-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HwxDYP0Gq1QGmH3BJAnGzC03vyqgyCbJ5VcCb15nl32quR+i0/OFIhAs9tu6qQTD XRCXOfrgp8hLUT0bO+HneA== 0000950114-99-000047.txt : 19990726 0000950114-99-000047.hdr.sgml : 19990726 ACCESSION NUMBER: 0000950114-99-000047 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEGIANT BANCORP INC CENTRAL INDEX KEY: 0000852642 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 431519382 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-26350 FILM NUMBER: 99583132 BUSINESS ADDRESS: STREET 1: 2122 KRATKY ROAD CITY: ST LOUIS STATE: MO ZIP: 63114 BUSINESS PHONE: 3146928200 MAIL ADDRESS: STREET 1: 2122 KRATKY ROAD CITY: ST LOUIS STATE: MO ZIP: 63114 10-K 1 ALLEGIANT BANCORP, INC. FORM 10-K 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 Commission File No. 0-26350 ALLEGIANT BANCORP, INC. (Exact name of registrant as specified in its charter) Missouri 43-1519382 (State of Incorporation) (IRS Employer Identification No.) 2122 Kratky Road 63114 St. Louis, Missouri (Zip code) (Address of principal executive offices) Registrant's telephone number, including area code: 314-692-8200 Securities registered pursuant to Section 12(b) of the Act: None Name of exchange on which registered: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 25, 1999: Common Stock, $0.01 par value, $65,601,240 Number of shares outstanding of each of the registrant's classes of common stock, as of March 25, 1999: Common Stock, $0.01 par value, 6,560,124 shares outstanding DOCUMENTS INCORPORATED BY REFERENCE As provided herein, portions of the documents below are incorporated by reference: Document Part--Form 10-K -------- --------------- 1998 Annual Report of the Registrant to its Shareholders Parts I, II, IV Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders Part III =============================================================================== 2 PART I ITEM 1. BUSINESS GENERAL Allegiant Bancorp, Inc. ("Allegiant" or the "Company") is a bank holding company that owns all of the capital stock of Allegiant Bank, a Missouri state-chartered bank (the "Bank"). The Bank provides personal and commercial banking and related financial services from 12 locations in the St. Louis Standard Metropolitan Statistical Area ("St. Louis SMSA"), the 16th largest metropolitan area in the United States. As of December 31, 1998, the Company reported consolidated total assets of $596.3 million, consolidated loans of $495.7 million, consolidated deposits of $450.8 million and consolidated shareholders' equity of $48.1 million. The Company has its principal offices at 2122 Kratky Road, St. Louis, Missouri 63114 (telephone number 314-692-8200). The Company was organized in May 1989 and acquired Allegiant State Bank at that time. The Company acquired the Bank in 1990. In November 1994, the Bank acquired Allegiant Mortgage Company, a Missouri corporation (the "Mortgage Company"). Effective January 1995, Allegiant State Bank merged into the Bank. The Company acquired Reliance Financial, Inc. ("Reliance"), a Delaware corporation and the parent of Reliance Savings and Loan Association of St. Louis County ("RFSLA"), a federal savings bank, through the merger of Reliance with and into the Company in August 1997. RFSLA was renamed Allegiant Bank, FSB upon consummation of the Reliance Acquisition and was merged into the Bank in September 1998. On January 1, 1999, the Bank acquired all of the assets and liabilities of the Mortgage Company, which subsequently was dissolved. Pursuant to separate Deposit Transfer and Asset Purchase Agreements, dated May 8, 1997, by and between the Company and Roosevelt Bank ("Roosevelt"), a Missouri state-chartered bank, the Bank assumed the deposits and acquired the loans and real property of Roosevelt's branch offices in Warrenton, Missouri and Union, Missouri (collectively, the "Branch Acquisition"). The Branch Acquisition was completed on September 4, 1997. The Bank assumed approximately $95.7 million of deposit liabilities, acquired real property and related automated teller machines, furniture, fixtures, equipment and other operating assets with an aggregate value of $0.9 million, and approximately $2.9 million of consumer loans. The Bank recorded goodwill of $8.8 million in connection with the Branch Acquisition. The Company's primary service area is located in St. Louis County which has a population of approximately 1.0 million and the City of St. Louis which has a population of approximately 400 thousand. A key to market coverage is accessibility. With the addition of the Mehlville retail banking office in 1996, the St. Peters, Affton (the Savings Bank) and Crestwood retail banking offices in 1997, and a new downtown retail banking office in the first quarter of 1999, management believes that the Company's retail banking offices are within a 20-minute drive from all principal sectors of the St. Louis SMSA. Upon consummation of the Branch Acquisition, the Bank added retail banking offices in Warrenton, Missouri and Union, Missouri. The Warrenton banking office is located in Warren County, which has a population of approximately 23 thousand. The Union banking office is located in Franklin County, which has a population of approximately 87 thousand. Both the Warrenton and Union banking offices are within a 45-minute drive from St. Louis County. The recent branch openings, the Reliance Acquisition and the Branch Acquisition are part of the Company's plan to expand into markets in St. Louis County and contiguous counties to provide accessibility to its customers. 1 3 The Bank sold three retail banking offices in northeastern Missouri, the cities of Kahoka, Palmyra and Monroe, including the deposit liabilities and certain loans and fixed assets with respect thereto, to Exchange Bank of Northeast Missouri, a subsidiary of Lincoln County Bancorp, Inc. on December 4, 1998. The sale of these branches will allow the Company to concentrate exclusively on opportunities in the higher-growth St. Louis metropolitan area and contiguous counties. Pursuant to this branch sale, the Bank transferred approximately $40.0 million of deposit liabilities and approximately $15.3 million of total assets, including approximately $13.9 million of total loans, to Exchange Bank of Northeast Missouri. The Company received a total premium of approximately $2.4 million in connection with such sale. FINANCIAL SUMMARY OF THE COMPANY A consolidated financial summary of the Company and its subsidiaries included on page 10 in the 1998 Annual Report of the Registrant to its Shareholders, is incorporated herein by reference. SUBSIDIARIES The table setting forth the names and locations of the Company's subsidiaries is included as Exhibit 21 hereto. OPERATIONS The Bank offers complete banking and trust services to the individual, commercial business and municipal segments of the St. Louis metropolitan market area that it serves. Services include commercial, real estate, mortgage and installment loans, checking, savings and time deposits, trust and other fiduciary services, and various other customer services such as brokerage, insurance and safe deposit. COMPETITION The Company's subsidiaries encounter substantial competition in offering all of their banking and related financial products and services from other banking institutions and from an increasing number of non-banking institutions in its market area. Many of the Bank's non-bank competitors are not subject to the extensive federal and state regulations which govern the Company and its subsidiaries and, as a result, have a competitive advantage over the Bank in providing certain services. Many of the financial institutions with which the Bank competes are larger and have substantially greater financial resources than the Bank. SUPERVISION AND REGULATION General. As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and its examination and reporting requirements. Under the BHCA, a bank holding company may not directly or indirectly acquire the ownership or control of more than 5% of the voting shares or substantially all of the assets of any company, including a bank or savings and loan association, without the prior approval of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). In addition, bank holding companies are generally prohibited under the BHCA from engaging in nonbanking activities, subject to certain exceptions. 