========== ==========
</TABLE>
FS-50
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
<TABLE>
<CAPTION>
1995
-------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES
- ----------------------------
Certificates backed
by GNMA $1,248,484 $ 62,497 $ (5,635) $ 1,305,346
Certificates backed
by FNMA 1,366,443 33,913 (6,983) 1,393,373
Certificates backed
by FHLMC 1,370,999 16,660 (10,952) 1,376,707
---------- -------- ----------- -----------
Total Mortgage
Backed Securities 3,985,926 113,070 (23,570) 4,075,426
---------- -------- ----------- -----------
OTHER SECURITIES
- ----------------
U.S. treasury obligations 894,264 15,145 (1,846) 907,563
Obligations of U.S.
government agencies 5,042,242 86,653 (11,425) 5,117,470
Obligations of states and
political subdivisions 538,692 22,631 (267) 561,056
---------- -------- ----------- -----------
Total Other Securities 6,475,198 124,429 (13,538) 6,586,089
---------- -------- ----------- -----------
$10,461,124 $ 237,499 $ (37,108) $10,661,515
============ ========= =========== ===========
</TABLE>
FS-51
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVESTMENT SECURITIES, Continued
Maturities of held-to-maturity securities at December 31, 1996, were:
<TABLE>
<CAPTION>
1996
----------------------
AMORTIZED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
In one year or less $ 398,855 $ 400,187
After one through five years 1,761,902 1,767,580
After five through ten years 2,235,741 2,232,041
After ten years 201,770 201,188
Mortgage backed securities not
due on a single maturity date 4,386,386 4,363,010
---------- ----------
$8,984,654 $8,964,006
========== ==========
</TABLE>
The Association had no sales of debt securities during 1996, 1995 or 1994.
The weighted average interest rate on mortgage-backed securities was 6.81% and
6.94% at December 31, 1996 and 1995, respectively. None of the Association's
mortgage-backed securities mature on a single maturity date. The Association
had no sales of mortgage-backed securities during 1996, 1995 or 1994.
FS-52
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 3: LOANS
Loans at December 31, 1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
1-4 family residential mortgage loans $7,887,638 $7,200,103
Loans secured by deposits 109,656 109,120
---------- ----------
7,997,294 7,309,223
Allowance for loan losses (50,000) (50,000)
Undisbursed portion of loans-in-process (44,398) (54,084)
Deferred loan fees, net (71,875) (65,293)
---------- ----------
$7,831,021 $7,139,846
========== ==========
</TABLE>
A summary of the activity in the allowance for loan losses for the years ended
December 31, 1996, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 50,000 $50,000 $50,000
Provision charged to operations - - -
Loans charged off, net of recoveries - - -
--------- ------- -------
Balance, end of year $ 50,000 $50,000 $50,000
========= ======= =======
</TABLE>
The total loan portfolio had a weighted average interest rate of 8.10% and
8.06% at December 31, 1996 and 1995, respectively.
Impaired loans totaled $39,621 and $180,242 at December 31,1996 and 1995,
respectively. None of the allowance for loan losses relates to impaired loans.
Interest of $8,904 and $11,771 was recognized on average impaired loans of
$109,932 and $146,041 for 1996 and 1995, respectively. No interest was
recognized on impaired loans on a cash basis during 1996 and 1995.
At December 31, 1996 and 1995, the Association had loans totaling $113,376 and
$51,723, respectively, to employees, officers, directors, principal stockholders
and companies with which the Association's officers or directors are affiliated.
In management's opinion, such loans were made in the ordinary course of
business, and were made on substantially the same terms (including interest
rates and collateral) as those prevailing at the time for comparable
transactions with other persons.
FS-53
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 4: PREMISES AND EQUIPMENT
At December 31, 1996 and 1995, premises and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land $ 70,000 $ 70,000
Building and improvements 215,500 215,500
Furniture, fixtures and equipment 192,703 188,464
--------- ---------
478,203 473,964
Less accumulated depreciation (352,616) (335,089)
--------- ---------
$ 125,587 $ 138,875
========= =========
</TABLE>
NOTE 5: COMMITMENTS AND CREDIT RISK
The Association requires collateral to support financial instruments when it
is deemed necessary. The Association evaluates each customer's creditworthiness
on a case-by-case basis. The amount of collateral obtained upon extension of
credit is based on management's credit evaluation of the counterparty.
Collateral held includes first mortgage deeds of trust and savings accounts.
The Association is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments consist of commitments to extend credit.
Commitments to extend credit are agreements to lend to a customer so long as
there is no violation of any condition established in the lending contract.
Commitments generally have fixed expiration dates or other termination clauses.
Since some of the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
FS-54
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 5: COMMITMENTS AND CREDIT RISK, Continued
The Association's maximum exposure to credit loss under commitments to extend
credit is represented by the contractual amount of those instruments. The
Association uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
At December 31, 1996, the Association had no credit commitments outstanding.
NOTE 6: SAVINGS DEPOSITS
Savings deposits consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996
--------------------------
STATED RATE AMOUNT
------------- -----------
<S> <C> <C>
Passbook accounts 3.25% $ 3,972,371
-----------
Certificate accounts 3.25% - 4.99% 1,589,703
Certificate accounts 5.00% - 6.49% 8,606,340
Certificate accounts 6.50% 837,932
-----------
11,033,975
-----------
$15,006,346
===========
1995
--------------------------
STATED RATE AMOUNT
------------- -----------
Passbook accounts 3.25% $ 4,209,393
-----------
Certificate accounts 3.25% - 4.99% 2,992,759
Certificate accounts 5.00% - 6.49% 7,454,304
Certificate accounts 6.50% 810,324
-----------
11,257,387
-----------
$15,466,780
===========
</TABLE>
FS-55
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 6: SAVINGS DEPOSITS, Continued
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 or more was $847,081 and $744,988 on December 31, 1996 and 1995,
respectively.
The weighted average interest rate on certificates of deposit at December 31,
1996 and 1995 was 5.44% and 5.39%, respectively.
Maturities of certificate accounts at December 31, 1996, were:
<TABLE>
<S> <C>
1997 $ 6,411,982
1998 3,446,429
1999 1,175,564
-----------
$11,033,975
===========
</TABLE>
A summary of interest expense on deposits is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Passbook accounts $135,022 $150,430 $175,015
Certificate accounts 618,253 558,196 448,949
Early withdrawal penalties (1,800) (139) (2,522)
-------- -------- --------
$751,475 $708,487 $621,442
======== ======== ========
</TABLE>
NOTE 7: INCOME TAXES
PROVISION FOR INCOME TAXES
- --------------------------
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Taxes currently payable $ 46,257 $ 83,472 $135,364
Deferred income taxes (1,732) (3,472) (2,364)
-------- -------- --------
$ 44,525 $ 80,000 $133,000
======== ======== ========
</TABLE>
FS-56
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 7: INCOME TAXES, Continued
PROVISION FOR INCOME TAXES, CONTINUED
- -------------------------------------
A reconciliation of income tax expense at the statutory rate to the
Association's actual income tax expense is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Computed at the statutory rate (34%) $50,000 $ 72,000 $121,000
Increase (decrease) in taxes resulting from:
State taxes 7,950 12,200 14,700
Municipal interest (8,700) (7,500) (8,800)
Graduated federal rates and other (4,725) 3,300 6,100
------- -------- --------
Actual tax provision $ 44,525 $ 80,000 $133,000
======= ======== ========
</TABLE>
DEFERRED INCOME TAXES
- ---------------------
The tax effects of temporary differences related to deferred taxes included in
other assets on the balance sheets are:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Deferred loan fees $ 30,000 $ 25,000
Unearned ESOP compensation 22,000 33,000
-------- --------
52,000 58,000
-------- --------
Deferred tax liabilities:
Accumulated depreciation (3,000) (3,000)
Allowance for loan loss (4,000) (4,000)
Unrealized gains on available-
for-sale securities (80,000) (57,000)
Stock dividend (1,000) (1,000)
-------- --------
(88,000) (65,000)
-------- --------
Net deferred tax liability (36,000) $ (7,000)
======= ========
</TABLE>
FS-57
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 7: INCOME TAXES, Continued
DEFERRED INCOME TAXES, CONTINUED
- --------------------------------
Through 1996, if certain conditions were met in determining taxable income,
the Association was allowed a specific bad-debt deduction based on a percentage
of taxable income (presently 8 percent) or on specified experience formulas. In
1996 and 1995, the Association was not allowed a bad-debt deduction based on a
percentage of taxable income due to tax limitations. Beginning January 1, 1997,
tax laws require that all savings and loan associations change to the
"experience method" in accounting for bad debts and recapture any "applicable
excess reserves". The Association will not be required to recapture any
"applicable excess reserves" for tax purposes.
Retained earnings at December 31, 1996 and 1995 includes approximately
$525,000 for which no deferred federal income tax liability has been recognized.
This amount represents an allocation of income to bad debt deductions for tax
purposes only. Reduction of amounts so allocated for purposes other than tax
bad debt losses or adjustments arising from carryback or net operating losses
would create income for tax purposes only, which would be subject to the then-
current corporate income tax rate. The deferred income tax liability on the
preceding amounts that would have been recorded if they were expected to reverse
into taxable income in the foreseeable future totaled approximately $200,000 at
December 31, 1996 and 1995.
NOTE 8: EMPLOYEE STOCK OWNERSHIP PLAN
The Association has established an employee stock ownership plan (ESOP) for
the benefit of all employees who meet eligibility requirements. The ESOP
borrowed $137,920 to purchase 13,792 shares of the Association's stock. The
ESOP's loan is due December 15, 1999 and requires semi-annual interest payments
and annual principal payments. Interest is paid at the prime rate semi-
annually. The Association's contributions are determined annually by the board
of directors. To date, the board has approved contributions sufficient to pay
principal and interest on the ESOP debt.
During 1994 the Association prospectively adopted AICPA Statement of Position
93-6 "Employers' Accounting for Employee Stock Ownership Plans". In accordance
with SOP 93-6 the ESOP's debt is reflected in the Association's balance sheet as
long-term borrowing, with a corresponding reduction in stockholders' equity
termed "Unearned ESOP Shares," net of tax. The estimated fair value of unearned
ESOP shares at December 31, 1996 and 1995 totaled $135,000 and $196,000,
respectively, based on an independent appraisal of the Association's stock.
FS-58
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 8: EMPLOYEE STOCK OWNERSHIP PLAN, Continued
Unearned ESOP shares are allocated to ESOP participants on the basis of the
ratio of current year debt service payments to total current and future debt
service. Compensation expense is accrued based on the estimated fair value of
shares committed to be released each year. Dividends on unallocated ESOP shares
are used to make debt service payments; dividends on allocated shares are
recorded as reductions of retained earnings.
ESOP compensation expense totaled $50,226, $53,402 and $52,236 for the years
ended December 31, 1996, 1995 and 1994, respectively.
At December 31, 1996, ESOP shares were as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares allocated 6,551
Shares committed to be released 2,274
Unallocated shares 4,967
</TABLE>
The Association has an obligation to repurchase any shares distributed to ESOP
participants if, at the time of distribution, the stock is not publicly traded.
The estimated fair value of shares subject to this repurchase obligation totaled
$240,000 at December 31, 1996.
The adoption of SOP 93-6 had no effect on prior year financial statements. In
prior years, ESOP compensation expense was computed based on the cost, rather
than fair value, of unearned ESOP shares using the shares allocated method. The
adoption of SOP 93-6 increased 1994 ESOP compensation expense by $30,739.
FS-59
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 9: REGULATORY MATTERS
The Association is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31, 1996,
approximately $1,300,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
The Association also is subject to various regulatory capital requirements
administered by the federal regulatory agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Association's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Association must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Association's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I, Tangible and Core capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1996, that the Association meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996, the most recent notification from the Office of
Thrift Supervision categorized the Association as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Association must maintain minimum total risk-based, Tier I
risk-based, Tier I leverage, Tangible and Core capital ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institution's category.
FS-60
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 9: REGULATORY MATTERS, Continued
The Associations actual capital amounts and ratios are also presented in the
table. No deduction from capital was made for interest-rate risk.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
--------------- ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital
(to Risk Weighted Assets) $3,781,752 62.6% $482,960 8.0% $603,700 10.0%
Tier I Capital
(to Risk Weighted Assets) $3,605,752 59.7% $241,480 4.0% $362,220 6.0%
Tier I Capital
(to Average Assets) $3,605,752 18.9% $764,778 4.0% $955,973 5.0%
Tangible Capital
(to Average Assets) $3,605,752 18.9% $286,792 1.5% $286,792 1.5%
Core Capital
(to Average Assets) $3,605,752 18.9% $573,584 3.0% $573,584 3.0%
AS OF DECEMBER 31, 1995
Total Capital
(to Risk Weighted Assets) $3,716,305 63.6% $467,520 8.0% $584,400 10.0%
Tier I Capital
(to Risk Weighted Assets) $3,576,305 61.1% $233,760 4.0% $350,640 6.0%
Tier I Capital
(to Average Assets) $3,576,305 18.6% $767,923 4.0% $959,904 5.0%
Tangible Capital
(to Average Assets) $3,576,305 18.6% $287,971 1.5% $287,977 1.5%
Core Capital
(to Average Assets) $3,576,305 18.6% $575,942 3.0% $575,942 3.0%
</TABLE>
FS-61
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 10: ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 115
At January 1, 1994, the Association adopted Statement of Financial Accounting
Standards No. 115 regarding investments in debt and equity securities. As
described in Note 1, this statement creates categories of securities based upon
management's intent. Securities meeting the criteria for the "available for
sale" category were adjusted to their fair values as of January 1, 1994, with a
corresponding valuation reserve, net of income taxes, reported in stockholders'
equity. The cumulative effect of adopting FAS 115 at January 1, 1994 was to
increase stockholders' equity by $53,000.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ADDITIONAL CASH INFORMATION
---------------------------
Interest paid $757,426 $692,948
Income taxes paid $ 22,313 $109,624
</TABLE>
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND CASH EQUIVALENTS
- -------------------------
For these short-term instruments, the carrying amount approximates fair value.
INTEREST-BEARING CERTIFICATES
- -----------------------------
For interest-bearing certificates in other financial institutions, the
carrying amount approximates fair value.
FS-62
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
AVAILABLE-FOR-SALE SECURITIES
- -----------------------------
Fair values for available-for-sale securities, which also are the amounts
recognized in the balance sheets, equal quoted market prices, if available. If
quoted market prices are not available, fair values are estimated based on
quoted market prices of similar securities.
HELD-TO-MATURITY SECURITIES
- ---------------------------
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
LOANS
- -----
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with
similar characteristics were aggregated for purposes of the calculations. The
carrying amount of accrued interest approximates its fair value.
DEPOSITS
- --------
The fair value of savings accounts is the amount payable on demand at the
reporting date (i.e., their carrying amount). The fair value of fixed-maturity
time deposits is estimated using a discounted cash flow calculation that applies
the rates currently offered for deposits of similar remaining maturities. The
carrying amount of accrued interest payable approximates its fair value.
LONG-TERM BORROWING
- -------------------
Rates currently available to the Association for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
FS-63
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
FAIR VALUE TABLE
- ----------------
The following table presents estimated fair values of the Association's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which method involves significant
judgements by management and uncertainties. Fair value is the estimated amount
at which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial instruments and because
management does not intend to sell these financial instruments, the Association
does not know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 920,987 $ 920,987 $ 633,105 $ 633,105
Interest-bearing certificates
in other financial
institutions $ 495,000 $ 495,000 $ 397,000 $ 397,000
Available-for-sale securities $ 217,562 $ 217,562 $ 158,562 $ 158,562
Held-to-maturity securities $8,984,654 $8,964,006 $10,461,124 $10,661,515
Interest receivable $ 145,099 $ 145,099 $ 185,336 $ 185,336
Loans, net of allowance
for loan losses $7,831,021 $7,809,456 $ 7,139,846 $ 7,148,727
</TABLE>
FS-64
<PAGE>
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SULLIVAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
<TABLE>
<CAPTION>
FAIR VALUE TABLE, CONTINUED
- ---------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Financial liabilities:
Deposits $15,024,049 $15,024,049 $15,466,780 $15,499,770
Long-term borrowing $ 55,544 $ 55,544 $ 78,811 $ 78,811
Interest payable $ 89,638 $ 89,638 $ 89,090 $ 89,090
</TABLE>
NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of
credit risk are discussed in the footnote on commitments and credit risk.
NOTE 14: SUBSEQUENT EVENT
MERGER
- ------
American Federal Savings and Loan Association of Sullivan (AFSL) and Mid-
Missouri Holding Company, Inc. (Mid-MO) with its wholly-owned subsidiary, Bank
of Sullivan (BOS), have entered into a plan of merger with Mid-MO and BOS being
the surviving entity. Under the plan, the shareholders of AFSL will exchange
100% of their stock in exchange for cash and stock of Mid-MO. The transaction
is subject to the approval of the shareholders and federal and state regulatory
agencies.
FS-65
<PAGE>
APPENDIX A
----------
________________________________________________________________________________
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN,
a Federal savings and loan association,
MID-MISSOURI HOLDING COMPANY, INC.,
a Missouri corporation
and
BANK OF SULLIVAN,
a Missouri bank
Dated December 6, 1996
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
- -----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE -- TERMS OF THE MERGER AND CLOSING.................................. A-1
Section 1.01. The Merger.................................................. A-1
Section 1.02. Merging Institution......................................... A-1
Section 1.03. Surviving Institution....................................... A-1
Section 1.04. Effect of the Merger........................................ A-1
Section 1.05. Merger Consideration; Conversion of Shares.................. A-2
Section 1.06. The Closing................................................. A-3
Section 1.07. Closing Date................................................ A-3
Section 1.08. Exchange Procedures; Surrender of Certificates.............. A-3
Section 1.09. Actions At Closing.......................................... A-4
Section 1.10. Tax Consequences............................................ A-5
ARTICLE TWO -- REPRESENTATIONS OF AMERICAN FEDERAL.............................. A-6
Section 2.01. Organization and Capital Stock.............................. A-6
Section 2.02. Authorizations; No Defaults................................. A-6
Section 2.03. Subsidiaries; Partnerships; Joint Ventures.................. A-7
Section 2.04. Financial Information....................................... A-7
Section 2.05. Absence of Changes.......................................... A-7
Section 2.06. Regulatory Enforcement Matters.............................. A-7
Section 2.07. Tax Matters................................................. A-7
Section 2.08. Litigation.................................................. A-7
Section 2.09. Employment Agreements....................................... A-8
Section 2.10. Reports..................................................... A-8
Section 2.11. Investment Portfolio........................................ A-8
Section 2.12. Loan Portfolio.............................................. A-8
Section 2.13. Employee Matters and ERISA.................................. A-8
Section 2.14. Title to Properties; Insurance.............................. A-10
Section 2.15. Environmental Matters....................................... A-10
Section 2.16. Compliance with Law......................................... A-11
Section 2.17. Brokerage................................................... A-11
Section 2.18. Undisclosed Liabilities..................................... A-11
Section 2.19. Statements True and Correct................................. A-11
ARTICLE THREE -- REPRESENTATIONS OF MID-MISSOURI
AND SUBSIDIARY BANK............................................ A-11
Section 3.01. Organization and Capital Stock.............................. A-11
Section 3.02. Authorization............................................... A-12
Section 3.03. Financial Information....................................... A-12
Section 3.04. Absence of Changes.......................................... A-13
Section 3.05. Litigation.................................................. A-13
Section 3.06. Reports..................................................... A-13
Section 3.07. Compliance With Law......................................... A-13
Section 3.08. Brokerage................................................... A-13
Section 3.09. Statements True and Correct................................. A-13
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
ARTICLE FOUR -- AGREEMENTS OF AMERICAN FEDERAL.................................. A-14
Section 4.01. Business in Ordinary Course................................. A-14
Section 4.02. Breaches.................................................... A-16
Section 4.03. Submission to Stockholders.................................. A-16
Section 4.04. Consents to Contracts and Leases............................ A-16
Section 4.05. Conforming Accounting and Reserve Policies.................. A-17
Section 4.06. Consummation of Agreement................................... A-17
Section 4.07. Environmental Reports....................................... A-18
Section 4.08. Access to Information....................................... A-18
Section 4.09. Restriction on Resales...................................... A-18
ARTICLE FIVE -- AGREEMENTS OF MID-MISSOURI...................................... A-19
Section 5.01. Regulatory Approvals and Registration Statement............. A-19
Section 5.02. Breaches.................................................... A-19
Section 5.03. Consummation of Agreement................................... A-19
Section 5.04. Directors' and Officers' Liability Insurance and
Indemnification............................................. A-19
ARTICLE SIX -- CONDITIONS PRECEDENT TO THE MERGER............................... A-20
Section 6.01. Conditions to Obligations of Mid-Missouri and
Subsidiary Bank............................................. A-20
Section 6.02. Conditions to American Federal's Obligations................ A-21
ARTICLE SEVEN -- TERMINATION OR ABANDONMENT..................................... A-22
Section 7.01. Mutual Agreement............................................ A-22
Section 7.02. Breach of Agreements........................................ A-22
Section 7.03. Environmental Reports....................................... A-22
Section 7.04. Failure of Conditions....................................... A-22
Section 7.05. Approval Denial............................................. A-22
Section 7.06. Shareholder Approval Denial................................. A-22
Section 7.07. Regulatory Enforcement Matters.............................. A-22
Section 7.08. Automatic Termination....................................... A-23
ARTICLE EIGHT -- GENERAL........................................................ A-23
Section 8.01. Confidential Information.................................... A-23
Section 8.02. Publicity................................................... A-23
Section 8.03. Return of Documents......................................... A-23
Section 8.04. Notices..................................................... A-23
Section 8.05. Liabilities................................................. A-24
Section 8.06. Expenses.................................................... A-25
Section 8.07. Nonsurvival of Representations and Warranties............... A-25
Section 8.08. Entire Agreement............................................ A-25
Section 8.09. Headings and Captions....................................... A-25
Section 8.10. Waiver, Amendment or Modification........................... A-25
Section 8.11. Rules of Construction....................................... A-25
Section 8.12. Counterparts................................................ A-25
Section 8.13. Successors and Assigns...................................... A-25
Section 8.14. Governing Law; Assignment................................... A-25
Section 8.15. Time........................................................ A-25
SIGNATURES...................................................................... A-26
</TABLE>
A-ii
<PAGE>
EXHIBITS
- --------
EXHIBIT 1.07 - Statutory Merger Agreement
EXHIBIT 1.09(a) - American Federal's Legal Opinion Matters
EXHIBIT 1.09(b) - Mid-Missouri's Legal Opinion Matters
EXHIBIT 4.09 - Form of Affiliate Agreement
SCHEDULES
- ---------
AMERICAN FEDERAL'S DISCLOSURE SCHEDULE
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made December 6,
1996, by and among AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN, a
Federal savings and loan association ("American Federal"), MID-MISSOURI HOLDING
CO., a Missouri corporation ("Mid-Missouri"), and BANK OF SULLIVAN, a Missouri
bank ("Subsidiary Bank").