2 4 The Company and the Bank are subject to supervision and examination by applicable federal and state banking agencies. The earnings of the Bank, and therefore the earnings of the Company, are affected by general economic conditions, management policies and the legislative and governmental actions of various regulatory authorities, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (the "FDIC"), the Missouri Division of Finance (the "Division of Finance") and various other state financial institution regulatory agencies. In addition, there are numerous governmental requirements and regulations that affect the activities of the Company and its subsidiaries. Certain Transactions with Affiliates. There are various legal restrictions on the extent to which a bank holding company and certain of its nonbank subsidiaries can borrow or otherwise obtain credit from its bank subsidiaries. In general, these restrictions require that any such extensions of credit must be on non-preferential terms and secured by designated amounts of specified collateral and be limited, as to any one of the holding company or such nonbank subsidiaries, to 10% of the lending bank's capital stock and surplus, and as to the holding company and all such nonbank subsidiaries in the aggregate, to 20% of such capital stock and surplus. Payment of Dividends. The Company is a legal entity separate and distinct from the Bank and the Mortgage Company. The principal source of the Company's revenues is dividends from the Bank. Various federal and/or state statutory provisions limit the amount of dividends the Bank can pay to the Company without regulatory approval. The approval of appropriate federal or state bank regulatory agencies is required for any dividend if the total of all dividends declared by the Bank in any calendar year would exceed the total of such institution's net profits, as defined by regulatory agencies, for such year combined with its retained net profits for the preceding two years. The payment of dividends by the Bank also may be affected by other factors, such as the maintenance of adequate capital. Capital Adequacy. The Federal Reserve Board has issued standards for measuring capital adequacy for bank holding companies. These standards are designed to provide risk-responsive capital guidelines and to incorporate a consistent framework for use by financial institutions operating in major international financial markets. The banking regulators have issued standards for banks that are similar to, but not identical with, the standards for bank holding companies. In general, the risk-related standards require financial institutions and financial institution holding companies to maintain capital levels based on "risk adjusted" assets, so that categories of assets with potentially higher credit risk will require more capital backing than categories with lower credit risk. In addition, financial institutions and financial institution holding companies are required to maintain capital to support off-balance sheet activities such as loan commitments. FDIC Insurance Assessments. The Bank is subject to FDIC deposit insurance assessments. The FDIC has adopted a risk-based premium schedule. Each financial institution is assigned to one of three capital groups--well capitalized, adequately capitalized or undercapitalized--and further assigned to one of three subgroups within a capital group, on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors, and on the basis of other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. The actual assessment rate applicable to a particular institution will, therefore, depend in part upon the risk assessment classification so assigned to the institution by the FDIC. See "--FIRREA and FDICIA." 3 5 Support of Subsidiary Banks. Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where it might not choose to do so absent such a policy. This support may be required at times when the Company may not find itself able to provide it. In addition, any capital loans by the Company to the Bank also would be subordinate in right of payment to deposits and certain other indebtedness of the Bank. Consistent with this policy regarding bank holding companies serving as a source of financial strength for their subsidiary banks, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the bank holding company's capital needs, asset quality and overall financial condition. FIRREA and FDICIA. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") contains a cross-guarantee provision that could result in insured depository institutions owned by the Company being assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other insured depository institution owned by the Company. Under FIRREA, failure to meet the capital guidelines could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including the termination of deposit insurance by the FDIC. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") made extensive changes to the federal banking laws. FDICIA instituted certain changes to the supervisory process, including provisions that mandate certain regulatory agency actions against undercapitalized institutions within specified time limits. FDICIA contains various other provisions that may affect the operations of banks and savings institutions. The prompt corrective action provision of FDICIA requires the federal banking regulators to assign each insured institution to one of five capital categories ("well capitalized," "adequately capitalized" or one of three "undercapitalized" categories) and to take progressively more restrictive actions based on the capital categorization, as specified below. Under FDICIA, capital requirements would include a leverage limit, a risk-based capital requirement and any other measure of capital deemed appropriate by the federal banking regulators for measuring the capital adequacy of an insured depository institution. All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the minimum levels for any relevant capital measure. The FDIC and the Federal Reserve Board adopted capital-related regulations under FDICIA. Under those regulations, a bank will be well capitalized if it: (i) had a total risk-based capital ratio of 10% or greater; (ii) had a ratio of Tier 1 capital to risk-weighted assets of 6% or greater; (iii) had a ratio of Tier 1 capital to adjusted total assets of 5% or greater; and (iv) was not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. An association will be adequately capitalized if it was not "well capitalized" and: (i) had a total risk-based capital ratio of 