In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows.
ARTICLE ONE
-----------
TERMS OF THE MERGER AND CLOSING
-------------------------------
SECTION 1.01. THE MERGER. Pursuant to the terms and provisions of this
------------ ----------
Agreement and the Home Owners' Loan Act of 1934, the regulations of the Office
of Thrift Supervision (the "O.T.S.") promulgated thereunder, the banking laws of
the State of Missouri and the regulations of the Missouri Division of Finance
(the "Division") promulgated thereunder (together, the "Corporate Law"),
American Federal shall merge with and into Subsidiary Bank under the charter of
the latter (the "Merger").
SECTION 1.02. MERGING INSTITUTION. American Federal shall be the merging
------------ -------------------
institution in the Merger and its corporate identity and existence, separate and
apart from Subsidiary Bank, shall cease upon consummation of the Merger.
SECTION 1.03. SURVIVING INSTITUTION. Subsidiary Bank shall be the
------------ ---------------------
surviving institution in the Merger (sometimes referred to as the "Surviving
Bank" when reference is made as of the Effective Time (as defined in Section
1.07 hereof) or thereafter). The Charter and Bylaws of the Surviving Bank shall
read in their entirety as do the Charter and Bylaws of Subsidiary Bank as of the
date hereof.
SECTION 1.04. EFFECT OF THE MERGER. The Merger shall have all of the
------------ --------------------
effects provided by the Corporate Law. The business of the Surviving Bank shall
be that of a Missouri-chartered commercial bank. This business shall be
conducted by the Surviving Bank at its main office and at all legally
established branch offices. The number of directors which the Surviving Bank
shall have shall be ten (10) and the board of directors of Subsidiary Bank at
the Effective Time shall be the board of directors of the Surviving Bank. The
terms which the directors shall serve shall be as provided in the Bylaws of
Subsidiary Bank or until their successors are duly elected and qualified. At
the Effective Time, the Surviving Bank shall be considered the same business and
corporate entity as each of Subsidiary Bank and American Federal (collectively,
the "Constituent Institutions") and thereupon and thereafter all the property,
rights, privileges, powers and franchises of each of the Constituent
Institutions shall vest in the Surviving Bank and the Surviving Bank shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties, including any liquidation account maintained by the
Constituent Institutions, of each of the Constituent Institutions and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property, rights, privileges, powers,
franchises, debts, liabilities, obligations, duties and relationships had been
originally acquired, incurred or entered into by the Surviving Bank. In
addition, any reference to either of the Constituent Institutions in any
contract or document, whether executed or taking effect before or after
A-1
<PAGE>
the Effective Time, shall be considered a reference to the Surviving Bank if not
inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceedings to which either of the Constituent
Institutions is a party shall not be deemed to have been abated and shall have
the same force and effect as if the Merger had not occurred; or the Surviving
Bank may be substituted as a party to such action or proceedings, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Institutions if the Merger had
not occurred. The liquidation account maintained by American Federal shall be
assumed by the Surviving Bank and shall be and become the liquidation account of
the Surviving Bank upon consummation of the Merger.
SECTION 1.05. MERGER CONSIDERATION; CONVERSION OF SHARES.
------------ ------------------------------------------
(a) At the Effective Time, each share of common stock, par value $1.00 per
share, of American Federal (the "American Federal Common") issued and
outstanding immediately prior to the Effective Time, other than shares any
holders of which have duly exercised and perfected their dissenters' rights
under the Corporate Law, shall, by virtue of the Merger and without any action
on the part of the holders thereof, be converted into the right to receive, in
the proportions described in Section 1.05(c) hereof, a combination of cash and
common stock, par value $10.00 per share, of Mid-Missouri (the "Mid-Missouri
Common") in an aggregate amount equal to the per share Closing Book Value (as
defined in Section 1.05(b) hereof) of American Federal (such aggregate amount of
cash and Mid-Missouri Common is hereinafter referred to as the "Merger
Consideration").
(b) The term "Closing Book Value" shall mean the amount of the consolidated
shareholders' equity accounts, exclusive of preferred stock, of American
Federal, reduced by any and all accruals, expenses, charge-offs, deductions or
adjustments to the accounts of American Federal in connection with the Merger.
The Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the Closing Date occurs by the
accounting firm of Baird, Kurtz & Dobson in accordance with generally accepted
accounting principles consistently applied ("GAAP").
(c) The aggregate number of shares of Mid-Missouri Common issued in the
Merger (the "Stock Component") will equal the quotient of (A) divided by (B),
where (A) equals seven percent (7%) of the Total Assets of American Federal, and
(B) equals the per share Book Value of Mid-Missouri Common. For purposes of
this Section 1.05(c), the "Total Assets" of American Federal shall mean the
total assets as shown on the books of American Federal as of the last day of the
month immediately preceding the month in which the Closing Date occurs, and the
"Book Value" of Mid-Missouri Common shall mean the amount of the consolidated
shareholders' equity accounts, exclusive of preferred stock, of Mid-Missouri as
of the last day of the month immediately preceding the month in which the
Closing Date occurs. The aggregate cash portion of the purchase price (the
"Cash Component") shall equal the difference between the Merger Consideration
minus the aggregate Book Value of the Stock Component as described above. No
fractional shares of Mid-Missouri Common shall be issued and, in lieu thereof,
holders of shares of American Federal Common who would otherwise be entitled to
a fractional share interest in Mid-Missouri Common (after taking into account
all shares of American Federal Common held by such holder) shall be paid an
amount in cash (which such cash shall be added to, and considered a part of, the
Cash Component, as defined below) in an amount equal to the product of such
fractional share interest and the Book Value of a share of Mid-Missouri Common.
Notwithstanding the foregoing, the number of whole shares of Mid-Missouri Common
issued to each shareholder of American Federal will be increased, as necessary,
and the Cash Component of the Merger Consideration payable to each shareholder
of American Federal will be decreased, as necessary, such that the aggregate
Book Value of
A-2
<PAGE>
the Stock Component, determined as of the Closing Date, will be not less than
40% of the aggregate Merger Consideration payable to all shareholders of
American Federal.
(d) At the Effective Time, all of the outstanding shares of American Federal
Common, by virtue of the Merger and without any action on the part of the
holders thereof, shall no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of any certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of American Federal Common (the "Certificates") shall
thereafter cease to have any rights with respect to such shares, except the
right of such holders to receive, without interest, the Merger Consideration
upon the surrender of such Certificate or Certificates in accordance with
Section 1.08 hereof or the right provided under Section 1.05(g) hereof, as
applicable.
(e) At the Effective Time, each share of American Federal Common, if any,
held in the treasury of American Federal (other than shares held in trust
accounts for the benefit of others or in other fiduciary, nominee or similar
capacities) immediately prior to the Effective Time shall be canceled.
(f) Each share of common stock, par value $20.00 per share, of Subsidiary
Bank outstanding immediately prior to the Effective Time shall remain
outstanding unaffected by the Merger.
(g) If holders of American Federal Common are entitled to and do object to
the Merger and demand payment of the value of their shares under the Corporate
Law, any issued and outstanding shares of American Federal Common held by an
objecting holder shall not be converted as described in this Section 1.05 but
from and after the Effective Time shall represent only the right to receive such
value as may be determined to be due to such objecting holder pursuant to the
Corporate Law; provided, however, that each share of American Federal Common
outstanding immediately prior to the Effective Time and held by an objecting
holder who shall, after the Effective Time, either withdraw his or her demand
for payment of value or lose his or her right to so object shall have only such
rights as are provided under the Corporate Law.
SECTION 1.06. THE CLOSING. The closing of the Merger (the "Closing") shall
------------ -----------
take place at the main offices of Mid-Missouri at 10:00 A.M. Central Time on the
Closing Date described in Section 1.07 of this Agreement.
SECTION 1.07. CLOSING DATE. The Closing shall take place at the close of
------------ ------------
business on the last business day of the month during which each of the
conditions in Sections 6.01 and 6.02 is satisfied or waived by the appropriate
party or on such other date after such satisfaction or waiver as Mid-Missouri
and American Federal may agree (the "Closing Date"). The effective time of the
Merger (the "Effective Time") shall be the time of filing for record, in the
office of the recorder of deeds of each of Franklin County and Crawford County,
Missouri, a copy of the short-form merger agreement attached hereto as Exhibit
1.07 and executed on the date hereof (the "Statutory Merger Agreement"),
together with such other documents as may be required by the Corporate Law.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
------------ ----------------------------------------------
(a) _________________________________________ shall act as Exchange Agent in
the Merger (the "Exchange Agent").
A-3
<PAGE>
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each record holder of any Certificate or Certificates whose
shares were converted into the right to receive the Merger Consideration, a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Mid-Missouri may reasonably specify) (each such letter,
the "Merger Letter of Transmittal") and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender to the Exchange Agent of a Certificate, together with a Merger Letter
of Transmittal duly executed and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor solely the
Merger Consideration. No interest on the Merger Consideration issuable upon the
surrender of the Certificates shall be paid or accrued for the benefit of
holders of Certificates. If the Merger Consideration is to be issued to a
person other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered Certificate
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such issuance shall pay to the Exchange Agent any required
transfer or other taxes or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable.
(c) At any time following six (6) months after the Effective Time, Mid-
Missouri shall be entitled to terminate the Exchange Agent relationship, and
thereafter holders of Certificates shall be entitled to look only to Mid-
Missouri (subject to abandoned property, escheat or other similar laws) with
respect to the Merger Consideration issuable upon surrender of their
Certificates.
(d) No dividends that are otherwise payable on shares of Mid-Missouri Common
constituting the Stock Component of the Merger Consideration shall be paid to
persons entitled to receive such shares of Mid-Missouri Common until such
persons surrender their Certificates. Upon such surrender, there shall be paid
to the person in whose name the shares of Mid-Missouri Common shall be issued
any dividends which may have become payable with respect to such shares of Mid-
Missouri Common (without interest and less the amount of taxes, if any, which
may have been imposed thereon), between the Effective Time and the time of such
surrender.
(e) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Mid-Missouri, the posting by
such person of a bond in such amount as Mid-Missouri may determine is necessary
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in respect thereof
pursuant to this Agreement.
SECTION 1.09. ACTIONS AT CLOSING.
------------ ------------------
(a) At the Closing, American Federal shall deliver to Mid-Missouri:
(i) a certified copy of the Charter of American Federal;
(ii) a Certificate signed by an appropriate officer of American
Federal stating that (A) each of the representations and warranties
contained in Article Two is true and correct in all material respects at the
time of the Closing with the same force and effect as if such
representations and warranties had been made at Closing, (B) all of the
conditions set forth in Sections 6.01(b) and 6.01(d) (but, with respect to
the latter section, only to approvals which
A-4
<PAGE>
American Federal is required by law to obtain) have been satisfied or waived
as provided therein and (C) this Agreement and the Statutory Merger
Agreement have been approved by the requisite vote of American Federal's
stockholders in accordance with the Corporate Law and with American
Federal's Charter and Bylaws;
(iii) a certified copy of the resolutions of American Federal's
Board of Directors and stockholders, as required for valid approval of the
execution of this Agreement and the Statutory Merger Agreement and the
consummation of the Merger and the other transactions contemplated in
connection therewith;
(iv) Certificate of the O.T.S., dated a recent date, stating that
American Federal is in good standing;
(v) such documents as may be required of American Federal pursuant
to the Corporate Law to cause the Merger to become effective at Closing; and
(vi) a legal opinion from counsel for American Federal, in form
reasonably acceptable to Mid-Missouri's counsel, opining with respect to the
matters listed on Exhibit 1.09(a) hereto.
(b) At the Closing, Mid-Missouri shall deliver to American Federal:
(i) a Certificate signed by an appropriate officer of Mid-Missouri
stating that (A) each of the representations and warranties contained in
Article Three is true and correct in all material respects at the time of
the Closing with the same force and effect as if such representations and
warranties had been made at Closing, and (B) all of the conditions set forth
in Sections 6.02(b) and 6.02(d) (but excluding the approval of American
Federal's shareholders) have been satisfied or waived as provided therein;
(ii) a certified copy of the resolutions of Mid-Missouri's Board of
Directors authorizing the execution of this Agreement and the Statutory
Merger Agreement and the consummation of the Merger and the other
transactions contemplated in connection therewith;
(iii) a certified copy of the resolutions of Subsidiary Bank's
Board of Directors and stockholder, as required for valid approval of the
execution of this Agreement and the Statutory Merger Agreement and the
consummation of the Merger and the other transactions contemplated in
connection therewith;
(iv) a legal opinion from counsel for Mid-Missouri, in form
reasonably acceptable to American Federal's counsel, opining with respect to
the matters listed on Exhibit 1.09(b) hereto.
(c) At the Closing, Mid-Missouri shall deposit with the Exchange Agent
pursuant to the Exchange Agreement immediately available funds in the amount of
the aggregate Cash Component of the Merger Consideration for the American
Federal Common and certificates representing the shares of Mid-Missouri Common
to be issued pursuant to Section 1.05 in exchange for outstanding shares of
American Federal Common.
SECTION 1.10. TAX CONSEQUENCES. It is intended that the Merger shall
------------ ----------------
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"),
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and that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code.
ARTICLE TWO
-----------
REPRESENTATIONS OF AMERICAN FEDERAL
-----------------------------------
American Federal hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) American Federal is a federally chartered, stock-form savings and loan
association duly organized, validly existing and in good standing under the laws
of the United States with full corporate power and all necessary governmental
authorizations to own all of its properties and assets, to incur all of its
liabilities and to carry on its business as presently conducted.
(b) The authorized capital stock of American Federal consists of 152,087
shares of American Federal Common, of which, as of the date hereof, 152,087
shares are issued and outstanding. No shares of preferred stock have been
authorized or issued. All of the issued and outstanding shares of American
Federal Common are duly and validly issued and outstanding and are fully paid
and non-assessable. None of the outstanding shares of American Federal Common
has been issued in violation of any preemptive rights of the current or past
stockholders of American Federal. As of the date hereof, American Federal has
neither granted nor is there outstanding any warrants, stock options or the like
representing the right to acquire any shares of American Federal Common. Except
as disclosed in Section 2.01(b) of that certain confidential writing delivered
by American Federal to Mid-Missouri and executed by American Federal and Mid-
Missouri concurrently with the delivery and execution of this Agreement (the
"Disclosure Schedule"), each Certificate representing shares of American Federal
Common issued by American Federal in replacement of any Certificate theretofore
issued by it which was claimed by the record holder thereof to have been lost,
stolen or destroyed was issued by American Federal only upon receipt of an
affidavit of lost stock certificate and a bond sufficient to indemnify American
Federal against any claim that may be made against it on account of the alleged
loss, theft or destruction of any such Certificate or the issuance of such
replacement Certificate.
(c) Except as set forth in subsection 2.01(b) hereof, there are no shares of
capital stock or other equity securities of American Federal outstanding and no
outstanding options, warrants, rights to subscribe for, calls, or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of American Federal or
contracts, commitments, understandings or arrangements by which American Federal
is or may be obligated to issue additional shares of its capital stock or
options, warrants or rights to purchase or acquire any additional shares of its
capital stock.
SECTION 2.02. AUTHORIZATIONS; NO DEFAULTS. American Federal's Board of
------------ ---------------------------
Directors has, by all appropriate action, approved this Agreement and the Merger
and authorized the execution hereof on its behalf by its duly authorized
officers and the performance by American Federal of its obligations hereunder.
Nothing in the Charter or Bylaws of American Federal, as amended, or any other
agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or to which it
is bound or subject would prohibit or inhibit American Federal from
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consummating this Agreement and the Merger on the terms and conditions herein
contained. This Agreement has been duly and validly executed and delivered by
American Federal and constitutes a legal, valid and binding obligation of
American Federal, enforceable against American Federal in accordance with its
terms. American Federal is not in default under or in violation of any
provision of its charter or articles of incorporation, bylaws, or any promissory
note, indenture or any evidence of indebtedness or security therefor, lease,
contract, purchase or other commitment or any other agreement which is material
to American Federal.
SECTION 2.03. SUBSIDIARIES; PARTNERSHIPS; JOINT VENTURES. American Federal
------------ ------------------------------------------
has no subsidiaries and is not a party to any partnership or joint venture.
SECTION 2.04. FINANCIAL INFORMATION. The audited balance sheets of
------------ ---------------------
American Federal as of December 31, 1995 and 1994, and related audited
statements of income, changes in stockholders' equity and cash flows for the
three (3) years ended December 31, 1995, together with the notes thereto, and
the unaudited balance sheet of American Federal as of September 30, 1996, and
the related unaudited income statement and statement of changes in shareholders'
equity and cash flows for the nine (9) months then ended, all of which are
included in Section 2.04 of the Disclosure Schedule (together, the "American
Federal Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
disclosed therein) and fairly present the financial position and the results of
operations, changes in stockholders' equity and cash flows of American Federal
as of the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of which
will be material).
SECTION 2.05. ABSENCE OF CHANGES. Since December 31, 1995, there has not
------------ ------------------
been any material adverse change in the financial condition, the results of
operations or the business or prospects of American Federal, nor have there been
any events or transactions having such a material adverse effect which should be
disclosed in order to make the American Federal Financial Statements not
misleading. Since the date of the most recent O.T.S. examination reports, there
has been no material adverse change in the financial condition, the results of
operations or the business or prospects of American Federal.
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as may be disclosed
------------ ------------------------------
in Section 2.06 of the Disclosure Schedule, American Federal is not subject to,
and has not received any notice or advice that it may become subject to, any
order, agreement, memorandum of understanding or any other regulatory
enforcement action or proceeding with or by any federal or state agency charged
with the supervision or regulation of thrifts or thrift holding companies or
engaged in the insurance of thrift deposits or any other governmental agency
having supervisory or regulatory authority with respect to American Federal.