8% or greater; (ii) had a ratio of Tier 1 capital to risk-weighted assets of 4% or greater; and (iii) had a ratio of Tier 1 capital to adjusted total assets of 4% or greater (except that certain associations rated "Composite 1" under the federal banking agencies' 4 6 CAMEL rating system in their most recent examination may be adequately capitalized if their ratios of Tier 1 capital to adjusted total assets were 3% or greater). FDICIA also made extensive changes in existing rules regarding audits, examinations and accounting. It generally requires annual on-site, full scope examinations by each bank's primary federal regulator. It also imposed new responsibilities on management, the independent audit committee and outside accountants to develop or approve reports regarding the effectiveness of internal controls, legal compliance and off-balance sheet liabilities and assets. Banking agencies have adopted final regulations that mandate that regulators take into consideration concentrations of credit risk and risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. This evaluation will be made as part of the institution's regular safety and soundness examination. Banking agencies also have adopted regulations requiring regulators to consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance sheet position) in the evaluation of a bank's capital adequacy and have established an explicit risk-based capital charge for interest rate risk. Depositor Preference Statute. Legislation enacted in August 1993 provides a preference for deposits and certain claims for administrative expenses and employee compensation against an insured depository institution, in the liquidation or other resolution of such an institution by any receiver. Such obligations would be afforded priority over other general unsecured claims against such an institution, including federal funds and letters of credit, as well as any obligation to shareholders of such an institution in their capacity as such. The Interstate Banking and Community Development Legislation. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal"), enacted in 1994, facilitated the interstate expansion and consolidation of banking organizations by permitting (i) bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home states regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks, except for banks located in Montana and Texas, which states enacted legislation to "opt out" of this authority, (iii) banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state, (iv) foreign banks to establish, with approval of the regulators in the United States, branches outside their home states to the same extent that national or state banks located in the home state would be authorized to do so, and (v) banks to receive deposits, renew time deposits, close loans, service loans and receive payments on loans and other obligations as agent for any bank or thrift affiliate, whether the affiliate is located in the same state or a different state. One effect of Riegle-Neal is to permit the Company to acquire banks located in any state and to permit bank holding companies located in any state to acquire banks and bank holding companies in Missouri. There also have been a number of recent legislative and regulatory proposals designed to improve the overall financial stability of the United States banking system, and to provide for other changes in the bank regulatory structure, including proposals to reduce regulatory burdens on banking organizations and to expand the nature of products and services banks and bank holding companies may offer. It is not possible to predict whether or in what form these proposals may be adopted in the future, and, if adopted, what their effect will be on the Company. 5 7 EMPLOYEES As of December 31, 1998, the Company and the Bank had approximately 215 full-time equivalent employees. None of these employees of the Company or the Bank are subject to a collective bargaining agreement. The Company considers its relationships with its employees and those of the Bank to be good. 6 8 STATISTICAL DISCLOSURES The following statistical disclosures, except as noted, are included in the 1998 Annual Report of the Registrant to its Shareholders, and incorporated herein by reference.
ANNUAL REPORT SCHEDULE REFERENCE -------- ----------- I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY: INTEREST RATES AND INTEREST DIFFERENTIAL A. Average Balance Sheets p. 12 B. Analysis of Net Interest Earnings p. 11 C. Taxable-Equivalent Rate-Volume Analysis p. 14 II. INVESTMENT PORTFOLIO A. Book Value by Type of Security p. 16 B. Maturity Distribution p. 16 III. LOAN PORTFOLIO A. Types of Loans p. 17 B. Maturities and Sensitivities to Changes in Interest Rates p. 17 C. Risk Elements 1. Non-Accrual, Past Due and Restructured Loans p. 18 2. Potential Problem Loans p. 18 3. Foreign Outstandings n/a IV. SUMMARY OF LOAN LOSS EXPERIENCE A. Reserve for Possible Loan Losses p. 19 B. Allocation of the Reserve for Possible Loan Losses pp. 18-19 V. DEPOSITS A. Average Balances and Rates Paid by Deposit Category p. 12 B. Maturity Distribution of Certain CDs and Time Deposits p. 20 VI. RETURN ON EQUITY AND ASSETS p. 11 VII. SHORT-TERM BORROWINGS p. 22 - - -------------------- There were no interest-bearing deposits with foreign banks at December 31, 1998, 1997 or 1996.
7 9 ITEM 2. PROPERTIES The Company operates its principal executive, administrative and operational offices at 2122 Kratky Road in St. Louis, Missouri. As of December 31, 1998, the Bank conducted its business and operations out of 15 locations in the greater St. Louis Metropolitan area. The Company's physical properties, which are either owned or leased, are in satisfactory condition, adequately insured and suitable and adequate for present operations. ITEM 3. LEGAL PROCEEDINGS Various claims and lawsuits, incidental to its ordinary course of business, are pending against the Company and its subsidiaries. In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the Company's consolidated financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted during the quarter ended December 31, 1998 to a vote of the Company's shareholders, through the solicitation of proxies or otherwise. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT See Part III, Item 10. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Information concerning the Common Stock of the Registrant, included on page 44 in the 1998 Annual Report of the Registrant to its Shareholders, is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Selected Financial Data, included on page 10 in the 1998 Annual Report of the Registrant to its Shareholders, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations, included on pages 11 through 23 of the 1998 Annual Report of the Registrant to its Shareholders, is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and Qualitative Disclosures About Market Risk, included under the Section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Sensitivity" on pages 20 and 21 of the 1998 Annual Report of the Registrant to its Shareholders, is incorporated herein by reference. 