SECTION 2.07. TAX MATTERS. American Federal has filed all federal, state
------------ -----------
and local tax returns due in respect of any of its business or properties in a
timely fashion and has paid or made provision for all amounts due as shown on
such returns. All such returns fairly reflect the information required to be
presented therein. All provisions for accrued but unpaid taxes contained in the
American Federal Financial Statements were made in accordance with generally
accepted accounting principles and in the aggregate do not materially fail to
provide for anticipated tax liabilities.
SECTION 2.08. LITIGATION. Except as may be disclosed in Section 2.08 of
------------ ----------
the Disclosure Schedule, there is no litigation, claim or other proceeding
pending or, to the knowledge of American Federal,
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threatened, against American Federal, or of which the property of American
Federal is or would be subject.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Except as may be disclosed in Section
------------ ---------------------
2.09 of the Disclosure Schedule, American Federal is not a party to or bound by
any contract for the employment, retention or engagement, or with respect to the
severance, of any officer, employee, agent, consultant or other person or entity
which, by its terms, is not terminable by American Federal on thirty (30) days
written notice or less without the payment of any amount by reason of such
termination. A true, accurate and complete copy of each such agreement,
together with any and all amendments or supplements thereto, is included in
Section 2.09 of the Disclosure Schedule.
SECTION 2.10. REPORTS. Except as may be disclosed in Section 2.10 of the
------------ -------
Disclosure Schedule, American Federal has filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with (i) the O.T.S., (ii) any applicable state securities
or banking or thrift authorities, and (iii) any other governmental authority
with jurisdiction over American Federal. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits and
schedules thereto, complied in all material respects with the relevant statutes,
rules and regulations enforced or promulgated by the regulatory authority with
which they were filed, and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 2.11. INVESTMENT PORTFOLIO. All United States Treasury securities,
------------ --------------------
obligations of other United States Government agencies and corporations,
obligations of States and political subdivisions of the United States and other
investment securities held by American Federal, as reflected in the latest
balance sheet of American Federal included in the American Federal Financial
Statements, are carried in the aggregate at no more than cost adjusted for
amortization of premiums and accretion of discounts, except as otherwise
required by FASB 115.
SECTION 2.12. LOAN PORTFOLIO. Except as may be disclosed in Section 2.12
------------ --------------
of the Disclosure Schedule, (i) all loans and discounts shown on the American
Federal Financial Statements at September 30, 1996 or which were entered into
after September 30, 1996, but before the Closing Date, were and will be made in
all material respects for good, valuable and adequate consideration in the
ordinary course of the business of American Federal, in accordance in all
material respects with sound banking practices, and are not subject to any known
defenses, setoffs or counterclaims, including without limitation any such as are
afforded by usury or truth in lending laws, except as may be provided by
bankruptcy, insolvency or similar laws or by general principles of equity; (ii)
the notes or other evidences of indebtedness evidencing such loans and all forms
of pledges, mortgages and other collateral documents and security agreements are
and will be, in all material respects, enforceable, valid, true and genuine and
what they purport to be; and (iii) American Federal has complied and will prior
to the Closing Date comply with all laws and regulations relating to such loans,
or to the extent there has not been such compliance, such failure to comply will
not materially interfere with the collection of any such loan.
SECTION 2.13. EMPLOYEE MATTERS AND ERISA.
------------ --------------------------
(a) American Federal has not entered into any collective bargaining
agreement with any labor organization with respect to any group of employees of
American Federal and to the knowledge of
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<PAGE>
American Federal there is no present effort nor existing proposal to attempt to
unionize any group of employees of American Federal.
(b) Except as may be disclosed in Section 2.13(b) of the Disclosure
Schedule, American Federal has not entered into any employment agreement with
respect to any of its employees.
(c) Except as may be disclosed in Section 2.13(c) of the Disclosure
Schedule, (i) American Federal is and has been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and American Federal is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against American
Federal pending or, to the knowledge of American Federal, threatened before the
National Labor Relations Board; (iii) there is no labor dispute, strike,
slowdown or stoppage actually pending or, to the knowledge of American Federal,
threatened against or directly affecting American Federal; and (iv) American
Federal has not experienced any work stoppage or other labor difficulty during
the past five (5) years.
(d) Except as may be disclosed in Section 2.13(d) of the Disclosure
Schedule, American Federal does not maintain, contribute to or participate in or
have any liability under any employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any nonqualified employee benefit plans or deferred compensation, bonus, stock
or incentive plans, or other employee benefit or fringe benefit programs for the
benefit of former or current employees of American Federal (the "Employee
Plans"). No present or former employee of American Federal has been charged
with breaching nor has breached a fiduciary duty under any of the Employee
Plans. American Federal does not participate in, nor has it in the past five
(5) years participated in, nor has it any present or future obligation or
liability under, any multiemployer plan (as defined at Section 3(37) of ERISA).
Except as may be disclosed in Section 2.13(d) of the Disclosure Schedule,
American Federal does not maintain, contribute to, or participate in, any plan
that provides health, major medical, disability or life insurance benefits to
former employees of American Federal except as provided in Section 4980B of the
Code.
(e) American Federal does not maintain, nor has it maintained for the past
ten (10) years, any Employee Plans subject to Title IV of ERISA or Section 412
of the Code. No reportable event (as defined in Section 4043 of ERISA) has
occurred with respect to any Employee Plans as to which a notice would be
required to be filed with the Pension Benefit Guaranty Corporation. No claim is
pending, and American Federal has not received notice of any threatened or
imminent claim with respect to any Employee Plan (other than a routine claim for
benefits for which plan administrative review procedures have not been
exhausted) for which American Federal would be liable after September 30, 1996,
except as will be reflected on the American Federal Financial Statements.
American Federal does not have any liabilities for excise taxes under Sections
4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under Section
502 of ERISA with respect to any Employee Plan. All Employee Plans have been
operated, administered and maintained in accordance with the terms thereof and
in substantial compliance with the requirements of all applicable laws, orders,
rules and regulations, including, without limitation, ERISA and the Code.
(f) Except as may be disclosed in Section 2.13(f) of the Disclosure
Schedule, each benefit plan maintained by American Federal for the benefit of
its directors, officers and employees (including, but
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<PAGE>
not limited to, defined contribution or savings plans and deferred compensation
plans) is fully funded and, except with respect to the vested rights of
participants in any such plan, unencumbered.
SECTION 2.14. TITLE TO PROPERTIES; INSURANCE. American Federal has good
------------ ------------------------------
and marketable title, insurable at standard rates, free and clear of all liens,
charges and encumbrances (except taxes which are a lien but not yet payable and
liens, charges or encumbrances reflected in the American Federal Financial
Statements and easements, rights-of-way, and other restrictions which are not
material and further excepting in the case of Other Real Estate Owned
("O.R.E.O."), as such real estate is internally classified on the books of
American Federal, rights of redemption under applicable law) to all of its real
properties. All leasehold interests for real property and any material personal
property used by American Federal in its business are held pursuant to lease
agreements which are valid and enforceable in accordance with their terms. All
such properties comply in all material respects with all applicable private
agreements, zoning requirements and other governmental laws and regulations
relating thereto and there are no condemnation proceedings pending or, to the
knowledge of American Federal, threatened with respect to such properties.
American Federal has valid title or other ownership or license rights under
licenses to all material intangible personal or intellectual property used by
American Federal in its business, free and clear of any claim, defense or right
of any other person or entity which is material to such property, subject only
to rights of the licensors pursuant to applicable license agreements, which
rights do not materially adversely interfere with the use of such property. All
material insurable properties owned or held by American Federal are adequately
insured by financially sound and reputable insurers in such amounts and against
fire and other risks insured against by extended coverage and public liability
insurance, as is customary with thrift institutions of similar size.
SECTION 2.15. ENVIRONMENTAL MATTERS.
------------ ---------------------
(a) As used in this Agreement, "Environmental Laws" means all local, state
and federal environmental, health and safety laws and regulations in all
jurisdictions in which American Federal has done business or owned, leased or
operated property, including, without limitation, the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal Clean
Air Act, and the Federal Occupational Safety and Health Act.
(b) Except as disclosed in Section 2.15(b) of the Disclosure Schedule,
neither the conduct nor operation of American Federal nor any condition of any
property presently or previously owned, leased or operated by it violates or
violated Environmental Laws in any material respect and no condition has existed
or event has occurred with respect to it or any such property that, with notice
or the passage of time, or both, would constitute a violation of Environmental
Laws or obligate (or potentially obligate) American Federal to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any such
property where the aggregate cost of such actions would be material to American
Federal. Except as may be disclosed in Section 2.15(b) of the Disclosure
Schedule, American Federal has not received any notice from any person or entity
that American Federal or the operation or condition of any facility or any
property ever owned (including, without limitation, O.R.E.O.), leased or
operated by it are or were in violation of any Environmental Laws or that
American Federal is responsible (or potentially responsible) for remedying, or
the cleanup of, any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property.
(c) Except as disclosed in Section 2.15(c) of the Disclosure Schedule,
American Federal has not received notice and does not have knowledge that any
property in which American Federal has a
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security interest, lien or other encumbrance violates or violated Environmental
Laws in any material respect.
SECTION 2.16. COMPLIANCE WITH LAW. American Federal has all licenses,
------------ -------------------
franchises, permits and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects and is in
compliance in all material respects with all applicable laws and regulations.
SECTION 2.17. BROKERAGE. There are no claims or agreements for brokerage
------------ ---------
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by American Federal.
SECTION 2.18. UNDISCLOSED LIABILITIES. American Federal has no material
------------ -----------------------
liability, whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or
to become due (and there is no past or present fact, situation, circumstance,
condition or other basis for any present or future action, suit or proceeding,
hearing, charge, complaint, claim or demand against American Federal giving rise
to any such liability), except (i) for liabilities set forth in the American
Federal Financial Statements, and (ii) as may be disclosed in Section 2.18 of
the Disclosure Schedule.
SECTION 2.19. STATEMENTS TRUE AND CORRECT. None of the information
------------ ---------------------------
supplied or to be supplied by American Federal for inclusion in (i) the
Registration Statement (as defined in Section 4.06 hereof), (ii) the Proxy
Statement/Prospectus (as defined in Section 4.03 hereof), and (iii) any document
to be filed with the Securities and Exchange Commission (the "S.E.C.") or any
banking or thrift or other regulatory authority in connection with the
transactions contemplated by this Agreement, will, at the respective times such
documents are filed, and, in the case of the Registration Statement, when it
becomes effective, and, with respect to the Proxy Statement/Prospectus, when
first mailed to the stockholders of American Federal, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading, or, in the case of the
Proxy Statement/Prospectus or any amendment thereof or supplement thereto, at
the time of the Stockholders' Meeting (as defined in Section 4.03 hereof), be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Stockholders' Meeting.
All documents that American Federal is responsible for filing with the O.T.S. or
any other regulatory authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law and the applicable rules and regulations thereunder.
ARTICLE THREE
-------------
REPRESENTATIONS OF MID-MISSOURI AND SUBSIDIARY BANK
---------------------------------------------------
Mid-Missouri and, where applicable, Subsidiary Bank hereby make the
following representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) Mid-Missouri is a corporation duly incorporated, validly existing, and
in good standing under the laws of the State of Missouri with full corporate
power and authority to own all of its properties
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and assets, to incur all of its liabilities and to carry on its business as it
is now being conducted. Subsidiary Bank is a commercial bank duly organized,
validly existing and in good standing under the laws of the State of Missouri
with full corporate power and authority to own all of its properties and assets,
to incur all of its liabilities and to carry on its business as it is now being
conducted.
(b) The authorized capital stock of Mid-Missouri consists of (i) 200,000
shares of Mid-Missouri Common, of which, as of September 30, 1996, 200,000
shares were issued and outstanding. Mid-Missouri has no authorized shares of
preferred stock and none are issued or outstanding. All of the issued and
outstanding shares of Mid-Missouri Common are duly and validly issued and
outstanding and are fully paid and non-assessable.
(c) The shares of Mid-Missouri Common that are to be issued to the
shareholders of American Federal pursuant to the Merger have been duly
authorized and, when so issued in accordance with the terms of this Agreement,
will be validly issued and outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof.
SECTION 3.02. AUTHORIZATION. The Boards of Directors of Mid-Missouri and
------------ -------------
Subsidiary Bank have, by all appropriate action, approved this Agreement and the
Merger and authorized the execution hereof on its behalf Mid-Missouri and
Subsidiary Bank by their respective duly authorized officers and the performance
by them of their obligations hereunder. Nothing in the articles of
incorporation or bylaws of Mid-Missouri or Subsidiary Bank, as amended, or any
other agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or to which
they or any of their subsidiaries are bound or subject would prohibit or inhibit
Mid-Missouri or Subsidiary Bank from entering into and consummating this
Agreement and the Merger on the terms and conditions herein contained. This
Agreement has been duly and validly executed and delivered by Mid-Missouri and
Subsidiary Bank and constitutes a legal, valid and binding obligation of them,
enforceable against them in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or other laws affecting creditors
rights generally or the rights of creditors of financial institutions, the
accounts of which financial institutions are insured by the Federal Deposit
Insurance Corporation ("F.D.I.C.") or laws relating to the safety and soundness
of insured financial institutions and by judicial discretion in applying
principles of equity, and no other corporate acts or proceedings are required to
be taken by Mid-Missouri or Subsidiary Bank to authorize the execution, delivery
and performance of this Agreement. Except for the requisite approvals of the
Division, the F.D.I.C., the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") and the O.T.S., no notice to, filing with,
authorization by, or consent or approval of, any federal or state regulatory
authority is necessary for the execution and delivery of this Agreement or
consummation of the Merger by Mid-Missouri and Subsidiary Bank.
SECTION 3.03. FINANCIAL INFORMATION. The audited consolidated balance
------------ ---------------------
sheets of Mid-Missouri and Subsidiary Bank as of December 31, 1995 and 1994 and
related audited consolidated statements of income, changes in stockholders'
equity and cash flows for the three (3) years ended December 31, 1995, together
with the notes thereto (together, the "Mid-Missouri Financial Statements"), have
been prepared in accordance with generally accepted accounting principles
consistently applied (except as disclosed therein) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations, changes in stockholders' equity and cash flows of Mid-
Missouri and Subsidiary Bank as of the dates and for the periods indicated
(subject, in the case of interim financial statements, to normal recurring year-
end adjustments, none of which will be material, and the absence of
footnotes).
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SECTION 3.04. ABSENCE OF CHANGES. Since December 31, 1995, Mid-Missouri,
------------ ------------------
on a consolidated basis, has not experienced or suffered a material adverse
change excluding declines from interest rate movements, and there have not been
any events or transactions having such a material adverse affect which should be
disclosed in order to make the Mid-Missouri Financial Statements not misleading.
SECTION 3.05. LITIGATION. There is no litigation, claim or other
------------ ----------
proceeding pending or, to the knowledge of Mid-Missouri, threatened, against
Mid-Missouri or Subsidiary Bank, or of which the property of Mid-Missouri or
Subsidiary Bank is or would be subject which, if adversely determined, would
have a material adverse effect on the business of Mid-Missouri and Subsidiary
Bank taken as a whole.
SECTION 3.06. REPORTS. Mid-Missouri and Subsidiary Bank have filed all
------------ -------
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (i) the S.E.C., (ii) the
Federal Reserve Board, (iii) the F.D.I.C., (iv) any state securities or banking
authorities having jurisdiction, and (v) any other governmental authority with
jurisdiction over Mid-Missouri or Subsidiary Bank. As of their respective
dates, each of such reports and documents, as amended, including the financial
statements, exhibits and schedules thereto, complied in all material respects
with the relevant statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.07. COMPLIANCE WITH LAW. Mid-Missouri and Subsidiary Bank have
------------ -------------------
all licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses in all
material respects and are in compliance in all material respects with all
applicable laws and regulations.
SECTION 3.08. BROKERAGE. There are no claims or agreements for brokerage
------------ ---------
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Mid-Missouri.
SECTION 3.09. STATEMENTS TRUE AND CORRECT. None of the information
------------ ---------------------------
supplied or to be supplied by Mid-Missouri for inclusion in (i) the Registration
Statement (as defined in Section 4.06 hereof), (ii) the Proxy
Statement/Prospectus (as defined in Section 4.03 hereof) and (iii) any document
to be filed with the S.E.C., or any banking or thrift or other regulatory
authority in connection with the transactions contemplated hereby, will, at the
respective times such documents are filed, and, in the case of the Registration
Statement, when it becomes effective, and, with respect to the Proxy
Statement/Prospectus, when first mailed to the stockholders of American Federal,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading,
or, in the case of the Proxy Statement/Prospectus or any amendment thereof or
supplement thereto, at the time of the Stockholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Stockholders' Meeting. All documents that
Mid-Missouri or Subsidiary Bank is responsible for filing with the S.E.C., the
F.D.I.C., the O.T.S., the Federal Reserve Board or any other regulatory
authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable law and any
rules and regulations thereunder.
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ARTICLE FOUR
------------
AGREEMENTS OF AMERICAN FEDERAL
------------------------------
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
------------ ---------------------------
(a) American Federal shall not declare or pay a dividend or make any other
distribution to stockholders, whether in cash, stock or other property, after
the date of this Agreement.
(b) American Federal shall continue to carry on, after the date hereof, its
business and the discharge or incurrence of obligations and liabilities, only in
the usual, regular and ordinary course of business, as heretofore conducted, and
by way of amplification and not limitation, American Federal will not, without
the prior written consent of Mid-Missouri (which shall not be unreasonably
withheld):
(i) issue any American Federal Common or other capital stock or
any options, warrants, or other rights to subscribe for or purchase American
Federal Common or any other capital stock or any securities convertible into
or exchangeable for any capital stock; or
(ii) directly or indirectly redeem, purchase or otherwise acquire
any American Federal Common or any other capital stock of American Federal;
or
(iii) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize; or
(iv) change its charter or certificate or articles of incorporation
or association, as the case may be, or bylaws; or
(v) grant any increase (other than ordinary and normal increases
consistent with past practices) in the compensation payable or to become
payable to directors, officers or salaried employees or grant any stock
options or, except as required by law, adopt or make any change in any
bonus, insurance, pension, or other Employee Plan, payment or arrangement
made to, for or with any of such directors, officers or employees; or
(vi) borrow or agree to borrow any funds, except for Federal Home
Loan Bank Advances in the ordinary course of business, or directly or
indirectly guarantee or agree to guarantee any obligations of others; or
(vii) make or commit to make any new loan or letter of credit or
any new or additional discretionary advance under any existing line of
credit, in principal amounts in excess of $100,000 (except for such
extensions of credit secured by single family, non-agricultural residential
property of one acre or less) or that would increase the aggregate credit
outstanding to any one borrower (or group of affiliated borrowers) to more
than $100,000 (excluding for this purpose any accrued interest or
overdrafts), without the prior written consent of Mid-Missouri acting
through its Chief Credit Officer or such other designee as Mid-Missouri may
give notice of to American Federal; or
(viii) purchase or otherwise acquire any investment security for
its own account having an average remaining life to maturity greater than
five (5) years or any asset-backed securities
A-14
<PAGE>
other than those issued or guaranteed by the Government National Mortgage
Association, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation (and American Federal shall consult and confer
with Mid-Missouri with respect to all securities transactions, even in
circumstances where approval is not required hereunder); or
(ix) increase or decrease the rate of interest paid on time
deposits, or on certificates of deposit, except in a manner and pursuant to
policies consistent with past practices; or
(x) enter into any agreement, contract or commitment out of the
ordinary course of business or having a term in excess of three (3) months
other than letters of credit, loan agreements, deposit agreements, and other
lending, credit and deposit agreements and documents made in the ordinary
course of business; or
(xi) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(xii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to American Federal or any claims
which American Federal may possess or waive any material rights of
substantial value; or
(xiii) sell or otherwise dispose of any real property or any
material amount of any tangible or intangible personal property other than
properties acquired in foreclosure or otherwise in the ordinary collection
of indebtedness to American Federal; or
(xiv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that American Federal shall not be required to obtain such a report
with respect to single family, non-agricultural residential property of one
acre or less to be foreclosed upon unless it has reason to believe that such
property might contain any such waste materials or otherwise might be
contaminated; or
(xv) commit any act or fail to do any act which will cause a breach
of any agreement, contract or commitment and which will have a material
adverse effect on American Federal's business, financial condition, or
earnings; or
(xvi) violate any law, statute, rule, governmental regulation, or
order, which violation might have a material adverse effect on American
Federal's business, financial condition, or earnings; or
(xvii) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in excess
of Twenty Thousand Dollars ($20,000); or
(xviii) change accounting principles or practices, or the method
of applying such principles or practices.