8 10 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements, included in the 1998 Annual Report of the Registrant to its Shareholders, are incorporated herein by reference. ANNUAL REPORT STATEMENT REFERENCE --------- ----------- Report of Ernst & Young LLP, Independent Auditor. Page 24 Consolidated Balance Sheets - December 31, 1998, 1997 and 1996. Page 25 Consolidated Statements of Income - Years ended December 31, 1998, 1997 and 1996. Page 26 Consolidated Statements of Shareholders' Equity - Years ended December 31, 1998, 1997 and 1996. Page 27 Consolidated Statements of Cash Flows - Years ended December 31, 1998, 1997 and 1996. Page 28 Notes to Consolidated Financial Statements. Pages 29-41 Selected Quarterly Financial Data (unaudited), included as Note 21 on page 41 in the 1998 Annual Report of the Registrant to its Shareholders is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Information regarding the change of accountants for the Company is contained in "Independent Public Accountants" in the Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders, which information is incorporated herein by reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors is contained under "Election of Directors" and "Voting Securities and Principal Holders Thereof" included in the Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders, which information is incorporated herein by reference. The following is a list, as of February 28, 1999, of the names and ages of the executive officers of Allegiant and all positions and offices with Allegiant presently held by the person named. There is no family relationship between any of the named persons. 9 11 The name, age and position with respect to each of the executive officers of the Company are set forth below: Marvin S. Wool, 70, has served as a director of the Company since 1990 and as the Chairman of the Company and of the Bank since March 1992. Mr. Wool served as Chief Executive Officer of the Company from March 1992 through December 1998. For more than the past five years, Mr. Wool has served as the President and Chief Executive Officer of Dash Multi-Corp, the holding company for ten subsidiary companies located in Georgia, Mississippi, Missouri, New Jersey and California that are in the chemical, cloth coating and carpet industries. Shaun R. Hayes, 39, has served as a director and as the President of the Company since 1989 and President and Chief Executive Officer of the Bank since May 1992. Mr. Hayes became Chief Executive Officer of the Company in January 1999. Sandra L. Friedman, 48, has served as Senior Vice President and Chief Financial Officer of the Company and as Executive Vice President and Chief Financial Officer of the Bank since January 1998. From 1996 to 1997, Ms. Friedman served as Senior Vice President/Risk Management of Mark Twain Bancshares, Inc. and from 1986 to 1996 as Vice President of Mark Twain Bancshares, Inc. The executive officers were appointed by and serve at the pleasure of the Board of Directors of the Company. Information regarding compliance with Section 16 of the Securities Exchange Act of 1934, as amended, is contained in "Section 16(a) Beneficial Ownership Reporting Compliance," included in the Registrant's Proxy Statement of the 1999 Annual Meeting of Shareholders, which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is contained in "Compensation of Executive Officers," included in the Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders, which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management is contained in "Voting Securities and Principal Holders Thereof," included in the Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders, which is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is contained in "Certain Relationships and Related Transactions," included in the Registrant's Proxy Statement for the 1999 Annual Meeting of Shareholders, which is incorporated herein by reference. 10 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements: Incorporated herein by reference, are listed in Item 8 hereof. (2) Financial Statement Schedules: Report of BDO Seidman, LLP, relating to the consolidated financial statements of the Company for the years ended December 31, 1997 and 1996, is found following the signature pages hereto. (3) Exhibits: See Exhibit Index at page 15 hereof. (b) Reports on Form 8-K The Company filed one Current Report on Form 8-K on December 18, 1998. In such report, under Item 5, the Company disclosed the sale on December 4, 1998 of its three Northeast Missouri branch offices in Kahoka, Palmyra and Monroe City, including the deposit liabilities and certain loans and fixed assets with respect thereto, to Exchange Bank of Northeast Missouri, a subsidiary of Lincoln County Bancorp, Inc. The sale of these branches will allow the Company to concentrate exclusively on opportunities in the higher-growth St. Louis metropolitan area and contiguous counties. Pursuant to this branch sale, the Bank transferred approximately $40.0 million of deposit liabilities and approximately $15.3 million of total assets, including approximately $13.9 million of total loans, to Exchange Bank of Northeast Missouri. The Company received a total premium of approximately $2.4 million in connection with such sale. 11 13 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of the 31st day of March 1999. ALLEGIANT BANCORP, INC. (Registrant) By /s/ Shaun R. Hayes -------------------------------------- Shaun R. Hayes, President and Chief Executive Officer In accordance with the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Marvin S. Wool Chairman of the Board March 31, 1999 - - --------------------------- Marvin S. Wool /s/ Shaun R. Hayes President, Chief Executive Officer March 31, 1999 - - --------------------------- Shaun R. Hayes and Director /s/ Sandra L. Friedman Senior Vice President and Chief March 31, 1999 - - --------------------------- Sandra L. Friedman Financial Officer /s/ Leland B. Curtis Director March 31, 1999 - - --------------------------- Leland B. Curtis /s/ Kevin R. Farrell Director March 31, 1999 - - --------------------------- Kevin R. Farrell /s/ Leon A. Felman Director March 31, 1999 - - --------------------------- Leon A. Felman 12 14 /s/ C. Virginia Kirkpatrick Director March 31, 1999 - - --------------------------- C. Virginia Kirkpatrick /s/ Jack K. Krause Director March 31, 1999 - - --------------------------- Jack K. Krause /s/ Lee S. Wielansky Director March 31, 1999 - - --------------------------- Lee S. Wielansky
13 15 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (BDO Seidman, LLP letterhead) The Board of Directors Allegiant Bancorp, Inc. St. Louis, Missouri We have audited the accompanying consolidated balance sheets of Allegiant Bancorp, Inc. (a Missouri corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. 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 financial statements referred to above present fairly, in all material respects, the financial position of Allegiant Bancorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ BDO Seidman, LLP St. Louis, Missouri March 13, 1998 14 16 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------- ----------- 3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit 3.1 to Registrant's Registration Statement on Form 10-SB (Reg. No. 0-26350) is hereby incorporated by reference. 3.1(a) Amendment to Articles of Incorporation, as amended, of the Company, filed as Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 3.2 By-laws of the Company, as currently in effect, are filed herewith. 4.1 Form of Stock Certificate for Common Stock, filed as Exhibit 4.2 to the Company's Registration Statement on Form 10-SB (Reg. No. 0-26350) is hereby incorporated by reference. 