A-15
<PAGE>
(c) American Federal shall not, without the prior written consent of Mid-
Missouri, engage in any transaction or take any action that would render untrue
in any material respect any of the representations and warranties of American
Federal contained in Article Two hereof, if such representations and warranties
were given as of the date of such transaction or action.
(d) American Federal shall promptly notify Mid-Missouri in writing of the
occurrence of any matter or event known to and directly involving American
Federal, which would not include any changes in conditions that affect the
thrift industry generally, that is materially adverse to the business,
operations, properties, assets, or condition (financial or otherwise) of
American Federal.
(e) American Federal shall not, on or before the earlier of the Closing Date
or the date of termination of this Agreement, directly or indirectly, through
any of its officers, directors, agents, or affiliates, solicit or encourage, or
hold any discussions or negotiations with or provide any information to, any
person in connection with, any proposal from any person for the acquisition of
all or a substantial portion of the business, assets, shares of American Federal
Common or other securities of American Federal. American Federal shall promptly
advise Mid-Missouri of its receipt of any such proposal or inquiry concerning
any possible such proposal, including the name of the other party or parties and
the substance of such inquiry, offer or proposal.
SECTION 4.02. BREACHES. American Federal shall, in the event it has
------------ --------
knowledge of the occurrence, or impending or threatened occurrence, of any event
or condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or referred to
herein, give prompt written notice thereof to Mid-Missouri and use its best
efforts to prevent or promptly remedy the same.
SECTION 4.03. SUBMISSION TO STOCKHOLDERS. American Federal shall cause to
------------ --------------------------
be duly called and held, on a date mutually selected by Mid-Missouri and
American Federal, a special meeting of its shareholders (the "Stockholders'
Meeting") for submission of this Agreement, the Statutory Merger Agreement and
the Merger for approval of such shareholders as required by law. In connection
with the Stockholders' Meeting, (i) American Federal shall cooperate and assist
Mid-Missouri in preparing and filing a Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") with the S.E.C., the O.T.S. and the Federal Reserve
Board, if required, and, upon approval from the O.T.S. and the Federal Reserve
Board, if such approval is required, American Federal shall mail such Proxy
Statement/Prospectus to its shareholders, (ii) American Federal shall furnish
Mid-Missouri all information concerning itself that Mid-Missouri may reasonably
request in connection with such Proxy Statement/Prospectus, and (iii), subject
to its fiduciary duty as advised by counsel, the Board of Directors of American
Federal shall recommend to its stockholders the approval of this Agreement, the
Statutory Merger Agreement and the Merger and use its best efforts to obtain
such stockholder approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. American Federal shall use
------------ --------------------------------
its best efforts to obtain all necessary consents with respect to all interests
of American Federal in any material leases, licenses, contracts, instruments and
rights which require the consent of another person for their transfer or
assumption pursuant to the Merger, if any.
A-16
<PAGE>
SECTION 4.05. CONFORMING ACCOUNTING AND RESERVE POLICIES.
------------ ------------------------------------------
(a) Notwithstanding that American Federal believes that it has established
all reserves and taken all provisions for possible loan losses required by
generally accepted accounting principles and applicable laws, rules and
regulations, American Federal recognizes that Mid-Missouri's banking subsidiary
may have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). From and
after the date of this Agreement to the Effective Time, American Federal and
Mid-Missouri shall consult and cooperate with each other with respect to
conforming, as specified in a written notice from Mid-Missouri to American
Federal, based upon such consultation and as hereinafter provided, American
Federal's loan, accrual and reserve policies to those policies of Subsidiary
Bank.
(b) In addition, from and after the date of this Agreement to the Effective
Time, American Federal and Mid-Missouri shall consult and cooperate with each
other with respect to determining, as specified in a written notice from Mid-
Missouri to American Federal, based upon such consultation and as hereinafter
provided, appropriate accruals, reserves and charges to establish and take in
respect of excess equipment write-off or write-down of various assets and other
appropriate charges and accounting adjustments taking into account the parties'
business plans following the Merger.
(c) American Federal and Mid-Missouri shall consult and cooperate with each
other with respect to determining, as specified in a written notice from Mid-
Missouri to American Federal, based upon such consultation and as hereinafter
provided, the amount and the timing for recognizing for financial accounting
purposes the expenses of the Merger and the restructuring charges related to or
to be incurred in connection with the Merger.
(d) At the request of Mid-Missouri, American Federal shall establish and
take such reserves and accruals as Mid-Missouri shall request to conform
American Federal's loan, accrual and reserve policies to Mid-Missouri's or
Subsidiary Bank's policies, shall establish and take such accruals, reserves and
charges in order to implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off or write-down
of various assets and other appropriate accounting adjustments, and to recognize
for financial accounting purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the Merger, in each case
at such times as are mutually agreeable to Mid-Missouri and American Federal.
(e) From and after the date of this Agreement to the Effective Time,
American Federal shall maintain and keep all of its benefit plans (including,
but not limited to, defined contribution plans and deferred compensation plans)
fully funded, and shall, to the extent any such benefit plan may not be fully or
adequately funded, make such contributions as are necessary to fully fund any
such inadequately funded benefit plan.
SECTION 4.06. CONSUMMATION OF AGREEMENT. American Federal shall use its
------------ -------------------------
best efforts to perform and fulfill all conditions and obligations on its part
to be performed or fulfilled under this Agreement, to effect the Merger in
accordance with the terms and provisions hereof and to obtain all necessary
approvals and consents on its part to be obtained pursuant to this Agreement.
American Federal shall furnish to Mid-Missouri in a timely manner all
information, data and documents in the possession or under the control of
American Federal requested by Mid-Missouri as may be required to obtain any
necessary regulatory or other approvals of the Merger or to file with the S.E.C.
a registration statement on Form S-4 (the "Registration Statement") relating to
the shares of Mid-Missouri Common
A-17
<PAGE>
that may be issued to the shareholders of American Federal pursuant to the
Merger and this Agreement and shall otherwise cooperate fully with Mid-Missouri
to carry out the purpose and intent of this Agreement.
SECTION 4.07. ENVIRONMENTAL REPORTS. On or before the fifteenth (15th) day
------------ ---------------------
after the date of this Agreement, Mid-Missouri may request American Federal to
provide a report of a phase one environmental investigation on any or all real
parcels of property owned (including, without limitation, OREO), leased or
operated by American Federal as of the date of such request (other than space in
retail and similar establishments leased by American Federal for automatic
teller machines). American Federal shall provide Mid-Missouri with a report of
such phase one environmental investigation on any or all such parcels of
property within forty-five (45) days of such request. If required by the phase
one investigation in Mid-Missouri's reasonable opinion, American Federal shall
provide to Mid-Missouri a report of a phase two investigation on properties
requiring such additional study. Mid-Missouri shall have fifteen (15) business
days from the receipt of any such phase two investigation report to notify
American Federal of any objection to the contents of such report. Should the
cost of taking all remedial and corrective actions and measures (i) required by
applicable law, or (ii) recommended or suggested by such report or reports, or
(iii) prudent in light of serious life, health or safety concerns, in the
aggregate, exceed the sum of $50,000 as reasonably estimated by an environmental
expert retained for such purpose by Mid-Missouri and reasonably acceptable to
American Federal, or if the cost of such actions and measures cannot be so
reasonably estimated by such expert to be $50,000 or less with any reasonable
degree of certainty, then Mid-Missouri shall have the right pursuant to Section
7.03 hereof, for a period of fifteen (15) business days following receipt of
such estimate or indication that the cost of such actions and measures can not
be so reasonably estimated, to terminate this Agreement.
SECTION 4.08. ACCESS TO INFORMATION. American Federal shall permit Mid-
------------ ---------------------
Missouri reasonable access in a manner which will avoid undue disruption or
interference with American Federal's normal operations to its properties and
shall disclose and make available to Mid-Missouri all books, documents, papers
and records relating to its assets, stock, ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, material contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent accountants'
consent), litigation files, plans affecting employees, and any other business
activities or prospects in which Mid-Missouri may have a reasonable and
legitimate interest in furtherance of the transactions contemplated by this
Agreement. Notwithstanding anything to the contrary contained herein, American
Federal will include in the Disclosure Schedule all available environmental
information, including without limitation environmental and regulatory reports,
studies, notices, claims and any material of whatever kind. Mid-Missouri will
hold any such information which is nonpublic in confidence in accordance with
the provisions of Section 8.01 hereof.
SECTION 4.09. RESTRICTION ON RESALES. American Federal shall obtain and
------------ ----------------------
deliver to Mid-Missouri, at least 31 days prior to the Closing Date, the signed
agreement, in the form of Exhibit 4.09 hereto, of each person who may reasonably
be deemed an "affiliate" of American Federal within the meaning of such term as
used in Rule 145 under the Securities Act of 1933, as amended (the "Securities
Act"), regarding compliance with the provisions of Rule 145.
A-18
<PAGE>
ARTICLE FIVE
------------
AGREEMENTS OF MID-MISSOURI
--------------------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT. Mid-
------------ -----------------------------------------------
Missouri shall use its best efforts to file all regulatory applications required
in order to consummate the Merger, including but not limited to the necessary
applications for the prior approval of the Division and F.D.I.C. Mid-Missouri
shall keep American Federal reasonably informed as to the status of such
applications and make available to American Federal, upon reasonable request by
American Federal from time to time, copies of such applications and any
supplementally filed materials. The shares of Mid-Missouri Common to be
exchanged for the shares of American Federal Common shall be issued from
treasury shares held by Mid-Missouri. Mid-Missouri shall file with the S.E.C.
the Registration Statement relating to the shares of Mid-Missouri Common to be
issued to the shareholders of American Federal pursuant to this Agreement, and
shall use its best efforts to cause the Registration Statement to become
effective. At the time the Registration Statement becomes effective, the
Registration Statement shall comply in all material respects with the provisions
of the Securities Act and the published rules and regulations thereunder, and
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not false or misleading, and at the time of mailing thereof to the
shareholders of American Federal, at the time of the Stockholders' Meeting and
at the Effective Time the Proxy Statement/Prospectus included as part of the
Registration Statement, as amended or supplemented by any amendment or
supplement, shall not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not false or
misleading. Mid-Missouri shall timely file all documents required to obtain all
necessary permits and approvals from state securities agencies or authorities,
if any, required to carry out the transactions contemplated by this Agreement,
shall pay all expenses incident thereto and shall use its best efforts to obtain
such permits and approvals on a timely basis. Mid-Missouri shall promptly and
properly prepare and file any other filings required under the Securities
Exchange Act of 1934 (the "Exchange Act") relating to the Merger and the
transactions contemplated herein.
SECTION 5.02. BREACHES. Mid-Missouri shall, in the event it has knowledge
------------ --------
of the occurrence, or impending or threatened occurrence, of any event or
condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or referred to
herein, give prompt written notice thereof to American Federal and use its best
efforts to prevent or promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. Mid-Missouri shall use its best
------------ -------------------------
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement, to effect the Merger in accordance
with the terms and conditions of this Agreement, and to obtain all necessary
approvals and consents on its part to be obtained pursuant to this Agreement.
SECTION 5.04. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE AND
------------ ------------------------------------------------
INDEMNIFICATION. The officers of American Federal have agreed and have
- ---------------
applied for a one (1) year, One Million Dollar ($1,000,000.00) Officers and
Directors Liability Bond, which is renewable annually for additional one (1)
year terms for a period of five (5) years.
A-19
<PAGE>
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF MID-MISSOURI AND SUBSIDIARY
------------ --------------------------------------------------------
BANK. The obligations of Mid-Missouri and Subsidiary Bank to effect the Merger
- ----
shall be subject to the satisfaction (or waiver by Mid-Missouri and Subsidiary
Bank) prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by American Federal in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date;
(b) American Federal shall have performed and complied in all material
respects with all of its obligations and agreements required to be performed
prior to the Closing Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any bank or thrift
regulatory authority or other person seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger shall have been
obtained and all waiting periods required by law shall have expired;
(e) Mid-Missouri shall have received any environmental reports that it has
requested of American Federal pursuant to Section 4.07 hereof, and shall not
have elected, pursuant to Section 7.03 hereof, to terminate and cancel this
Agreement;
(f) Mid-Missouri shall have received all documents required to be received
from American Federal on or prior to the Closing Date, all in form and substance
reasonably satisfactory to Mid-Missouri;
(g) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C.;
(h) Mid-Missouri shall have received an opinion of its accountants or
counsel to the effect that if the Merger is consummated in accordance with the
terms set forth in this Agreement, (i) the Merger will constitute a
reorganization within the meaning of Section 368 of the Code; (ii) gain, if any,
will be recognized by each American Federal shareholder upon receipt of Mid-
Missouri Common and cash, but not in excess of the amount of cash received;
(iii) the aggregate tax basis of shares of Mid-Missouri Common received by each
shareholder of American Federal will be the same as the aggregate tax basis of
shares of American Federal Common exchanged therefor decreased by the amount of
cash received by the shareholder and increased by the amount, if any, treated as
a dividend and the amount of gain recognized by the shareholder on the exchange;
and (iv) the holding period of the shares of Mid-Missouri
A-20
<PAGE>
Common received by each American Federal shareholder will include the holding
period of the shares of American Federal Common exchanged therefor, provided the
shares of American Federal Common are held as a capital asset as of the
Effective Time; and
(i) Mid-Missouri shall have received a legal opinion substantially in the
form of Exhibit 1.09(a) attached hereto.
SECTION 6.02. CONDITIONS TO AMERICAN FEDERAL'S OBLIGATIONS. American
------------ --------------------------------------------
Federal's obligation to effect the Merger shall be subject to the satisfaction
(or waiver by American Federal) prior to or on the Closing Date of the following
conditions:
(a) The representations and warranties made by Mid-Missouri and Subsidiary
Bank in this Agreement shall be true in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on the Closing Date;
(b) Mid-Missouri and Subsidiary Bank shall have performed and complied in
all material respects with all of their obligations and agreements hereunder
required to be performed prior to the Closing Date under this Agreement;
(c) No Injunction preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any thrift regulatory authority or other
governmental agency seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, if any, to be obtained by Mid-Missouri, Subsidiary Bank and American
Federal including the requisite approval of this Agreement, the Statutory Merger
Agreement and the Merger by the shareholders of American Federal, required by
law for consummation of the Merger shall have been obtained and all waiting
periods required by law shall have expired;
(e) American Federal shall have received all documents required to be
received from Mid-Missouri or Subsidiary Bank on or prior to the Closing Date,
all in form and substance reasonably satisfactory to American Federal;
(f) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceeding for such purpose pending before or threatened
by the S.E.C.;
(g) American Federal shall have received a copy of the opinion of Mid-
Missouri's accountants or counsel contemplated by Section 6.01(h) of this
Agreement; and
(h) American Federal shall have received a legal opinion substantially in
the form of Exhibit 1.09(b) attached hereto.
A-21
<PAGE>
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
------------ ----------------
mutual written agreement of the parties at any time prior to the Closing Date,
regardless of whether stockholder approval of this Agreement, the Statutory
Merger Agreement and the Merger by the shareholders of American Federal shall
have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that there is a material
------------ --------------------
breach in any of the representations and warranties or agreements of Mid-
Missouri and Subsidiary Bank, on one hand, or American Federal, on the other
hand, which breach is not cured within thirty (30) days after written notice to
cure such breach is given by the non-breaching party, then the non-breaching
party, regardless of whether shareholder approval of this Agreement, the
Statutory Merger Agreement and the Merger shall have been previously obtained,
may terminate and cancel this Agreement by providing written notice of such
action to the other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. Mid-Missouri and Subsidiary Bank may
------------ ---------------------
terminate this Agreement to the extent provided by Section 4.07 by giving
written notice thereof to American Federal.
SECTION 7.04. FAILURE OF CONDITIONS. In the event any of the conditions to
------------ ---------------------
the obligations of either party are not satisfied or waived on or prior to the
Closing Date, and if any applicable cure period provided in Section 7.02 has
lapsed, then such party may, regardless of whether shareholder approval of this
Agreement, the Statutory Merger Agreement and the Merger shall have been
previously obtained, terminate and cancel this Agreement by delivery of written
notice of such action to the other party on such date.
SECTION 7.05. APPROVAL DENIAL. If any regulatory application filed
------------ ---------------
pursuant to Section 5.01 should be finally denied or disapproved by the
respective regulatory authority, or if Mid-Missouri should fail to obtain any
regulatory approvals required to consummate the Merger on or before February 28,
1997, then either party may terminate this Agreement by delivery of written
notice of such termination to the other party within thirty (30) calendar days
of such date; provided, however, that a request for additional information or
undertaking by Mid-Missouri, as a condition for approval, shall not be deemed to
be a denial or disapproval so long as Mid-Missouri diligently provides the
requested information or undertaking. In the event an application is denied
pending an appeal, petition for review, or similar such act on the part of Mid-
Missouri (hereinafter referred to as the "appeal"), then the application will be
deemed denied unless Mid-Missouri prepares and timely files such appeal,
continues the appellate process and obtains the necessary approval by February
28, 1997.
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL. If the Merger is not approved
------------ ---------------------------
by the requisite vote of the shareholders of American Federal at the
Stockholders' Meeting, then either party may terminate this Agreement, without
liability to the other party.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event that American
------------ ------------------------------
Federal shall become a party or subject to any new or amended written agreement,
memorandum of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with any federal
or state agency charged with the supervision or regulation of thrifts or
banks
A-22
<PAGE>
after the date of this Agreement which is significant to its overall business,
operations or financial condition, then Mid-Missouri may terminate this
Agreement.
SECTION 7.08. AUTOMATIC TERMINATION. If the Closing Date does not occur on
------------ ---------------------
or prior to March 31, 1997, then this Agreement may be terminated by either
party by giving written notice to the other; provided, however, a party who is
then in breach of its obligation or covenants under this Agreement in any
material respect may not exercise such right of termination unless the other
party is also in breach of its obligations or covenants under this Agreement in
any material respect.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
------------ ------------------------
confidential and proprietary nature of the "Information" (as hereinafter
described) which has heretofore been exchanged and which will be received from
each other hereunder and agree to hold and keep the same confidential. Such
"Information" will include any and all financial, technical, commercial,
marketing, customer or other information concerning the business, operations and
affairs of a party that may be provided to the other, irrespective of the form
of the communications, by such party's employees or agents. Such Information
shall not include information which is or becomes generally available to the
public other than as a result of a disclosure by a party or its representatives
in violation of this Agreement. The parties agree that the Information will be
used solely for the purposes contemplated by this Agreement and that such
Information will not be disclosed to any person other than employees and agents
of a party who are directly involved in evaluating the transaction. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party.
SECTION 8.02. PUBLICITY. Mid-Missouri and American Federal shall cooperate
------------ ---------
with each other in the development and distribution of, and mutually agree upon
the form and content of, all news releases and other written public disclosures
concerning this Agreement and the Merger and shall not issue any news release or
make any other written public disclosure without the prior consent of the other
party, unless such is required by law or the written advice of counsel or is in
response to published newspaper or other mass media reports regarding the
transaction contemplated hereby, in which such latter event the parties shall
consult with each other regarding such responsive public disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this Agreement
------------ -------------------
without the Merger becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
will not retain any copies, extracts or other reproductions in whole or in part
of such Information.
SECTION 8.04. NOTICES. Any notice or other communication shall be in
------------ -------
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as
follows:
A-23
<PAGE>
(a) if to Mid-Missouri:
E. Milt Branum, Jr.
President
Mid-Missouri Holding Co.
318 West Main Street
Sullivan, Missouri 63080
Facsimile: (573) 468-1400
with a copy to:
John K. Pruellage, Esq.
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Facsimile: (314) 241-6056
and
(b) if to American Federal:
Rita J. Heady
Executive Vice President
American Federal Savings & Loan Association of
Sullivan
20 Hughes Ford Road
P.O. Box 250
Sullivan, Missouri 63080
Facsimile: (573) 468-7970
with a copy to:
Michael W. Forster, Esq.
Sandberg, Phoenix & von Gontard, P.C.
1 City Centre, 15th Floor
St. Louis, Missouri 63101
Facsimile: (314) 241-7604
or to such other address as any party may from time to time designate by notice
to the others.