4.2 Form of Warrant Agreement, filed as Exhibit 4.3 to Company's Registration Statement on Form 10-SB (Reg. No. 0-26350) is hereby incorporated by reference. 10.1 Loan Agreement, dated November 12, 1998, by and between LaSalle National Bank and the Company, is filed herewith. 10.2 Pledge Agreement, dated November 12, 1998, by and between LaSalle National Bank and the Company, is filed herewith. 10.3 Allegiant Bancorp, Inc. 1994 Stock Option Plan, filed as Exhibit 10.7 to Company's Registration Statement on Form 10-SB (Reg. No. 0-26350) is hereby incorporated by reference. 10.4 Allegiant Bancorp, Inc. 1996 Stock Option Plan, filed as Exhibit 4.4 to Company's Form S-8 (Reg. No. 0-26350) is hereby incorporated by reference. 10.5 Allegiant Bancorp, Inc. Directors Stock Option Plan, filed as Exhibit 4.5 to Company's Form S-8 (Reg. No. 0-26350) is hereby incorporated by reference. 10.6 Allegiant Bancorp, Inc. 1989 Stock Option Plan, filed as Exhibit 4.6 to Company's Form S-8 (Reg. No. 0-26350) is hereby incorporated by reference. 10.7 Deposit Transfer and Asset Purchase Agreement, dated May 8, 1997, between Roosevelt Bank and Allegiant Bancorp, Inc., filed as Exhibit 10.15 to Registrant's Registration Statement on Form S-4/A (Reg. No. 0-26433) is hereby incorporated by reference. 10.8 Deposit Transfer and Asset Purchase Agreement, dated May 8, 1997, between Roosevelt Bank and Allegiant Bancorp, Inc., filed as Exhibit 10.16 to Company's Registration Statement on Form S-4/A (Reg. No. 0-26433) is hereby incorporated by reference. 13 Portions of the 1998 Annual Report of the Company to its Shareholders are filed herewith. 21.1 Subsidiaries of the Company is filed herewith. 23.1 Consent of Ernst & Young LLP is filed herewith. 23.2 Consent of BDO Seidman, LLP is filed herewith. 27.1 Financial Data Schedule is filed herewith (December 31, 1998). - - ------------------------- Management contract or compensatory plan or arrangement.
15 EX-3.2 2 1 BY-LAWS OF ALLEGIANT BANCORP, INC. ARTICLE I - OFFICES ------------------- The principal office of the Corporation shall be located in the County of St. Louis, Missouri. The Corporation may have offices at such other places, both within and without the State of Missouri, as the Board of Directors may from time to time designate. ARTICLE II - SEAL ----------------- The corporate seal shall have inscribed thereon the name of the Corporation. ARTICLE III - SHAREHOLDERS' MEETINGS ------------------------------------ Section 1. Place of Meeting. All meetings of the shareholders shall ---------------------------- be held at the office of the Corporation or at such other place within or without the State of Missouri as may be designated by the Chairman of the Board or the Board of Directors. Section 2. Annual Meeting. The annual meeting of shareholders shall -------------------------- be held at the time designated by the Board of Directors of the Corporation in the month of April, in each year, or at such other date or time as shall be determined by the Chairman of the Board or the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. Section 3. Quorum. The holders of a majority of the stock issued and ------------------ outstanding, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by the Corporation's Articles of Incorporation or by these By-Laws. Section 4. Voting. Except as otherwise required by law or by the ------------------ Corporation's Articles of Incorporation, at each meeting of the shareholders, every shareholder shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such shareholder, or by his duly authorized attorney, and he shall have one vote for each share of stock registered in his name at the time of the closing of the transfer books for said meeting. The vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Articles of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. 2 Section 5. Notice of Meeting. Notice of any special or annual meeting ----------------------------- shall be served personally on each shareholder or shall be mailed to each shareholder at such address as appears on the stockbook of the Corporation not less than ten (10) days nor more than sixty (60) days before such meeting. Service or mailing of such notice shall be made by the Secretary; but in case the Secretary shall refuse or neglect to serve or mail such notice upon each shareholder as herein provided, then such service may be made by any officer or director of the Corporation. The notice of any special meeting shall state the purpose or purposes of the proposed meeting. Section 6. Special Meetings. Special meetings of the shareholders for ---------------------------- any purpose or purposes may be called by the Chairman of the Board or by the Board of Directors, or by the Secretary, at the request in writing by shareholders owning at least fifty percent (50%) in the amount of the entire capital stock of the Corporation issued and outstanding. Section 7. Waiver of Notice. Any shareholder may waive notice of any ---------------------------- meeting of the shareholders, by a writing signed by him, or by his duly authorized attorney, either before or after the time of such meeting. A copy of such waiver shall be entered in the minutes, and shall be deemed to be the notice required by law or by these By-Laws. Any shareholder present in person, or represented by proxy, at any meeting of the shareholders shall be deemed to have thereby waived notice of such meeting, except where a shareholder attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 8. Informal Meetings. Whenever the vote of shareholders at a ----------------------------- meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the Articles of Incorporation, the meeting, any notice thereof and vote of shareholders thereat may be dispensed with if all the shareholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. Such written consent shall be filed with the minutes of shareholders' meetings. Section 9. Shareholders Entitled to Vote. The Board of Directors may ----------------------------------------- prescribe a period not exceeding fifty (50) days prior to any meeting of the shareholders during which no transfer of stock on the books of the Corporation may be made. The Board of Directors may fix a day not more than fifty (50) days prior to the holding of any meeting of the shareholders as the day as of which shareholders are entitled to notice of and to vote at such meeting. Section 10. List of Voters. A complete list of all shareholders --------------------------- entitled to vote at any annual and special meeting shall be compiled at least ten days before such meeting by the officer or agent having charge of the transfer books for shares of stock of the Corporation. Such list shall be compiled in alphabetical order with the address of and the number of shares held by each shareholder, and the list shall be kept on file at the registered office of the Corporation for a period, beginning at least ten days prior to such meeting and ending on the date of such meeting. Such list shall be open to inspection by any shareholder for such period during usual business -2- 3 hours. Such list also shall be produced and kept open at the time and place of such meeting and shall be subject to the inspection of any shareholder during this meeting. The original share ledger or transfer book, or a duplicate thereof, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer books, or to vote any meeting of shareholders. Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. Section 11. Proxies. A shareholder may, at any annual or special -------------------- meeting, vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of execution unless otherwise provided in the proxy. Section 12. Organization. The Chairman of the Board, and in his ------------------------- absence, the Chief Executive Officer or the President, and in the absence of both the Chairman of the Board and the Chief Executive Officer or the President, any Vice-President chosen by the shareholders present, shall preside at each meeting of shareholders and shall act as chairman thereof. The Secretary, and in his absence the Assistant Secretary, and in the absence of both the Secretary and the Assistant Secretary, a Secretary pro tem, chosen by the shareholders present, shall act as Secretary of all meetings of the shareholders. Section 13. Adjournment. If at any meeting of the shareholders a ------------------------ quorum shall fail to attend at the time and place for which the meeting was called or if the business of such meeting shall not be completed, the shareholders present in person or represented by proxy may, by a majority vote, adjourn the meeting from day to day or from time to time, not exceeding ninety (90) days from such adjournment without further notice until a quorum shall attend or the business thereof shall be completed. At any such adjourned meeting any business may be transacted which might have been transacted at the meeting as originally called. Section 14. Notice of Shareholder Business and Nominations. ----------------------------------------------------------- (A) Annual Meetings of Shareholders. (1) Nominations of persons for ------------------------------- election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this By-law. (2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (c) of paragraph (A)(1) of this By-law, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the -3- 4 Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. Such shareholder's notice shall set forth: (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation that are owned beneficially and of record by such shareholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this By-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this By-law also shall be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is made by the Corporation. (B) Special Meetings of Shareholders. Only such business shall be -------------------------------- conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this By-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-law. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (A)(2) of this By-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 90th day prior to such special -4- 5 meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (C) General. (1) Only such persons who are nominated in accordance ------- with the procedures set forth in this By-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-law. Except as otherwise provided by law, the Articles of Incorporation or these By-laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this By-law and, if any proposed nomination or business is not in compliance with this By-law, to declare that such defective proposal or nomination shall be disregarded. (2) For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this By-law, a shareholder also shall comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. ARTICLE IV - DIRECTORS ---------------------- Section 1. Powers of the Board. The business of the Corporation shall ------------------------------- be managed by its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the shareholders. Section 2. Composition of the Board of Directors. The affairs and ------------------------------------------------- business of the Corporation shall be managed by the Board of Directors, whose number shall be not less than six nor more than 24. The directors shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in size as possible, with the term of office of Class I directors to expire at the 2001 annual meeting of shareholders, the term of office of Class II directors to expire at the 1999 annual meeting of shareholders and the term of office of Class III directors to expire at the 2000 annual meeting of shareholders, with each director to hold office until his or her successor shall have been duly elected and qualified. At each meeting of shareholders, (i) directors elected to succeed those directors whose terms then expire shall be elected for a term of -5- 6 office to expire at the first succeeding annual meeting of shareholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (ii) if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created. ARTICLE V - MEETING OF THE BOARD -------------------------------- Section 1. Place of Meeting. Meetings of the Board of Directors of ---------------------------- the Corporation, both regular and special, may be held at any place either within or without the State of Missouri, and unless otherwise designated as herein provided, shall be held at the office of the Corporation. Section 2. First Meeting of New Board. The first meeting of each -------------------------------------- newly elected Board of Directors for the purpose of electing officers and transacting such other business as may come before the meeting shall be held immediately after the final adjournment of the annual meeting of the shareholders. No notice of such annual meeting of Directors need be given, provided a quorum shall be present. If, for any reason, such meeting of the Directors is not or cannot be held as herein prescribed, the officers may be elected at any meeting of the Directors thereafter called for such purpose pursuant to these By-Laws. Section 3. Regular Meetings. Regular meetings of the Board of ---------------------------- Directors may be held at such time and place as shall from time to time be determined by resolution of the Board. Section 4. Notice of Regular Meetings. After the time and place of -------------------------------------- regular meetings shall have been determined, no notice of any regular meetings need be given. Notice of any change in the place of holding any regular meeting or any adjournment of a regular meeting shall be given by mail or telegram not less than forty-eight (48) hours before such meeting, to all Directors who were absent at the time such action was taken. Section 5. Special Meetings. Special meetings of the Board for any ---------------------------- purpose or purposes may be called by the Chairman of the Board or President on three (3) days' notice to each Director either personally or by mail or by telegram. Upon like notice, the Secretary of the Corporation, upon the written request of a majority of the Directors, shall call a special meeting of the Board. Such request shall state the purpose or purposes of the proposed meeting. The officer calling the special meeting may designate the place for holding same. Section 6. Quorum. At all meetings of the Board, a majority of the ------------------ Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except where otherwise provided by law or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall be present. -6- 7 Section 7. Waiver of Notice. Any Director may waive notice of any ---------------------------- meeting of the Board by a writing signed by him either before or after the time of such meeting. A copy of such waiver shall be entered in the minutes and shall be deemed to be the notice required by law or by these By-Laws. Any Director present in person at any meeting of the Board shall be deemed to have thereby waived notice of such meeting except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 8. Informal Meetings. Whenever the vote of Directors at a ----------------------------- meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the Articles of Incorporation, the meeting, any notice thereof, and vote of Directors thereat may be dispensed with if all the Directors who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. Such written consent shall be filed with the minutes of the Board. Section 9. Compensation. Unless otherwise restricted by the Articles ------------------------ of Incorporation or these By-laws, the Board of Directors shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 10. Presumption of Assent. A Director of the Corporation ---------------------------------- shall be presumed to have assented to the action taken on any corporate matter at a Board of Directors meeting at which he is present, unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the Secretary of the meeting before the adjournment thereof or shall forward such dissent by certified mail to the Secretary of the Corporation immediately after the adjournment of the meeting. A Director who voted in favor of such action may not so dissent. Section 11. Vacancies. All vacancies in the office of Directors shall ---------------------- be filled by election by the shareholders, except as herein provided. Vacancies not exceeding one-third (1/3) of the whole number of the Board may be filled by the affirmative vote of the majority of the Directors then in office, and the Directors so elected may hold office until such vacancies are filled by the shareholders at a special or annual meeting. Section 12. Organization. The Chairman of the Board, and in his ------------------------- absence, the Chief Executive Officer or the President, and in the absence of the Chairman of the Board and the Chief Executive Officer or the President, a Chairman pro tem, chosen by the Directors present shall preside at each meeting of the Directors and shall act as Chairman thereof. The Secretary, and in his absence, the Assistant Secretary, and in the absence of the Secretary and the Assistant -7- 8 Secretary, a Secretary pro tem, chosen by the Directors present shall act as Secretary of all meetings of the Directors. Section 13. Minutes and Statements. The Board of Directors shall ----------------------------------- cause to be kept a complete record of their meetings and acts, and of the proceedings of the shareholders. ARTICLE VI - COMMITTEES ----------------------- Section 1. Executive Committee. The Board of Directors, by resolution ------------------------------- adopted by a majority of the whole Board, may designate two or more Directors to constitute an Executive Committee, which committee shall have and exercise all of the authority of the Board of Directors in the management of the Corporation, but the designation of the committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed on him by law, by the Articles of Incorporation or by these By-Laws. The Executive Committee shall keep a complete record of its activities and regularly report them to the Board of Directors at every meeting thereof. All action taken by the Executive Committee shall be subject to revision, alteration or change by the Board of Directors, provided that rights of third persons shall not be affected thereby. Section 2. Meetings of the Executive Committee. A majority of the ----------------------------------------------- Executive Committee shall constitute a quorum for the transaction of business. The Executive Committee may determine the time and place for its meetings, the notice necessary therefor and its rules of procedure. Section 3. Other Committees. The Board of Directors shall have the ---------------------------- power to establish and designate, by resolution passed by a majority of the Board of Directors, such other committees as it shall deem appropriate or expedient for the furtherance of the objectives and purposes of the Corporation and to delegate to such committees those powers which, in its discretion, it feels are necessary and desirable. A majority of the members of any such committee shall constitute a quorum thereof and no acts of any such committee shall be valid unless proved by the affirmative vote or consent of the majority of such committee constituting a quorum at any such meeting. Any such committee shall keep regular minutes of its proceedings and shall report the same to the Board of Directors from time to time. Any such committee shall meet whenever necessary upon three days' prior written notice to all members thereof. ARTICLE VII - OFFICERS ---------------------- Section 1. Officers. The permitted officers of this Corporation will -------------------- include a Chairman of the Board, the Chief Executive Officer, the President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers, all of whom shall be chosen by the Board of Directors. Any person may hold two or more offices. -8- 9 Section 2. Subordinate Officers and Employees. The Board of Directors ---------------------------------------------- may appoint such other officers and agents as it may deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 3. Compensation. The Board of Directors shall from time to ------------------------ time, in its discretion, fix or alter the compensation of any officer or agent. Section 4. Bond. The Directors shall direct and require good and ---------------- sufficient fidelity bonds on all active officers and employees, whether or not they draw salary or compensation, which bonds shall provide for indemnity to the Corporation on account of any losses sustained by it as the result of any dishonest, fraudulent or criminal act or omission committed or omitted by them acting independently or in collusion or combination with any person or persons. The bonds may be individual, schedule or blanket form, and the premiums therefor may be paid by the Corporation. Section 5. Tenure of Office and Removal. The officers of the ---------------------------------------- Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 6. Chairman of the Board. The Chairman of the Board shall --------------------------------- provide overall direction and guidance to the Corporation. He or she shall preside at all meetings of the shareholders and of the Board of Directors. The Chairman shall in general perform all duties incident to the office of Chairman of the Board and such other duties as may be prescribed by the Board of Directors from time to time. Section 7. Chief Executive Officer. The Chief Executive Officer shall ----------------------------------- have the primary responsibility for and the general control and management of all of the business and affairs of the Corporation, under the direction of the Board of Directors. He shall have power to select and appoint all necessary officers and employees of the Corporation except such officers as under these By-Laws are to be elected by the Board of Directors, to remove all appointed officers or employees whenever he shall deem necessary, and to make new appointments to fill the vacancies. He shall have the power of suspension from office for cause of any elected officer, which shall be forthwith declared in writing to the Board of Directors. Whenever