SECTION 8.05. LIABILITIES. In the event that this Agreement is terminated
------------ -----------
pursuant to the provisions of Article Seven hereof, no party hereto shall have
any liability to any other party for costs, expenses, damages or otherwise;
provided, however, that, notwithstanding the foregoing, in the event that this
Agreement is terminated pursuant to Section 7.02 hereof on account of a willful
breach of any of the representations and warranties set forth herein or a
willful breach of any of the agreements set forth herein, then the non-breaching
party shall be entitled to recover appropriate damages from the breaching
party.
A-24
<PAGE>
SECTION 8.06. EXPENSES. Each of the parties to this Agreement shall bear
------------ --------
their respective costs, fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby.
SECTION 8.07. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
------------ ---------------------------------------------
provided in this Section 8.07, no representation, warranty or covenant contained
in this Agreement shall survive the Effective Time or the earlier termination of
this Agreement. The agreements set forth in Sections 1.03, 1.04, 1.05, 1.08 and
5.04 shall survive the Effective Time, and the agreements set forth in Sections
8.01, 8.02, 8.03, 8.05 and 8.06 hereof shall survive the Effective Time or the
earlier termination of this Agreement.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement, including the Exhibits and
------------ ----------------
Schedules hereto, constitute the entire agreement between the parties and
supersedes and cancels any and all prior discussions, negotiations, undertakings
and agreements between the parties relating to the subject matter hereof.
SECTION 8.09. HEADINGS AND CAPTIONS. The captions of Articles and Sections
------------ ---------------------
hereof are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
SECTION 8.10. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
------------ ---------------------------------
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may not be amended or
modified except by a written document duly executed by the parties hereto.
SECTION 8.11. RULES OF CONSTRUCTION. Unless the context otherwise
------------ ---------------------
requires: (a) a term has the meaning assigned to it; (b) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the singular.
SECTION 8.12. COUNTERPARTS. This Agreement may be executed in two or more
------------ ------------
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
SECTION 8.13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
------------ ----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns. Except as expressly provided in this Agreement, there shall be no
third party beneficiaries hereof.
SECTION 8.14. GOVERNING LAW; ASSIGNMENT. THIS AGREEMENT SHALL BE GOVERNED
------------ -------------------------
BY THE LAWS OF THE STATE OF MISSOURI, EXCEPT TO THE EXTENT THAT APPLICABLE
FEDERAL LAWS AND REGULATIONS MUST GOVERN ASPECTS OF THE MERGER PROCEDURES AND
SHAREHOLDER RIGHTS RELATED THERETO. THIS AGREEMENT MAY NOT BE ASSIGNED BY
EITHER OF THE PARTIES HERETO.
SECTION 8.15. TIME. Time is of the essence in connection with this
------------ ----
Agreement.
(THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY)
A-25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
AMERICAN FEDERAL SAVINGS & LOAN
ASSOCIATION OF SULLIVAN
By /s/ Rita J. Heady
-------------------------------
Name: Rita J. Heady
----------------------------
Title: Executive Vice President
--------------------------
MID-MISSOURI HOLDING CO.
By /s/ E. Milt Branum, Jr.
-------------------------------
Name: E. Milt Branum, Jr.
----------------------------
Title: President
---------------------------
BANK OF SULLIVAN
By /s/ E. Milt Branum, Jr.
-------------------------------
Name: E. Milt Branum, Jr.
----------------------------
Title: President
---------------------------
A-26
<PAGE>
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared E. Milt
Branum, Jr. personally known, who, being by me duly sworn, did say that s/he is
the President of Mid-Missouri Holding Company, Inc., a corporation of the State
of Missouri, and that the foregoing agreement was signed and sealed on behalf of
such corporation, by authority of its Board of Directors; and such E. Milt
Branum, Jr. acknowledged the foregoing instrument to be the free act and deed of
such corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
------------------------------
Notary Public
My Commission Expires:
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared E. Milt
Branum, Jr. personally known, who, being by me duly sworn, did say that s/he is
the President of Bank of Sullivan, a bank of the State of Missouri, and that the
foregoing agreement was signed and sealed on behalf of such bank, by authority
of its Board of Directors; and such E. Milt Branum, Jr. acknowledged the
foregoing instrument to be the free act and deed of such corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
--------------------------
Notary Public
My Commission Expires:
A-27
<PAGE>
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared Rita J.
Heady personally known, who, being by me duly sworn, did say that s/he is the
Executive Vice President of American Federal Savings and Loan Association of
Sullivan, a federal savings association, and that the foregoing agreement was
signed and sealed on behalf of such association, by authority of its Board of
Directors; and such Rita J. Heady acknowledged the foregoing instrument to be
the free act and deed of such corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
------------------------------
Notary Public
My Commission Expires:
A-28
<PAGE>
EXHIBIT 1.07
------------
STATUTORY MERGER AGREEMENT
A-29
<PAGE>
AGREEMENT FOR MERGER
OF
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
WITH AND INTO
BANK OF SULLIVAN
THIS AGREEMENT FOR MERGER (this "Agreement") dated as of December 6, 1996,
by and among BANK OF SULLIVAN, a Missouri state chartered bank (hereinafter
referred to as "Subsidiary Bank"), MID-MISSOURI HOLDING COMPANY, INC., a
Missouri corporation and holding company of Subsidiary Bank (hereinafter
referred to as "Mid-Missouri"), and AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION
OF SULLIVAN, a Federal savings and loan association (hereinafter referred to as
"American Federal").
WHEREAS, Subsidiary Bank is a state chartered bank duly organized under the
laws of the State of Missouri, with its principal office and place of business
at 318 West Main Street, Sullivan, Missouri, and having, as of September 30,
1996, authorized capital of 20,000 shares of stock, par value $20.00 per share,
20,000 of which were issued and outstanding, with capital of approximately
$2,000,000, surplus of approximately $5,027,000, and other capital accounts of
approximately $2,280,000, in accordance with the balance sheet reflecting its
condition as of the close of business on that date; and
WHEREAS, American Federal is a federally chartered thrift duly organized
under the laws of the United States of America, with its principal office and
place of business at 20 Hughes Ford Road, Sullivan, Missouri, and having, as of
September 30, 1996, authorized capital of 152,087 shares of stock, par value
$1.00 per share, 152,087 of which were issued and outstanding, with capital of
approximately $152,000, surplus of approximately $1,287,000, and other capital
accounts of approximately $2,278,000, in accordance with the balance sheet
reflecting its condition as of the close of business on that date;
WHEREAS, on November 12, 1996, a majority of the entire board of directors
of Mid-Missouri and, on November 15, 1996, a majority of the entire board of
directors of American Federal, deemed it, and on January 13, 1997, the entire
board of directors of Subsidiary Bank is expected to deem it, advisable, for the
general welfare and advantage of each of such respective institutions and the
respective shareholders of each, that American Federal merge with and into
Subsidiary Bank (the "Merger"), and approved this Agreement and authorized its
execution; and
WHEREAS, the sole shareholder of Subsidiary Bank is expected to approve and
confirm this Agreement by written consent, and the shareholders of American
Federal are expected to approve and confirm this Agreement at a meeting of such
shareholders to be duly called and held.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, Subsidiary Bank, Mid-Missouri and American Federal enter into
this Agreement and prescribe the terms and conditions of the Merger and the mode
of carrying it into effect, as follows:
A-30
<PAGE>
1. American Federal shall be merged into Subsidiary Bank, with Subsidiary
Bank being the survivor (the "Surviving Bank") under the charter of Subsidiary
Bank and under the title of "Bank of Sullivan".
2. The business of the Surviving Bank shall be that of a Missouri state
chartered banking corporation. This business shall be conducted by the
Surviving Bank at its main office which shall be located at 318 West Main
Street, Sullivan, Missouri, and at its branch offices located at Fisher &
Springfield Streets, Sullivan, Missouri, and 1 Meramec Plaza, Sullivan,
Missouri.
3. All assets of Subsidiary Bank and American Federal, as they exist
immediately prior to the Effective Time (as defined in Section 6 hereof) of the
Merger, shall pass to and vest in the Surviving Bank without any conveyance or
other transfer, and the Surviving Bank shall be responsible for all of the
liabilities of every kind and description of each of Subsidiary Bank and
American Federal existing immediately prior to the Effective Time.
4. (a) Each share of common stock, $20.00 par value per share, of
Subsidiary Bank issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding and shall be unaffected by the Merger.
(b) Each share of common stock, $1.00 par value per share, of American
Federal issued and outstanding immediately prior to the effective time of the
Merger, other than shares any holders of which have duly exercised and perfected
their dissenters' rights under applicable law, shall, by virtue of the Merger
and without any action on the part of the holders thereof, be converted into the
consideration set forth in Section 1.05 of the certain Agreement and Plan of
Merger of even date herewith between Mid-Missouri, Subsidiary Bank and American
Federal (the "Master Merger Agreement").
5. The board of directors of the Surviving Bank shall be as follows:
E. Milt Branum, Jr.
Mr. John M. Brummet
Edward P. Burke
Gordian J. Mathias
James E. McIntosh
Norman N. Rubenstein
Albert M. Schlueter
John W. Waller
T. Scott Waller
Edward C. Wallis
6. This Agreement has been approved and confirmed by the written consent
of the sole shareholder of Subsidiary Bank. This Agreement is expected to be
approved and confirmed by the shareholders of American Federal owning two-thirds
of its capital stock outstanding, at a meeting of such shareholders to be duly
called and held. The Merger shall become effective at the time specified in
Section 362.700 of the Revised Statutes of Missouri, upon completion of the acts
therein described (the "Effective Time").
A-31
<PAGE>
7. This Agreement shall terminate, and shall thereafter be of no further
force or effect, regardless of whether shareholder approval has been obtained,
immediately upon the termination of the Master Merger Agreement.
IN WITNESS WHEREOF, Mid-Missouri, Subsidiary Bank and American Federal have
caused this Agreement For Merger to be executed in multiple copies by their duly
authorized officers, and have caused their seals to be affixed hereto, as of the
date first above written.
MID-MISSOURI HOLDING COMPANY, INC.
By: /s/ E. Milt Branum, Jr.
-----------------------------
E. Milt Branum, Jr., President
and Chief Executive Officer
Attest:
By: /s/ Carol Markham
---------------------
Secretary
BANK OF SULLIVAN
By: /s/ E. Milt Branum, Jr.
----------------------------
E. Milt Branum, Jr., President
and Chief Executive Officer
Attest:
By: /s/ Carol Markham
------------------------
Secretary
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION
OF SULLIVAN
By: /s/ Rita J. Heady
------------------------------------
Rita J. Heady, Executive Vice President
Attest:
By: /s/ Joseph Withington
---------------------------
Secretary
A-32
<PAGE>
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared E. Milt
Branum, Jr. personally known, who, being by me duly sworn, did say that he is
the President and Chief Executive Officer of Mid-Missouri Holding Company, Inc.,
a corporation of the State of Missouri, and that the foregoing agreement was
signed and sealed on behalf of such corporation, by authority of its Board of
Directors; and such E. Milt Branum, Jr. acknowledged the foregoing instrument to
be the free act and deed of such corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
Notary Public
My Commission Expires:
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared E. Milt
Branum, Jr. personally known, who, being by me duly sworn, did say that he is
the President and Chief Executive Officer of Bank of Sullivan, a bank of the
State of Missouri, and that the foregoing agreement was signed and sealed on
behalf of such bank, by authority of its Board of Directors; and such E. Milt
Branum, Jr. acknowledged the foregoing instrument to be the free act and deed of
such bank.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
Notary Public
My Commission Expires:
A-33
<PAGE>
STATE OF MISSOURI )
) SS.
COUNTY OF FRANKLIN )
On this 12th day of December, 1996, before me personally appeared Rita J.
Heady personally known, who, being by me duly sworn, did say that she is the
Executive Vice President of American Federal Savings and Loan Association of
Sullivan, a federal savings association, and that the foregoing agreement was
signed and sealed on behalf of such association, by authority of its Board of
Directors; and such Rita J. Heady acknowledged the foregoing instrument to be
the free act and deed of such association.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Connie L. Richardson
Notary Public
My Commission Expires:
A-34
<PAGE>
EXHIBIT 1.09(A)
---------------
AMERICAN FEDERAL'S LEGAL OPINION MATTERS
1. The due organization, valid existence and good standing of American
Federal under the laws of the United States, its power and authority to own and
operate its properties and to carry on its business as now conducted, and its
power to execute, enter into, deliver and perform its obligations under the
Agreement and the Statutory Merger Agreement, to merge with Subsidiary Bank in
accordance with the terms of such agreements and to consummate the transactions
contemplated thereby.
2. With respect to American Federal, (i) the number of authorized, issued
and outstanding shares of capital stock of American Federal immediately prior to
the Closing, (ii) the nonexistence of any violation of the preemptive or
subscription rights of any person, (iii) the nonexistence of any outstanding
options, warrants, or other rights to acquire, or securities convertible into,
any equity security of American Federal, (iv) the nonexistence of any
obligation, contingent or otherwise, to reacquire any shares of capital stock of
American Federal, and (v) the nonexistence of any outstanding stock
appreciation, phantom stock or similar rights.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by American Federal to authorize
the execution, delivery and performance of the Agreement and the Statutory
Merger Agreement, the due execution of the Agreement and the Statutory Merger
Agreement by American Federal, and the Agreement and the Statutory Merger
Agreement as valid and binding obligations of American Federal, enforceable
against American Federal in accordance with their respective terms (subject to
the provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforceability of creditors' rights
generally from time to time in effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion).
4. The execution of the Agreement and the Statutory Merger Agreement by
American Federal, and the consummation of the Merger and the other transactions
contemplated thereby, does not violate or cause a default under American
Federal's charter or articles of incorporation or association or bylaws, or any
statute, regulation or rule or any judgment, order or decree against or any
material agreement binding upon American Federal.
5. The receipt of all required consents, approvals (including the
requisite approval of the shareholders of American Federal), orders or
authorizations of, or registrations, declarations or filings with or notices to,
any court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, or any other person or group of persons
or entity required to be obtained or made by American Federal in connection with
the execution and delivery of the Agreement and the Statutory Merger Agreement
or the consummation of the transactions contemplated thereby.
6. The nonexistence of any material actions, suits, proceedings, orders,
investigations or claims pending or threatened against or affecting American
Federal which, if adversely determined, would have a material adverse effect
upon its properties or assets or the transactions contemplated by the Agreement
or the Statutory Merger Agreement.
A-35
<PAGE>
EXHIBIT 1.09(B)
---------------
MID-MISSOURI'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of Mid-
Missouri under the laws of the State of Missouri, and its power and authority to
enter into the Agreement and to consummate the transactions contemplated
thereby.
2. The due and proper performance of all corporate acts and other
proceedings required to be taken by Mid-Missouri to authorize the execution,
delivery and performance of the Agreement and the Statutory Merger Agreement,
the due execution and delivery of the Agreement and the Statutory Merger
Agreement by Mid-Missouri, and the Agreement and the Statutory Merger Agreement
as valid and binding obligations of Mid-Missouri enforceable against Mid-
Missouri in accordance with their respective terms (subject to the provisions of
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion).
3. The due authorization and, when issued to shareholders of American
Federal in accordance with the terms of the Agreement and the Statutory Merger
Agreement, the valid issuance of shares of Mid-Missouri Common to be issued
pursuant to the Merger, such shares being fully paid and nonassessable.
4. The execution and delivery of the Agreement and the Statutory Merger
Agreement by Mid-Missouri, and the consummation of the transactions contemplated
thereby, as neither conflicting with, in breach of in default under, resulting
in the acceleration of, creating in any party the right to accelerate,
terminate, modify or cancel, or violate, any provision of Mid-Missouri's
articles of incorporation or bylaws, or any statute, regulation, rule, judgment,
order or decree binding upon Mid-Missouri which would be materially adverse to
the business of Mid-Missouri and the Subsidiary Bank taken as a whole.
5. The receipt of all required consents, approvals, orders or
authorizations of, or registrations, declarations or filings with or without
notices to, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, or any other person or entity
required to be obtained or made by or with respect to Mid-Missouri in connection
with the execution and delivery of the Agreement and the Statutory Merger
Agreement or the consummation of the transactions contemplated thereby.
A-36
<PAGE>
EXHIBIT 4.09
------------
___________________, 1996
Mid-Missouri Holding Company, Inc.
318 West Main Street
Sullivan, Missouri 63080
RE: AGREEMENT AND PLAN OF MERGER, DATED AS OF DECEMBER ___, 1996 (THE
"ACQUISITION AGREEMENT"), BY AND AMONG AMERICAN FEDERAL SAVINGS AND
LOAN ASSOCIATION OF SULLIVAN ("AMERICAN FEDERAL"), MID-MISSOURI HOLDING
COMPANY, INC. ("MID-MISSOURI") AND BANK OF SULLIVAN
Ladies and Gentlemen:
I have been advised that I may be deemed to be an affiliate of American
Federal, as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 ("Rule 145") of the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the terms and conditions of the Acquisition Agreement, each
share of common stock of American Federal owned by me as of the effective time
of the merger contemplated by the Acquisition Agreement (the "Merger") may be
converted into the right to receive a combination of cash and shares of common
stock of Mid-Missouri (the "Mid-Missouri Shares"). This letter is delivered to
Mid-Missouri pursuant to Section 4.10 of the Acquisition Agreement.
A. I represent and warrant to Mid-Missouri and agree that:
1. I shall not make any sale, transfer or other disposition of the
Mid-Missouri Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
2. I understand that the issuance of the Mid-Missouri Shares to me
pursuant to the Merger will be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of American Federal and because any distributions by me of the
Mid-Missouri Shares will not be registered under the Securities Act, such
Mid-Missouri Shares must be held by me unless (i) the sale, transfer or
other distribution has been registered under the Securities Act, (ii) the
sale, transfer or other distribution of such Mid-Missouri Shares is made in
accordance with the provisions of Rule 145, or (iii) in the opinion of
counsel acceptable to Mid-Missouri some other exemption from registration
under the Securities Act is available with respect to any such proposed
distribution, sale, transfer or other disposition of such Mid-Missouri
Shares.
A-37
<PAGE>
B. I understand and agree that:
1. Stop transfer instructions will be issued with respect to the Mid-
Missouri Shares and there will be placed on the certificates representing
such Mid-Missouri Shares, or any certificate delivered in substitution
therefor, a legend stating in substance:
"The shares represented by this Certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933, as
amended, applied. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
dated ___________________, 199_, by the registered holder in favor of
Mid-Missouri Holding Company, Inc., a copy of which agreement is on
file at the principal offices of Mid-Missouri Holding Company, Inc."
2. Unless the transfer by me of Mid-Missouri Shares is a sale made in
compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, Mid-Missouri
reserves the right to place the following legend on the Certificates issued
to my transferee:
"The shares represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
under the Securities Act of 1933, as amended, applied. The shares have
not been acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold or otherwise
transferred unless the shares have been registered under the Securities
Act of 1933, as amended, or an exemption from registration is
available."
I understand and agree that the legends set forth in paragraphs 1 and 2
above shall be removed by delivery of substitute Certificates without any legend
if I deliver to Mid-Missouri a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance satisfactory to Mid-
Missouri, to the effect that no such legend is required for the purpose of the
Securities Act.
I have carefully read this letter and the Acquisition Agreement and
understand the requirements of each and the limitations imposed upon the
distribution, sale, transfer or other disposition of Mid-Missouri Shares by me.
Very truly yours,
A-38
<PAGE>
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "First
Amendment") is made and entered into as of the 13th day of February, 1997, by
and among AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN, a Federal
savings and loan association ("American Federal"), MID-MISSOURI HOLDING COMPANY,
INC., a Missouri corporation ("Mid-Missouri"), and BANK OF SULLIVAN, a Missouri
bank ("Subsidiary Bank").
RECITALS
--------
WHEREAS, American Federal, Mid-Missouri and Subsidiary Bank entered into
that certain Agreement and Plan of Merger dated December 6, 1996, (the "Merger
Agreement") pursuant to which American Federal has agreed to merge with and into
Subsidiary Bank under the charter of Subsidiary Bank; and
WHEREAS, American Federal, Mid-Missouri and Subsidiary Bank now desire to
amend the Merger Agreement as expressly provided herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this First Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend the Merger Agreement as follows:
SECTION 1. AMENDMENT. Section 7.05 of the Merger Agreement is hereby
--------- ---------
amended by deleting the two references therein to "February 28, 1997," and
substituting in lieu thereof "May 16, 1997."
SECTION 2. FURTHER AMENDMENT. Section 7.08 of the Merger Agreement is
--------- -----------------
hereby amended by deleting the reference therein to "March 31, 1997," and
substituting in lieu thereof "June 20, 1997."
SECTION 3. FURTHER AMENDMENT. Section 6.01 of the Merger Agreement is
--------- -----------------
hereby amended by adding thereto the following:
(j) The shareholders of Mid-Missouri shall have duly authorized
and approved, and the Missouri Secretary of State shall have certified,
an amendment to the Articles of Incorporation of Mid-Missouri providing
for an additional number of authorized shares of Mid-Missouri Common
equal to or greater than the number of such shares constituting the
Stock Component.
SECTION 4. CONTINUED FORCE AND EFFECT. Except as expressly amended
--------- --------------------------
hereby, the Merger Agreement shall remain in full force and effect. Nothing
contained in this First Amendment shall prevent further amendment or
modification of any provision of the Merger Agreement.
A-39
<PAGE>
SECTION 5. MULTIPLE COUNTERPARTS. This First Amendment may be executed
--------- ---------------------
in multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the day and year first above written.
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION
OF SULLIVAN, a Federal savings and loan association
By: /s/ Rita J. Heady
--------------------------------
Rita J. Heady
Executive Vice President
MID-MISSOURI HOLDING COMPANY, INC., a Missouri
corporation
By: E. Milt Branum, Jr.
--------------------------------
E. Milt Branum, Jr.
President
BANK OF SULLIVAN, a Missouri bank
By: E. Milt Branum, Jr.
--------------------------------
E. Milt Branum, Jr.
President
A-40
<PAGE>
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Second
Amendment") is made and entered into as of the 7th day of May, 1997, by and
among AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN, a Federal savings
and loan association ("American Federal"), MID-MISSOURI HOLDING COMPANY, INC., a
Missouri corporation ("Mid-Missouri"), and BANK OF SULLIVAN, a Missouri bank
("Subsidiary Bank").
RECITALS
--------
WHEREAS, American Federal, Mid-Missouri and Subsidiary Bank entered into
that certain Agreement and Plan of Merger dated December 6, 1996, as amended on
February 13, 1997 (as amended, the "Merger Agreement") pursuant to which
American Federal has agreed to merge with and into Subsidiary Bank under the
charter of Subsidiary Bank; and
WHEREAS, American Federal, Mid-Missouri and Subsidiary Bank now desire to
further amend the Merger Agreement as expressly provided herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Second Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend the Merger Agreement as follows:
SECTION 1. AMENDMENT. Section 7.05 of the Merger Agreement is hereby
--------- ---------
amended by deleting the two references therein to "May 16, 1997," and
substituting in lieu thereof "June 30, 1997."
SECTION 2. FURTHER AMENDMENT. Section 7.08 of the Merger Agreement is
--------- -----------------
hereby amended by deleting the reference therein to "June 20, 1997," and
substituting in lieu thereof "July 31, 1997."
SECTION 3. CONTINUED FORCE AND EFFECT. Except as expressly amended
--------- --------------------------
hereby, the Merger Agreement shall remain in full force and effect. Nothing
contained in this Second Amendment shall prevent further amendment or
modification of any provision of the Merger Agreement.
SECTION 4. MULTIPLE COUNTERPARTS. This Second Amendment may be executed
--------- ---------------------
in multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute but one and the same document.
A-41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Second
Amendment as of the day and year first above written.
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION
OF SULLIVAN, a Federal savings and loan association
By: /s/ Rita J. Heady
---------------------------------------
Rita J. Heady
Executive Vice President
MID-MISSOURI HOLDING COMPANY, INC., a Missouri
corporation
By: /s/ E. Milt Branum, Jr.
---------------------------------------
E. Milt Branum, Jr.
President
BANK OF SULLIVAN, a Missouri bank
By: /s/ E. Milt Branum, Jr.
---------------------------------------
E. Milt Branum, Jr.
President
A-42
<PAGE>
APPENDIX B
----------
SECTION 8 OF THE FEDERAL STOCK CHARTER OF AMERICAN FEDERAL
SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding
anything contained in the Association's charter or Bylaws to the contrary, for a
period of five years from the date of completion of the conversion of the
Association form mutual to stock form, the following provisions shall apply:
A. BENEFICIAL OWNERSHIP LIMITATION. No person shall directly or indirectly
offer to acquire or acquire the beneficial ownership of more than 10 percent of
any class of any equity security of the Association. This limitation shall not
apply to a transaction in which the Association forms a holding company without
change in the respective beneficial ownership interests of its stockholders
other than pursuant to the exercise of any dissenter and appraisal right, the
purchase of shares by underwriters in connection with a public offering, or the
purchase of shares by a tax-qualified employee stock benefit plan which is
exempt from the approval requirements under Section 574.3(c)(1)(vi) of the
regulations of the OTS.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10 percent shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the stockholders for a vote.
(1) The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the Association.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any other contract, understanding, relationship, agreement or other
arrangements, whether written or otherwise.
B. CUMULATIVE VOTING LIMITATION. Stockholders shall not be permitted to
cumulate their votes for the election of directors.
C. CALL FOR SPECIAL MEETINGS. Special meetings of stockholders relating
to changes in control of the Association or amendments to its charter shall
be called only upon direction of the Board of Directors.
B-1
<PAGE>
APPENDIX C
----------
PROPOSED STOCKHOLDER RESOLUTIONS REGARDING
THE MERGER AGREEMENT AND THE CHARTER AMENDMENT
C-1
<PAGE>
RESOLUTIONS TO BE ADOPTED BY
STOCKHOLDERS OF
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
AMENDMENT OF CHARTER
--------------------
RESOLVED, that Section 8.A of the Charter of the Association, be, and it
hereby is, deleted in its entirety.
RESOLVED, FURTHER, that Sections 8.B and 8.C of the Charter of the
Association be, and they hereby are, redesignated as Sections 8.A and 8.B
respectively.
RESOLVED, FURTHER, that the Board of Directors and officers of the
Association are hereby authorized and directed to take all such actions,
make all such applications, and execute all such documents as may be
necessary to carry out the foregoing amendments to the Charter of the
Association.
APPROVAL OF MERGER
------------------
RESOLVED, that the Merger Agreement dated December 6, 1996 (as amended)
between the Association, Mid-Missouri Holding Company, Inc. and Bank of
Sullivan, whereunder the Association will be merged into Bank of Sullivan
(with Bank of Sullivan being the surviving party) be and it hereby is
approved and ratified in all respects.
RESOLVED, FURTHER, that the Board of Directors and officers of the
Association are hereby authorized and directed to take all such actions,
make all such applications, and execute all such documents as may be
necessary to carry out the provisions and intent of the Merger Agreement
and to complete the merger of the Association into Bank of Sullivan
pursuant to the terms of the Merger Agreement.
C-2
<PAGE>
APPENDIX D
----------
FAIRNESS OPINION OF
NORMAN BACKUES & ASSOCIATES, INC.
D-1
<PAGE>
[NORMAN BACKUES & ASSOCIATES, INC. LETTERHEAD]
March 20, 1997
Board of Directors
American Federal Savings & Loan Association of Sullivan
20 Hughes Ford Road
Sullivan, Missouri 63080-0250
Members of the Board:
American Federal Savings & Loan Association of Sullivan (the "Bank"), under date
of March 7, 1997, requested and authorized our firm to conduct the necessary
investigation to produce a fairness opinion for your bank suitable for the
fulfillment of the requirements of the banking laws of the State of Missouri and
the regulations of the Missouri Division of Finance. Our opinion as to the
fairness was the consideration to be paid by Mid-Missouri Holding Company, Inc.
(the "Company") in connection with the proposed transaction of the Bank (the
"Transaction"). The terms of the proposed Transaction are contained in the
Agreement and Plan of Reorganization dated December 1996 ("the Agreement")
between the Company and the Bank and the related merger Agreement between the
Mid-Missouri Holding Company, Inc. and Bank, and provide for, among other
things, each share of the Bank's common stock to be converted into the right to
receive shares of stock in the Company as per the formula included in the
Agreement.
In conducting our investigation and analysis, and in arriving at the opinion as
expressed herein, we have reviewed and analyzed, among other data:
(1) the financial statements of the Bank and the Company for the years
ending 1995 and 1996;
(2) the Agreement;
(3) publicly available information regarding the performance of certain
other banking companies whose business activities we believe to be
generally comparable with the Bank and the Company;
(4) other information we deemed relevant.
D-2
<PAGE>
The Internal Revenue Service has prescribed various factors to be considered in
the valuation of closely-held businesses. Accordingly, we have considered all of
the factors described in various Revenue Rulings, including:
a. nature and history of the business
b. economic outlook and condition of the industry
c. book value of stock and financial condition of the business
d. earning capacity of the company
e. dividend paying capacity
f. goodwill and other intangibles
g. prior sales and size of the block to be valued
h. market price of similar stocks actively traded in open markets
Further, we have taken into account our assessment of general economic, market
and financial conditions, our experience in bank valuation, the nature and terms
of certain other acquisition transactions involving commercial banks and bank
holding companies whose business characteristics are reasonably comparable to
the Bank and the Company, respectively, and our knowledge of the banking
industry generally.
We understand that our appraisal will be used for fairness opinion purposes
only. No other purpose is intended or should be inferred.
For purposes of this appraisal, we define the term fair value as the price which
property will bring when it is offered for sale by one who is willing but not
obligated to sell it, and is bought by one who is willing or desires to
purchase, but is not compelled to do so.
As it relates to the stock of the Bank, when no market exists for a stock, or
the stock is thinly traded resulting in a potential distortion of fair value,
the appraiser must resort to an analysis of relevant intrinsic factors to
determine fair value.
Shares of the Company are not publicly traded and the value of the shares used
in our valuation is based upon the information that is readily available (see
Exhibits V, VI and IX). Based upon our review of the data, the fair value of a
share of Mid-Missouri Holding Company, Inc. common stock, as of December 31,
1996, was $72 per share.
Shares of the Bank are not publicly traded and the value of the shares used in
our valuation is based upon the information that is readily available (See
Exhibits III, IV, VII and VIII). Based upon our review of the data, the fair
value of a share of American Federal Savings & Loan Association of Sullivan
common stock, as of December 31, 1996, was $28 per share.
In our review and analysis, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us or publicly
available without independent verification. Further, we have not made any
evaluations or appraisals of the investment and loan portfolios or the
properties and facilities of the Bank.
Based upon the foregoing and such other factors as we deem relevant, it is our
opinion as consultants that, as of the date hereof, the terms of the Transaction
are fair, from a financial point of view, to the
D-3
<PAGE>
holders of the Bank's common stock as well as the holders of the Company's
common stock. We understand that we are not obligated to revise our opinion due
to events and fluctuating economic conditions occurring subsequent to the date
of this opinion.
The attached exhibits are an integral part of this letter and our opinion.
Sincerely,
NORMAN BACKUES & ASSOCIATES, INC.
Thomas B. Fahnestock, C.P.A.
Senior Consultant
TBF/si
REVIEW: NB
Exhibits:
I. Statement of Appraisal Assumptions and Limiting Conditions
II. Appraisal Certification
III. American Federal Savings Discounted Cash Flow Assumptions as of
December 1996
IV. American Federal Savings Discounted Cash Flow Analysis as of
December 1996
V. Mid-Missouri Holding Company, Inc. Discounted Cash Flow
Assumptions as of December 1996
VI. Mid-Missouri Holding Company, Inc. Discounted Cash Flow
Analysis as of December 1996
VII. American Federal / Mid-Missouri Conversion of Shares Formula as
of December 31, 1996
VIII. American Federal Savings & Loan Estimation of Fair Value as of
December 31, 1996
IX. Mid-Missouri Holding Company, Inc. Estimation of Fair Value as
of December 31, 1996
X. Other Resources Used for Analysis as of December 31, 1996
D-4
<PAGE>
EXHIBIT I
Statement of Appraisal Assumptions and Limiting Conditions
----------------------------------------------------------
This valuation opinion report has been prepared pursuant to the following
general assumptions and general limiting conditions:
1. We assume no responsibility for the legal description or matters including
legal or title considerations. Title to the subject assets, properties, or
business interests are assumed to be good and marketable unless otherwise
stated.
2. The subject assets, properties, or business interests are appraised free
and clear of any or all liens or encumbrances unless otherwise stated.
3. We assume responsible ownership and competent management with respect to
the subject assets, properties, or business interests.
4. The information furnished by others is believed to be reliable. However, we
issue no warranty or other form of assurance regarding its accuracy.
5. We assume that there is full compliance with all applicable Federal, state,
and local regulations and laws unless noncompliance is stated, defined, and
considered in the appraisal report.
6. We assume that all required licenses, certificates of occupancy, consents,
or legislative or administrative authority from any local, state, or
national government, private entity or organization have been or can be
obtained or renewed for any use on which the valuation opinion contained in
this report is based.
7. Possession of this valuation opinion report, or a copy thereof, does not
carry with it the right of publication. It may not be used for any purpose
by any person other than the party to whom it is addressed without our
written consent and, in any event, only with proper written qualifications
and only in its entirety.
8. We, by reason of this valuation, are not required to furnish a complete
valuation report, or to give testimony, or to be in attendance in court
with reference to the assets, properties, or business interests in question
unless arrangements have been previously made.
9. No part of the contents of this report especially any conclusions of value,
the identity of the appraisers, or the firm with which the appraisers are
associated) shall be disseminated to the public through advertising, public
relations, news, sales, or other media without our prior written consent
and approval.
10. We assume no responsibility for any financial reporting judgements which
are appropriately those of management. Management accepts the
responsibility for any related financial reporting with respect to the
assets, properties, or business interests encompassed by this
appraisal.
D-5
<PAGE>
EXHIBIT II
Appraisal Certification
-----------------------
We hereby certify the following statements regarding this appraisal:
1. We have personally inspected the assets, properties, or business interests
encompassed by this appraisal, as deemed necessary.
2. We have no present or contemplated future interest in the assets,
properties, or business interests that are the subject of this appraisal
report.
3. We have no personal interest or bias with respect to the subject matter of
this report or the parties involved.
4. Our compensation for making the appraisal is in no way contingent upon the
value reported.
5. To the best of our knowledge and belief, the statements of facts contained
in this report, upon which the analyses, conclusions and opinions expressed
herein are based, are true and correct.
6. This valuation report has been prepared in conformity with generally
accepted appraisal standards and is subject to the requirements of the code
of professional ethics and standards of professional conduct of the
professional organizations of which Mr. Fahnestock is a member.
7. No persons other than the appraiser, whose qualifications were included in
our proposal, have prepared the analyses, conclusions and opinions
concerning the assets, properties, or business interests set forth in this
report.
D-6
<PAGE>
EXHIBIT III
AMERICAN FEDERAL SAVINGS
DISCOUNTED CASH FLOW ASSUMPTIONS
AS OF DECEMBER 1996
(000's)
<TABLE>
<CAPTION>
==============================================================================================================================
VARIABLE YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-------- -------- ------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSET GROWTH RATE -3.00% -3.00% -3.00% -3.00% -3.00% -3.00% -3.00% -3.00% -3.00% -3.00%
TOTAL ASSETS $18,922 18,354 17,804 17,270 16,752 16,249 15,761 15,289 14,830 14,385 13,954
AVERAGE ASSETS 18,638 18,079 17,537 17,011 16,500 16,005 15,525 15,059 14,608 14,169
NET INTEREST INCOME
AS A PERCENT OF AVERAGE ASSETS 3.72% 3.72% 3.72% 3.72% 3.72% 3.72% 3.72% 3.72% 3.72% 3.72%
PROVISION FOR LOAN LOSSES
AS A PERCENT OF AVERAGE ASSETS 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NON-INTEREST INCOME
AS A PERCENT OF AVERAGE ASSETS 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
NON-INTEREST EXPENSE
AS A PERCENT OF AVERAGE ASSETS 2.28% 2.28% 2.28% 2.28% 2.28% 2.28% 2.28% 2.28% 2.28% 2.28%
INCOME TAX RATE 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00%
DEPRECIATION AND AMORTIZATION
AS A PERCENT OF AVERAGE ASSETS 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12%
ADDITIONAL CAPITAL REQUIREMENTS
AS PERCENT OF CHANGE IN ASSETS 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DISCOUNT RATE - EXPECTED R.O.E. 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00%
RESIDUAL GROWTH RATE 4.00%
RESIDUAL CAPITALIZATION RATE 5.00%
RESIDUAL PRESENT VALUE FACTOR 0.6139
EQUITY CAPITAL $ 3,732
CAPITAL TO ASSET RATIO 19.72%
REQUIRED CAPITAL AT 7% OF ASSETS $ 1,325
<CAPTION>
=========================================================
REQUIRED
CAPITAL
<S> <C>
ASSET GROWTH RATE
TOTAL ASSETS $18,922 977
AVERAGE ASSETS
NET INTEREST INCOME
AS A PERCENT OF AVERAGE ASSETS
PROVISION FOR LOAN LOSSES
AS A PERCENT OF AVERAGE ASSETS
NON-INTEREST INCOME
AS A PERCENT OF AVERAGE ASSETS
NON-INTEREST EXPENSE
AS A PERCENT OF AVERAGE ASSETS
INCOME TAX RATE
DEPRECIATION AND AMORTIZATION
AS A PERCENT OF AVERAGE ASSETS
ADDITIONAL CAPITAL REQUIREMENTS
AS PERCENT OF CHANGE IN ASSETS
DISCOUNT RATE - EXPECTED R.O.E.
RESIDUAL GROWTH RATE
RESIDUAL CAPITALIZATION RATE
RESIDUAL PRESENT VALUE FACTOR
EQUITY CAPITAL
CAPITAL TO ASSET RATIO
REQUIRED CAPITAL AT 7% OF ASSETS
</TABLE>
D-7
<PAGE>
EXHIBIT IV
AMERICAN FEDERAL SAVINGS
DISCOUNTED CASH FLOW ANALYSIS
AS OF DECEMBER 1996
(000's)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BANK CASH FLOW YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INTEREST INCOME $ 693 $ 673 $ 652 $ 633 $ 614 $ 595 $ 578 $ 560 $ 543 $ 527
PROVISION FOR LOAN LOSSES 0 0 0 0 0 0 0 0 0 0
NON-INTEREST INCOME 21 20 19 19 18 18 17 17 16 16
NON-INTEREST EXPENSE 425 412 400 388 376 365 354 343 333 323
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME BEFORE SECURITY TRANSACTIONS $ 289 $ 280 $ 272 $ 264 $ 256 $ 248 $ 241 $ 233 $ 226 $ 220
INCOME TAXES 98 95 92 90 87 84 82 79 77 75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME $ 191 $ 185 $ 179 $ 174 $ 169 $ 164 $ 159 $ 154 $ 149 $ 145
========================================================================================
PLUS: DEPRECIATION 22 22 21 20 20 19 19 18 18 17
LESS: ADDITIONAL CAP REQUIREMENTS 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
AVAILABLE CASH FLOW $ 213 $ 207 $ 200 $ 194 $ 189 $ 183 $ 177 $ 172 $ 167 $ 162
PRESENT VALUE FACTOR 0.8621 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
DISCOUNTED CASH FLOWS $ 184 $ 156 $ 132 $ 111 $ 94 $ 79 $ 67 $ 56 $ 47 $ 40
=========================================================================================
SUM OF DISCOUNTED CASH FLOWS $ 966
PRESENT VALUE OF RESIDUAL 1,138
-------
FAIR MARKET VALUE OF CAPITAL
ACCOUNTS $ 2,105
PLUS: PRESENT CAPITAL IN EXCESS OF 7% 2,407
-------
FAIR MARKET VALUE OF EQUITY ON A DIFFERENCES IN CALCULATED AMOUNTS
CONTROLLING, NON-MARKETABLE BASIS $ 4,512 MAY EXIST DUE TO ROUNDING
=========
VALUE PER SHARE - $ 30
ISSUED SHARES 152,087
- -------------------------------------------------------------------
<CAPTION>
RESIDUAL
VALUE
===================================================================
<S> <C>
NET INTEREST INCOME
PROVISION FOR LOAN LOSSES
NON-INTEREST INCOME
NON-INTEREST EXPENSE
INCOME BEFORE SECURITY TRANSACTIONS
INCOME TAXES
NET INCOME
PLUS: DEPRECIATION
LESS: ADDITIONAL CAP REQUIREMENTS
AVAILABLE CASH FLOW $1,854
PRESENT VALUE FACTOR
DISCOUNTED CASH FLOWS
</TABLE>
D-8
<PAGE>
EXHIBIT V
MID-MISSOURI HOLDING COMPANY, INC.
DISCOUNTED CASH FLOW ASSUMPTIONS
AS OF DECEMBER 1996
(000's)
<TABLE>
<CAPTION>
===============================================================================================================================
VARIABLE YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSET GROWTH RATE 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%
TOTAL ASSETS $120,742 128,590 136,949 145,850 155,331 165,427 176,180 187,631 199,827 212,816 226,649
AVERAGE ASSETS 124,666 132,769 141,399 150,590 160,379 170,803 181,906 193,729 206,322 219,733
NET INTEREST INCOME
AS A PERCENT OF AVERAGE
ASSETS 3.88% 3.88% 3.88% 3.88% 3.88% 3.88% 3.88% 3.88% 3.88% 3.88%
PROVISION FOR LOAN LOSSES
AS A PERCENT OF AVERAGE
ASSETS 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
NON-INTEREST INCOME
AS A PERCENT OF AVERAGE
ASSETS 0.64% 0.64% 0.64% 0.64% 0.64% 0.64% 0.64% 0.64% 0.64% 0.64%
NON-INTEREST EXPENSE
AS A PERCENT OF AVERAGE
ASSETS 3.18% 3.18% 3.18% 3.18% 3.18% 3.18% 3.18% 3.18% 3.18% 3.18%
INCOME TAX RATE 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00% 34.00%
DEPRECIATION AND
AMORTIZATION
AS A PERCENT OF AVERAGE
ASSETS 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17%
ADDITIONAL CAPITAL
REQUIREMENTS
AS PERCENT OF CHANGE IN
ASSETS 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DISCOUNT RATE - EXPECTED
R.O.E. 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00%
RESIDUAL GROWTH RATE 4.00%
RESIDUAL CAPITALIZATION
RATE 5.00%
RESIDUAL PRESENT VALUE
FACTOR 0.6139
EQUITY CAPITAL $9,573
CAPITAL TO ASSET RATIO 7.93%
REQUIRED CAPITAL AT 7% OF
ASSETS $8,433
<CAPTION>
REQUIRED
CAPITAL
<S> <C>
ASSET GROWTH RATE
TOTAL ASSETS $120,742 15,865
AVERAGE ASSETS
NET INTEREST INCOME
AS A PERCENT OF AVERAGE
ASSETS
PROVISION FOR LOAN LOSSES
AS A PERCENT OF AVERAGE
ASSETS
NON-INTEREST INCOME
AS A PERCENT OF AVERAGE
ASSETS
NON-INTEREST EXPENSE
AS A PERCENT OF AVERAGE
ASSETS
INCOME TAX RATE
DEPRECIATION AND
AMORTIZATION
AS A PERCENT OF AVERAGE
ASSETS
ADDITIONAL CAPITAL
REQUIREMENTS
AS PERCENT OF CHANGE IN
ASSETS
DISCOUNT RATE - EXPECTED
R.O.E.
RESIDUAL GROWTH RATE
RESIDUAL CAPITALIZATION
RATE
RESIDUAL PRESENT VALUE
FACTOR
EQUITY CAPITAL
CAPITAL TO ASSET RATIO
REQUIRED CAPITAL AT 7% OF
ASSETS
</TABLE>
D-9
<PAGE>
EXHIBIT VI
AMERICAN FEDERAL SAVINGS
DISCOUNTED CASH FLOW ANALYSIS
AS OF DECEMBER 1996
(000's)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BANK CASH FLOW YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INTEREST INCOME $ 4,837 $ 5,151 $ 5,486 $ 5,843 $ 6,223 $ 6,627 $ 7,058 $ 7,517 $ 8,005 $ 8,526
PROVISION FOR LOAN LOSSES 12 13 14 15 16 17 18 19 21 22
NON-INTEREST INCOME 798 850 905 964 1,026 1,093 1,164 1,240 1,320 1.406
NON-INTEREST EXPENSE 3,964 4,222 4,497 4,789 5,100 5,432 5,785 6,161 6,561 6,988
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME BEFORE SECURITY TRANSACTIONS $ 1,658 $ 1,766 $ 1,881 $ 2,003 $ 2,133 $ 2,272 $ 2,419 $ 2,577 $ 2,744 $ 2,922
INCOME TAXES 564 600 639 681 725 772 823 876 933 994
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME $ 1,094 $ 1,165 $ 1,241 $ 1,322 $ 1,408 $ 1,499 $ 1,597 $ 1,701 $ 1,811 $ 1,929
========================================================================================
PLUS: DEPRECIATION $ 208 $ 222 $ 236 $ 251 $ 268 $ 285 $ 304 $ 324 $ 345 $ 367
LESS: ADDITIONAL CAP REQUIREMENTS 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
AVAILABLE CASH FLOW $ 1,303 $ 1,387 $ 1,477 $ 1,573 $ 1,676 $ 1,785 $ 1,901 $ 2,024 $ 2,156 $ 2,296
PRESENT VALUE FACTOR 0.8621 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
DISCOUNTED CASH FLOWS $ 1,123 $ 1,049 $ 971 $ 900 $ 833 $ 771 $ 714 $ 662 $ 613 $ 568
=========================================================================================
SUM OF DISCOUNTED CASH FLOWS $ 8,204
PRESENT VALUE OF RESIDUAL 7,248
-------
FAIR MARKET VALUE OF CAPITAL ACCOUNTS $15,452
PLUS: PRESENT CAPITAL IN EXCESS OF 7% 1,140
-------
FAIR MARKET VALUE OF EQUITY ON A
CONTROLLING, NON-MARKETABLE BASIS $16,592 DIFFERENCES IN CALCULATED AMOUNTS
========= MAY EXIST DUE TO ROUNDING
VALUE PER SHARE - $ 83
ISSUED SHARES 200,000
- ---------------------------------------------------------
<CAPTION>
RESIDUAL
VALUE
=========================================================
<S> <C>
NET INTEREST INCOME
PROVISION FOR LOAN LOSSES
NON-INTEREST INCOME
NON-INTEREST EXPENSE
INCOME BEFORE SECURITY TRANSACTIONS
INCOME TAXES
NET INCOME
PLUS: DEPRECIATION
LESS: ADDITIONAL CAP REQUIREMENTS
AVAILABLE CASH FLOW $11,806
PRESENT VALUE FACTOR
DISCOUNTED CASH FLOWS
</TABLE>
D-10
<PAGE>
EXHIBIT VII
AMERICAN FEDERAL/MID-MISSOURI
CONVERSION OF SHARES FORMULA
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCK COMPONENT:
- ----------------------
<S> <C> <C> <C> <C>
7% OF TOTAL ASSETS
OF THE BANK $18,921,924 x 7.00% $1,324,535
- --------------------- = --------------- = ---------- = 27,673
PER SHARE BOOK VALUE OF $9,572,872 / 200,000 $48 SHARES
MID-MISSOURI COMMON
CASH COMPONENT:
- ----------------------
(Rounded to 000's)
BOOK VALUE OF AMERICAN FEDERAL $3,732,000
LESS STOCK COMPONENT 31,189 SHARES 1,493,000
---------
CASH COMPONENT $2,239,000
=========
STOCK COMPONENT PER SHARE 31,189 SHARES $72 $2,240,000
(ESTIMATED VALUE OF
MID-MISSOURI SHARE)
CASH COMPONENT
AS CALCULATED ABOVE $2,239,000
---------
FAIR VALUE OF MERGER CONSIDERATION $4,479,000
=========
MERGER CONSIDERATION PER SHARE 152,087 SHARES $ 29
ESTIMATED VALUE PER SHARE OF AMERICAN FEDERAL $ 28
BOOK VALUE PER SHARE $ 25
MERGER CONSIDERATION AS A RATIO OF BOOK VALUE 1.16
</TABLE>
D-11
<PAGE>
EXHIBIT VIII
AMERICAN FEDERAL SAVINGS & LOAN
ASSOCIATION OF SULLIVAN
ESTIMATION OF FAIR VALUE
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
WEIGHTED
FAIR FAIR
VALUATION VALUE WEIGHT VALUE
METHODOLOGY ----- ------- -----
- -----------
<S> <C> <C> <C>
INCOME APPROACH $ 30 50% $ 15
BOOK VALUE $ 25 50% $ 13
---- ----
TOTAL 100% $ 28
==== ====
</TABLE>
D-12
<PAGE>
EXHIBIT IX
MID-MISSOURI HOLDING COMPANY, INC.
ESTIMATION OF FAIR VALUE
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
WEIGHTED
FAIR FAIR
VALUATION VALUE WEIGHT VALUE
METHODOLOGY ----- ------- -----
- -----------
<S> <C> <C> <C>
INCOME APPROACH $ 83 70% $ 58
BOOK VALUE $ 48 30% $ 14
---- ----
TOTAL 100% $ 72
==== ====
</TABLE>
Note:
More weight is given to the income approach because of the
growth and earning potential of the company versus the bank.
D-13
<PAGE>
EXHIBIT X
OTHER RESOURCES USED FOR ANALYSIS
AS OF DECEMBER 31, 1996
FINANCIAL INFORMATION
A. Mid-Missouri Holding Company, Inc.
December 31, 1995 and 1996 Audited Financial Statement
B. American Federal Savings & Loan Association of Sullivan
Audited Financial Statements for years ended December 31, 1995 and
December 31, 1996
C. Agreement of Plan & Merger
D. Data contained in the draft of the Securities & Exchange Commission
Form S-4
D-14
<PAGE>
APPENDIX E
----------
FAIRNESS OPINION OF
LEXINGTON FINANCIAL GROUP, L.L.C.
E-1
<PAGE>
LEXINGTON FINANCIAL GROUP, L.L.C.
- -----------------------------------
March 14, 1997
Board of Directors
Mid-Missouri Holding Company, Inc.
318 West Main Street
P.O. Box 489
Sullivan, MO 63080-0489
Gentlemen:
American Federal Savings & Loan Association of Sullivan, a Federal savings and
loan association ("American Federal"), Mid-Missouri Holding Company, Inc., a
Missouri Corporation ("Mid-Missouri"), and Bank of Sullivan, a Missouri bank and
wholly owned subsidiary of Mid-Missouri ("Subsidiary Bank"), have entered into
an Agreement and Plan of Merger ("Merger Agreement") dated December 6, 1996.
Pursuant to Merger Agreement, and subject to certain conditions and provisions
set forth therein, American Federal will be merged with and into Subsidiary Bank
in a transaction ("The Merger") in which each share of American Federal common
stock will be converted into the right to receive the "Merger Consideration" (as
defined hereafter) in common stock and cash. Therefore, you have requested our
opinion as to the fairness of the Merger Consideration, from a financial point
of view, for the benefit of the shareholders of Mid-Missouri.
Pursuant to the Merger Agreement, the Merger Consideration will consist of the
right to receive cash and common stock for each issued and outstanding share of
American Federal Common Stock, subject to certain adjustments set forth in the
Merger Agreement. The shares received will be shares of common stock of Mid-
Missouri in the proportion as described hereafter.
In the Merger, shares of American Federal Common will be converted into a
combination of cash and Mid-Missouri Common having an aggregate value equal to
the per share Closing Book Value (as herein defined) of American Federal. From
hereon, the term "Book Value" means the total amount of an entity's consolidated
stockholders' equity accounts, less preferred stock, reduced by any adjustments
to the accounts in connection with the Merger. The date of record to determine
the Book Value will be the last day of the month immediately preceding the month
in which the date of the closing of the Merger occurs.
The aggregate value of the Merger Consideration received by all stockholders of
American Federal will be payable in a combination of cash and shares of Mid-
Missouri Common. The amount of cash will be the difference between the Merger
Consideration and the aggregate Closing Book Value of the stock portion
provided. The number of shares of Mid-Missouri Common will be calculated as
follows:
- --------------------------------------------------------------------------------
[LETTER HEAD APPEARS]
E-2
<PAGE>
LEXINGTON FINANCIAL GROUP, L.L.C.
- -------------------------------------
Total Assets of American Federal X. 07
-----------------------------------------------
Per Share Book Value of Mid-Missouri Common
As used herein, the term "Total Assets" means the total assets as shown on the
books of American Federal as of the last day of the month preceding the month in
which the Closing Date occurs and the term "Per Share Book Value" means the
amount of the consolidated shareholders' equity accounts, exclusive of preferred
stock, of Mid-Missouri as of the last day of the month immediately preceding the
month in which the Closing Date occurs divided by the number of shares of common
stock of Mid-Missouri outstanding on such date. The Stock Component issuable
pursuant to the Merger Agreement will be increased, as necessary, and the amount
of the Cash Component payable will be decreased, as necessary, such that the
aggregate Book Value of the Stock, determined as of the Closing Date, will not
be less than forty percent (40%) of the Merger Consideration.
VALUE OF THE MERGER
Based on the approximate Book Value of American Federal at December 31, 1996,
calculated in accordance with the terms of the Merger Agreement as described
above, the Merger Consideration had an approximate per share value of $24.54
($14.72 cash and .2051 share of Mid-Missouri Common) and an approximate total
value of $3.7 million to holders of American Federal Common. The value of the
Merger Consideration estimated above may increase or decrease depending on the
components making up the determination of American Federal's Book Value and the
date on which the Effective Time occurs.
The actual value of the Merger Consideration to be received by stockholders of
American Federal, including the number of shares of Mid-Missouri Common
constituting the Stock Component and the value of the Cash Component, cannot be
calculated as of the date of this opinion.
Lexington Financial Group, L.L.C. is a financial advisory and consulting firm
that specializes in bank holding companies, commercial banking, and savings bank
industries. We are largely engaged for purposes of valuation of securities in
connection with merger and acquisition transactions, recapitalizations, and
Employee Stock Ownership Plans. We have not been retained to advise in any
capacity, other than that previously stated, in this Merger by any of the
parties involved.
In arriving at the opinion expressed hereafter, we have among other things:
1) Reviewed the Draft of the Form S-4 Registration Statement to be filed with
the Securities and Exchange Commission in compliance with the securities
laws which govern this transaction.
2) Reviewed the audited financial statements of both American Federal and Mid-
Missouri dated December 31, 1996, 1995, and 1994.
3) Reviewed the Merger Agreement, dated December 6, 1996 between American
Federal and Mid-Missouri and compared the proposed financial terms of the
transactions anticipated by the Merger Agreement with the financial terms of
certain other transactions we believe to be relevant.
E-3
<PAGE>
LEXINGTON FINANCIAL GROUP, L.L.C
- ---------------------------------------
4) Reviewed the prospectus relating to this transaction and the financial
information provided therein.
5) Reviewed performance of similar institutions, considered to be peer
companies, for comparative analysis of operations, earnings, asset growth
and capital retention.
6) Reviewed general economic conditions, market and specific financial industry
trends that may impact the transaction at hand.
In rendering this opinion, we have relied, without independent verification,
upon the accuracy and completeness of the financial and other information and
the representations provided to us by American Federal and Mid-Missouri. In
addition, we have accepted all forecasts and projected values purported to us to
be reasonable and prudent. We have not tested the assets for integrity and
accept that all charge-offs are valid and all provisions adequate. We assume
that there will be no material adverse changes in the assets, financial
condition and capital accounts on the part of American Federal or Mid-Missouri
prior to the closing date of the Merger. This opinion, therefore, is based
solely upon all conditions, whether market or economic, as they exist at this
time.
Based upon the analysis and conditions as outlined above, we are of the opinion
that, as of the date hereof, the Merger Consideration to be paid by Mid-
Missouri, pursuant to the terms of the Agreement, is fair to the shareholders of
Mid-Missouri from a financial point of view.
Lexington Financial Group, L.L.C.
E-4
<PAGE>
APPENDIX F
----------
EXCERPTS OF TITLE 12 - BANKS AND BANKING (DISSENTERS' RIGHTS)
(S) 552.14 DISSENTER AND APPRAISAL RIGHTS.
(a) Right to demand payment of fair or appraised value. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with (S) 552.13 of this part shall have the
right to demand payment of the fair or appraised value of his stock: Provided,
That such stockholder has not voted in favor of the combination and complies
with the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to (S) 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ, or any combination of such
shares of stock and cash.
(c) Procedure-(1) Notice. Each constituent Federal stock association
shall notify all stockholders entitled to rights under this section, not less
than twenty days prior to the meeting at which the combination agreement is to
be submitted for stockholder approval, of the right to demand payment of
appraised value of shares, and shall include in such notice a copy of this
section. Such written notice shall be mailed to stockholders of record and may
be part of management's proxy solicitation for such meeting.
(2) Demand for appraisal and payment. Each stockholder electing to make a
demand under this section shall deliver to the Federal stock association, before
voting on the combination, a writing identifying himself or herself and stating
his or her intention thereby to demand appraisal of and payment for his or her
shares. Such demand must be in addition to and separate from any proxy or vote
against the combination by the stockholder.
(3) Notification of effective date and written offer. Within ten days
after the effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent Federal
stock associations who have complied with the provisions of paragraph (c)(2) of
this section and have not voted in favor of the combination, of the effective
date of the combination;
(ii) Make a written offer to each stockholder to pay for dissenting shares
at a specified price deemed by the resulting association to be the fair value
thereof; and
(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (c)(6) of this section (set out in the
notice) must be satisfied.
F-1
<PAGE>
The notice and offer shall be accompanied by a balance sheet and statement of
income of the association the shares of which the dissenting stockholder holds,
for a fiscal year ending not more than sixteen months before the date of notice
and offer, together with the latest available interim financial statements.
(4) Acceptance of offer. If within sixty days of the effective date of
the combination the fair value is agreed upon between the resulting association
and any stockholder who has complied with the provisions of paragraph (c)(2) of
this section, payment therefor shall be made within ninety days of the effective
date of the combination.
(5) Petition to be filed if offer not accepted. If within sixty days of
the effective date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market value of the
stock of all such stockholders. A stockholder entitled to file a petition under
this section who fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the terms offered under
the combination.
(6) Stock certificates to be noted. Within sixty days of the effective
date of the combination, each stockholder demanding appraisal and payment under
this section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) Withdrawal of demand. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any stockholder
shall have the right to withdraw his or her demand for appraisal and to accept
the terms offered upon the combination.
(8) Valuation and payment. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate staff of
the Office to appraise the shares to determine their fair market value, as of
the effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair value of the shares, upon surrender of the
certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) Costs and expenses. The costs and expenses of any proceeding under
this section may be apportioned and assessed by the Director as he or she may
deem equitable against all or some of the parties. In making this determination
the Director shall consider whether any party has acted arbitrarily,
vexatiously, or not in good faith in respect to the rights provided by this
section.
F-2
<PAGE>
(10) Voting and distribution. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any purpose nor be entitled to the payment of
dividends or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distributions described above.
(11) Status. Shares of the resulting association into which shares of the
stockholders demanding appraisal rights would have been converted or exchanged,
had they assented to the combination, shall have the status of authorized and
unissued shares of the resulting association.
F-3
<PAGE>
APPENDIX G
----------
PRELIMINARY TAX OPINION OF
LEWIS, RICE & FINGERSH, L.C.
G-1
<PAGE>
A LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
500 N. BROADWAY, SUITE 2000
ST. LOUIS, MISSOURI 63102-2147
TEL (314) 444-7600
FAX (314) 241-6056
ST. LOUIS, MISSOURI KANSAS CITY, MISSOURI CLAYTON, MISSOURI JEFFERSON
CITY, MISSOURI WASHINGTON, MISSOURI BELLEVILLE, ILLINOIS HAYS, KANSAS
LEAWOOD, KANSAS
May 7, 1997
Board of Directors
Mid-Missouri Holding Company, Inc.
318 West Main Street
Sullivan, Missouri 63080
RE: MERGER OF AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN INTO
BANK OF SULLIVAN
Gentlemen:
You have requested our opinions as to the federal income tax consequences
of the proposed merger ("Merger") of American Federal Savings & Loan Association
of Sullivan ("American Federal") into Bank of Sullivan ("Bank") pursuant to the
Agreement and Plan of Merger, dated December 6, 1996, as amended ("Merger
Agreement"), by and among Mid-Missouri Holding Company, Inc. ("Mid-Missouri"),
American Federal and Bank.
In issuing the opinions set forth in this letter, we have relied upon (1)
the factual representations made by Mid-Missouri, and Bank, dated March 10, 1997
and March 11, 1997, respectively, and factual representations, substantially
similar to representations set forth in Revenue Procedure 86-42, 1986-2 C.B.
722, which have been requested from American Federal (the "Representations"),
(2) the Merger Agreement, and (3) the facts, information and documentation set
forth in the Registration Statement on Form S-4 of Mid-Missouri filed with the
Securities and Exchange Commission in connection with the Merger ("Registration
Statement").
The opinions set forth in this letter are predicated upon our understanding
of the facts set forth in the Merger Agreement, the Representations, and the
Registration Statement. Any change in such facts may adversely affect our
opinions. Furthermore, our opinions are based upon our understanding of the
existing provisions of the Internal Revenue Code of 1986, as amended ("Code"),
currently applicable regulations promulgated under the Code, current published
administrative positions of the Internal Revenue Service such as revenue rulings
and revenue procedures, and existing judicial decisions, all of which are
subject to change either prospectively or retroactively. Any change in such
authorities may adversely affect our
G-2
<PAGE>
Board of Directors
May 7, 1997 LEWIS, RICE & FINGERSH
Page 2
opinions. We assume no obligation to update our opinions for any deletions or
additions to or modification of any law applicable to the Merger.
Based on the authority described above and on our review of the Merger
Agreement, the Representations and the Registration Statement, and assuming that
(i) the Representations will be received from American Federal in substantially
the form requested and (ii) the transactions described in all of the above
documents are completed as described, our opinions as to the federal income tax
consequences of the Merger are as follows.
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
2. Pursuant to Section 356(a)(1) of the Code, gain, if any, will be
realized by each shareholder of American Federal common stock who receives both
Mid-Missouri common stock and cash in exchange for his American Federal common
stock and will be recognized, but not in excess of the amount of cash received.
3. Pursuant to Section 358(a)(1) of the Code, the aggregate tax basis
of the Mid-Missouri common stock received by each shareholder of American
Federal will be the same as the aggregate tax basis of the American Federal
common stock surrendered in exchange therefor decreased by the amount of cash
received by the shareholder and increased by the amount, if any, treated as a
dividend and the amount, if any, of gain recognized by the shareholder in the
exchange.
4. Pursuant to Section 1223(1) of the Code, the holding period of Mid-
Missouri common stock received by each shareholder of American Federal will
include, in each instance, the period during which the American Federal
shareholder held the American Federal common stock surrendered in exchange
therefor, provided that such American Federal stock is held as a capital asset
in the hands of such American Federal shareholder on the date of the exchange.
We express no opinion with regard to the federal income tax consequences of
the Merger not addressed expressly by the above opinions. In addition, we
express no opinion as to any state or local tax consequences with respect to the
Merger.
The shareholders of American Federal should consult with a qualified tax
advisor with respect to any reporting requirements which may be applicable, or
any other tax considerations not expressly mentioned herein.
G-3
<PAGE>
Board of Directors
May 7, 1997 LEWIS, RICE & FINGERSH
Page 2
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
cc.: Rita J. Heady
Executive Vice President
American Federal Savings & Loan Association
of Sullivan
G-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 351.355(1) and (2) of The General and Business Corporation Law of
the State of Missouri provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, except that, in the case of an action or suit by or in the right
of the corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which the action or suit was
brought determines upon application that such person is fairly and reasonably
entitled to indemnity for proper expenses. Section 351.355 further provides
that, to the extent that a director, officer, employee or agent of the
corporation has been successful in the defense of any such action, suit or
proceeding or any claim, issue or matter therein, he shall be indemnified
against expenses, including attorney's fees, actually and reasonably incurred in
connection with such action, suit or proceeding. Section 351.355 also provides
that a Missouri corporation may provide additional indemnification to any person
indemnifiable under subsection (1) or (2), provided such additional
indemnification is authorized by the corporation's articles of incorporation or
an amendment thereto or by a shareholder-approved by-law or agreement, and
provided further that no person shall thereby be indemnified against conduct
which was finally adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct. Article XIII of the Articles of Incorporation
of registrant provides that registrant shall indemnify its directors and certain
of its executive officers to the full extent specified in Section 351.355 and,
in addition, shall indemnify each of them against all expenses incurred in
connection with service for or at the request of the registrant in any of the
capacities referred to in Section 351.355 or arising out of his or her status in
any such capacity, provided that he or she may not be indemnified against
conduct finally adjudged to have been liable for negligence or misconduct.
Pursuant to a policy of directors' and officers' liability insurance, with
total annual limits of $500,000, registrant's officers and directors are
insured, subject to the limits, retention, exceptions and other terms and
conditions of such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect or
II-1
<PAGE>
breach of duty by the directors or officers of registrant in the discharge of
their duties solely in their capacity as directors or officers of registrant,
individually or collectively, or any matter claimed against them solely by
reason of their being directors or officers of registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement:
(2)(a) Agreement and Plan of Merger, dated December 6, 1996, by and
among American Federal Savings & Loan Association of
Sullivan, Mid-Missouri Holding Company, Inc., and Bank of
Sullivan, as amended by the First Amendment to Agreement and
Plan of Merger, dated as of February 13, 1997 (Appendix A to
Proxy Statement/Prospectus). The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request;
(3)(a) Articles of Incorporation of Mid-Missouri Holding Company,
Inc., as amended;
(3)(b) By-laws of Mid-Missouri Holding Company, Inc.;
(5) Opinion of Lewis, Rice & Fingersh, L.C. re legality;
(8) Preliminary Tax Opinion of Lewis, Rice & Fingersh, L.C.
(Appendix A to Proxy Statement/Prospectus).
(23)(a) Consent of Baird, Kurtz & Dobson;
(23)(b) Consent of Baird, Kurtz & Dobson;
(23)(c) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re
legality);
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re
federal income tax consequences);
(23)(e) Consent of Norman Backues & Associates, Inc.;
(23)(f) Consent of Lexington Financial Group, L.L.C.;
(24) Powers of Attorney;
II-2
<PAGE>
(99)(a) Form of Proxy Card for American Federal Savings & Loan
Association of Sullivan Special Meeting;
(99)(b) Form of Letter to Stockholders of American Federal Savings &
Loan Association of Sullivan to accompany Proxy
Statement/Prospectus;
(99)(c) Form of Notice of American Federal Savings & Loan
Association of Sullivan Special Meeting;
(99)(d) Fairness Opinion of Norman Backues & Associates, Inc.
regarding fairness of merger consideration to stockholders
of American Federal Savings & Loan Association of Sullivan
(Appendix D to Proxy Statement/Prospectus);
(99)(e) Fairness Opinion of Lexington Financial Group, L.L.C.
regarding fairness of merger consideration to stockholders
of the Registrant (Appendix E to Proxy
Statement/Prospectus);
(99)(f) Excerpts of Title 12 - Banks and Banking Dissenters' Rights)
(Appendix F to Proxy Statement/Prospectus).
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: That prior
to any public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
such
II-3
<PAGE>
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated document by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Sullivan, State of
Missouri, on March 19, 1997.
MID-MISSOURI HOLDING COMPANY, INC.
By: /s/ E. Milt Branum, Jr.
--------------------------------------------
E. Milt Branum, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Alan Brueske
--------------------------------------------
Alan Brueske
Financial Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on March 19, 1997, by the following
persons in the capacities indicated.
Name Title/Position
- ---- --------------
/s/ John W. Waller Chairman of the Board
- ----------------------------
John W. Waller
/s/ E. Milt Branum, Jr. President, Chief Executive Officer,
- ----------------------------
E. Milt Branum, Jr. Principal Accounting Officer and Director
/s/ Edward P. Burke Director
- ----------------------------
Edward P. Burke
<PAGE>
/s/ Gordian J. Mathias Director
- ----------------------------
Gordian J. Mathias
/s/ James E. McIntosh Director
- ----------------------------
James E. McIntosh
/s/ Norman M. Rubenstein Director
- ----------------------------
Norman M. Rubenstein
/s/ Albert M. Schlueter Director
- ----------------------------
Albert M. Schlueter
/s/ T. Scott Waller Director
- ----------------------------
T. Scott Waller
/s/ Edward C. Wallis Director
- ----------------------------
Edward C. Wallis
/s/ John M. Brummet Director
- ----------------------------
John M. Brummet
<PAGE>
INDEX TO EXHIBITS
Number Exhibit
- ------ -------
(2)(a) Agreement and Plan of Merger, dated December 6, 1996, by and among
American Federal Savings & Loan Association of Sullivan, Mid-Missouri
Holding Company, Inc., and Bank of Sullivan, as amended by the First
Amendment to Agreement and Plan of Merger, dated as of February 13,
1997 (Appendix A to Proxy Statement/Prospectus). The Registrant agrees
to furnish supplementally a copy of any omitted schedule to the
Commission upon request;
(3)(a) Articles of Incorporation of Mid-Missouri Holding Company, Inc., as
amended;
(3)(b) By-laws of Mid-Missouri Holding Company, Inc.;
(5) Opinion of Lewis, Rice & Fingersh, L.C. re legality;
(8) Preliminary Tax Opinion of Lewis, Rice & Fingersh, L.C. (Appendix G to
Proxy Statement/Prospectus)
(23)(a) Consent of Baird, Kurtz & Dobson;
(23)(b) Consent of Baird, Kurtz & Dobson;
(23)(c) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re legality);
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal income
tax consequences);
(23)(e) Consent of Norman Backues & Associates, Inc.;
(23)(f) Consent of Lexington Financial Group, L.L.C.;
(24) Powers of Attorney;
(99)(a) Form of Proxy Card for American Federal Savings & Loan Association of
Sullivan Special Meeting;
(99)(b) Form of Letter to Stockholders of American Federal Savings & Loan
Association of Sullivan to accompany Proxy Statement/Prospectus;
(99)(c) Form of Notice of American Federal Savings & Loan Association of
Sullivan Special Meeting;
(99)(d) Fairness Opinion of Norman Backues & Associates, Inc. regarding
fairness of merger consideration to stockholders of American Federal
Savings & Loan Association of Sullivan (Appendix D to Proxy
Statement/Prospectus);
<PAGE>
(99)(e) Fairness Opinion of Lexington Financial Group, L.L.C. regarding
fairness of merger consideration to stockholders of the Registrant
(Appendix E to Proxy Statement/Prospectus);
(99)(f) Excerpts of Title 12 - Banks and Banking Dissenters' Rights) (Appendix
F to Proxy Statement/Prospectus).
<PAGE>
EXHIBIT (23)(A)
---------------
<PAGE>
[Letterhead of Baird, Kurtz & Dobson]
Independent Auditors' Consent
-----------------------------
The Board of Directors
Mid-Missouri Holding Company, Inc.
We consent to the inclusion in the Registration Statement on Form S-4 of
Mid-Missouri Holding Company, Inc. of our report dated February 7, 1997,
relating to the balance sheets of Mid-Missouri Holding Company, Inc. as of
December 31, 1996 and 1995, and the related statements of income, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996. We also consent to the reference to us under the caption
"Experts" in Form S-4.
BAIRD, KURTZ & DOBSON
St. Louis, Missouri
May 8, 1997
<PAGE>
EXHIBIT (23)(B)
---------------
<PAGE>
[Letterhead of Baird, Kurtz & Dobson]
Independent Auditors' Consent
-----------------------------
The Board of Directors
American Federal Savings and Loan
Association of Sullivan
We consent to the inclusion in the Registration Statement on Form S-4 of
Mid-Missouri Holding Company, Inc. of our report dated January 10, 1997,
relating to the balance sheets of American Federal Savings and Loan Association
of Sullivan as of December 31, 1996 and 1995, and the related statements of
income, stockholders' equity, and cash flows for each of the years in the three-
year period ended December 31, 1996. We also consent to the reference to us
under the caption "Experts" in Form S-4.
BAIRD, KURTZ & DOBSON
St. Louis, Missouri
May 8, 1997
<PAGE>
EXHIBIT (23)(E)
---------------
<PAGE>
[LETTERHEAD OF NORMAN BACKUES & ASSOCIATES, INC.]
-------------------------------------------------
May 9, 1997
The Board of Directors
American Federal Savings & Loan Association of Sullivan
20 Hughes Ford Road
Sullivan, Missouri 63080
RE: FAIRNESS OPINION IN CONNECTION WITH ACQUISITION OF AMERICAN FEDERAL SAVINGS
& LOAN ASSOCIATION OF SULLIVAN
We hereby consent to the inclusion as an appendix to the Registration Statement
on Form S-4, and any pre-effective or post-effective amendments thereto, of Mid-
Missouri Holding Company, Inc. ("Mid-Missouri"), of our fairness opinion dated
March 20, 1997, concluding that the merger consideration to be issued in
connection with the acquisition of American Federal Savings & Loan Association
of Sullivan ("American Federal") by Mid-Missouri is fair, from a financial
perspective, to the stockholders of American Federal. We also hereby consent to
the reference of our firm in the Proxy Statement/Prospectus to be distributed to
the stockholders of American Federal in connection with the foregoing
acquisition.
Sincerley,
NORMAN BACKUES & ASSOCIATES, INC.
/s/ Jerry Backues
Jerry Backues
Vice President
JB/si
<PAGE>
EXHIBIT (23)(F)
---------------
<PAGE>
[LETTERHEAD OF LEXINGTON FINANCIAL GROUP, L.L.C.]
-------------------------------------------------
May 9, 1997
The Board of Directors
Mid-Missouri Holding Company, Inc.
318 West Main Street
Sullivan, Missouri 63080
RE: FAIRNESS OPINION IN CONNECTION WITH ACQUISITION OF AMERICAN FEDERAL SAVINGS
& LOAN ASSOCIATION OF SULLIVAN
Gentlemen:
We hereby consent to the inclusion as an appendix to the Registration Statement
on Form S-4, and any pre-effective or post-effective amendments thereto, of Mid-
Missouri Holding Company, Inc. ("Mid-Missouri"), of our fairness opinion dated
March 14, 1997, concluding that the merger consideration to be issued in
connection with the acquisition of American Federal Savings & Loan Association
of Sullivan ("American Federal") by Mid-Missouri is fair, from a financial
perspective, to the stockholders of Mid-Missouri. We also hereby consent to the
reference of our firm in the Proxy Statement/Prospectus to be distributed to the
stockholders of American Federal in connection with the foregoing acquisition.
Sincerely,
/s/ Michael Ross
Michael Ross
Member
<PAGE>
EXHIBIT (99)(A)
---------------
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
JUNE 17, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
The undersigned stockholder of American Federal Savings & Loan Association
of Sullivan, a Federal savings and loan association ("AFSL"), hereby appoints
Rita J. Heady and Joseph Withington, and any of them, with full power to act
alone, as proxies, each with full power of substitution and revocation, to vote
all shares of Common Stock of AFSL which the undersigned is entitled to vote at
the Special Meeting of Shareholders of AFSL (the "Special Meeting") to be held
at the Odd Fellows Community Center located at 77 Hughes Ford Road, Sullivan,
Missouri on June 17, 1997, at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, with all powers the undersigned would possess if
personally present, on the following:
Proposal to approve an Agreement and Plan of Merger, dated December 6, 1996,
as amended on February 13, 1997 and on May 7, 1997, by and among AFSL, Mid-
Missouri Holding Company, Inc., a Missouri corporation ("Mid-Mo"), and Bank
of Sullivan, a Missouri bank, providing for Mid-Mo's acquisition of AFSL by
means of the merger of AFSL with and into Bank of Sullivan, and in
connection therewith a proposal to repeal Section 8.A of the Federal Stock
Charter of AFSL which prohibits direct and indirect offers to acquire, and
acquisitions of, more than ten percent (10%) of any class of any equity
security of AFSL.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal to permit the Special Meeting to be adjourned or postponed, in the
discretion of the proxies, which adjournment or postponement could be used
for the purpose, among others, of allowing time for the solicitation of
additional votes to approve the referenced Agreement and Plan of Merger and,
in connection therewith, the Charter Amendment.
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby ratifies and confirms that all said proxies, or any of
them or their substitutes, may lawfully do or cause to be done by virtue hereof,
and acknowledges receipt of the notice of the Special Meeting and the Proxy
Statement/Prospectus accompanying it.
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU ABOVE. IF NO SPECIFICATION IS
MADE, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED ABOVE.
Dated _________________, 1997. SIGN HERE:
_____________________________________________
_____________________________________________
Please insert date of signing. Sign exactly
as name appears at left. Where stock is
issued in two or more names, all should sign.
If signing as attorney, administrator,
executor, trustee or guardian, give full
title as such. A corporation should sign by
an authorized officer and affix seal.
<PAGE>
EXHIBIT (99)(B)
---------------
<PAGE>
On letterhead of:
American Federal Savings & Loan Association of Sullivan
Dear Stockholder:
We are please to invite you to attend the Special Meeting of Stockholders
(the "Special Meeting") of American Federal Savings & Loan Association of
Sullivan ("American Federal") on June 17, 1997. The Special Meeting will be
held at the Odd Fellows Community Center, 77 Hughes Ford Road, Sullivan,
Missouri 63080, commencing at 10:00 a.m. local time.
At the Special Meeting, stockholders of American Federal will be asked to
approve the merger of American Federal with Bank of Sullivan, a Missouri bank
and wholly owned subsidiary of Mid-Missouri Holding Company, Inc., Sullivan,
Missouri ("Mid-Mo), and in connection therewith a proposal to repeal Section
8.A. of the Federal Stock Charter of American Federal which prohibits direct and
indirect offers to acquire, or acquisitions of, more than ten percent (10%) of
any equity security of American Federal. The terms of the merger provide that
upon consummation of the merger each outstanding share of common stock of
American Federal will be converted into a combination of cash and shares of
common stock of Mid-Mo.
Your Board of Directors submits this proposed merger and charter amendment
to you after careful review and consideration. We believe that this proposed
merger and charter amendment will provide significant value to all
stockholders, enabling holders of American Federal common stock to participate
in the expanded opportunities for growth that association with a larger
financial organization makes possible and position American Federal and its
stockholders to take advantage of future opportunities as the banking industry
continues to consolidate and restructure. Accordingly, the Board has approved
the merger and the charter amendment as being in the best interests of American
Federal and its stockholders and recommends that you vote in favor of the merger
and the charter amendment at the Special Meeting.
You are urged to read carefully the accompanying Proxy Statement/Prospectus,
which contains detailed information concerning the matters to be acted upon at
the Special Meeting.
Your participation in the meeting, in person or by proxy, is important.
Therefore, we ask that you please mark, sign and date the enclosed proxy card
and return it as soon as possible in the enclosed postage-paid envelope. If you
attend the Special Meeting, you may vote in person if you wish, even if you have
previously mailed in your proxy card.
Sincerely,
<PAGE>
EXHIBIT (99)(C)
---------------
<PAGE>
AMERICAN FEDERAL SAVINGS & LOAN ASSOCIATION OF SULLIVAN
A Federal Savings and Loan Association
---------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 17, 1997
---------------
The Special Meeting of Stockholders (the "Special Meeting") of American
Federal Savings & Loan Association of Sullivan ("American Federal") will be held
on June 17, 1997, at 10:00 a.m., local time, at The Odd Fellows Community
Center, 77 Hughes Ford Road, Sullivan, Missouri 63080 for the purpose of
considering and voting upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated December 6, 1996, as amended on February 13, 1997 and on
May 7, 1997, attached as Appendix A to the accompanying Proxy
Statement/Prospectus, providing for the merger of American Federal with and into
Bank of Sullivan, a Missouri bank and wholly owned subsidiary of Mid-Missouri
Holding Company, Inc., and in connection therewith, a proposal to repeal Section
8.A. of the Federal Stock Charter of American Federal which prohibits direct and
indirect offers to acquire, and acquisitions of, more than ten percent (10%) of
any class of equity security of American Federal.
Only the holders of common stock of American Federal of record at the close
of business on May 13, 1997 are entitled to notice of and to vote at the Special
Meeting or at any adjournments of postponements thereof.
EACH STOCKHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE SPECIAL MEETING. The prompt
return of your signed proxy will help assure a quorum and aid American Federal
in reducing the expense of additional proxy solicitation. The giving of such
proxy does not affect your right to vote in person in the event you attend the
Special Meeting.
By Order of the Board of Directors
Secretary
Sullivan, Missouri
May 15, 1997
AMERICAN FEDERAL STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FOR SUBMITTING SUCH
CERTIFICATES.