in his opinion it may be necessary, he shall define the duties of any officer or employee of the Corporation which are not prescribed in these By-Laws or by resolution of the Board of Directors. He also shall be an Assistant Secretary and shall have such other authority and shall perform such other duties as may be assigned to him by the Board of Directors. Section 8. President. The President (if one shall have been elected by --------------------- the Board of Directors) shall have such powers and discharge such duties as may be assigned to him from time -9- 10 to time by the Board of Directors, the Chairman of the Board or the senior officer to whom he reports. If the office of Chairman of the Board and Chief Executive Officer is held by another person, the President shall be the chief operating officer of the Corporation. He also shall be an Assistant Secretary and shall have such other authority and shall perform such other duties as may be assigned to him by the Board of Directors. Section 9. Vice-President. The Vice-Presidents, if any, in the order -------------------------- designated by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties and have such other powers as the Board of Directors, Chairman of the Board, the Chief Executive Officer or the President may from time to time prescribe. Section 10. The Secretary. The Secretary shall attend all meetings of -------------------------- the shareholders of the Corporation and of the Board of Directors and shall record all of the proceedings of such meetings in minute books kept for that purpose. He shall keep in safe custody the corporate seal of the Corporation and is authorized to affix the same to all instruments requiring the Corporation's seal. He shall have charge of the corporate records, and, except to the extent authority may be conferred upon any transfer agent or registrar duly appointed by the Board of Directors, he shall maintain the Corporation's books, registers, stock certificate and stock transfer books and stock ledgers, and such other books, records and papers as the Board of Directors may from time to time entrust to him. He shall give or cause to be given proper notice of all meetings of shareholders and Directors as required by law and the By-Laws, shall, with the President or a Vice-President, sign the stock certificates of the Corporation, and shall perform such other duties as may from time to time be prescribed by the Board of Directors, Chairman of the Board, the Chief Executive Officer or the President. Section 11. The Assistant Secretary. Each Assistant Secretary, if ------------------------------------ any, shall assist the Secretary in the performance of his duties, and may at any time perform any of the duties of the Secretary; in case of the death, resignation, absence or disability of the Secretary, the duties of the Secretary shall be performed by an Assistant Secretary, and each Assistant Secretary shall have such other powers and perform such other duties as, from time to time, may be assigned to him by the Board of Directors. Section 12. Treasurer. The Treasurer, if any, shall have the custody ---------------------- of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and Directors at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer, and of the financial condition of the Corporation. -10- 11 Section 13. The Assistant Treasurer. Each Assistant Treasurer, if ------------------------------------ any, shall assist the Treasurer in the performance of his duties, and may at any time perform any of the duties of the Treasurer; in case of the death, resignation, absence or disability of the Treasurer, the duties of the Treasurer shall be performed by an Assistant Treasurer, and each Assistant Treasurer shall have such other powers and perform such other duties as, from time to time, may be assigned to him by the Board of Directors. ARTICLE VIII - RESIGNATIONS --------------------------- Any Director or other officer may resign his office at any time, such resignation to be made in writing and to take effect from the time of its receipt by the Corporation, unless some different time be fixed in the resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. ARTICLE IX - CERTIFICATES OF STOCK AND TRANSFERS ------------------------------------------------ Section 1. Form and Execution of Certificate. The Board of Directors --------------------------------------------- shall prescribe the form of the certificates of stock of the Corporation. The certificates shall be signed by the Chairman of the Board, the Chief Executive Officer or President and by the Secretary or Assistant Secretary and shall be sealed with the seal of the Corporation and all be numbered consecutively. The name of the owner of the certificates of stock, number of shares of stock represented thereby, and the date of issue shall be recorded on the books of the Corporation. The persons who may own stock of the corporation and the number of shares which may be owned by any such persons are restricted in accordance with the Articles of Incorporation. Section 2. Transfer of Shares. Shares of stock may be transferred by ------------------------------ endorsement thereon of the signature of the proprietor, his agent, attorney or legal representative and the delivery of the certificate; but such transfer shall not be valid against the Corporation until the same is so entered on the books of the Corporation and the old certificate is surrendered for cancellation. Section 3. Record Owner. The Corporation shall be entitled to treat ------------------------ the person in whose name any shares of stock is registered as owner thereof for the following purposes: capitalization, consolidation, merger, reorganization, sale of assets, liquidation or otherwise; for votes, approvals and consents by shareholders; for notice to the shareholders; and for all other purposes whatever. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly required by the law or these By-Laws. Section 4. Closing of Stock Transfer Books - Fixing Record Date. The ---------------------------------------------------------------- Board of Directors shall have power to close the stock transfer books of the Corporation for a period not exceeding fifty (50) days preceding the date of any meeting of shareholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change, conversion, or -11- 12 exchange of capital stock shall go into effect; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding fifty (50) days preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend or to any such allotment of ,rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case such shareholders and only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment or rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 5. Lost, Mutilated or Destroyed Stock Certificates. Upon ----------------------------------------------------------- presentation to the Corporation of a proper affidavit attesting the loss, destruction or mutilation of any certificate or shares of stock to the Corporation, the Board of Directors may direct the issuance of a new certificate in lieu of and to replace the certificate so alleged to be lost, destroyed or mutilated. The Board of Directors may require as a condition precedent to the issuance of a new certificate any or all of the following: (a) Additional evidence of the loss, destruction or mutilation claimed; (b) Advertisement of the loss in such manner that the Board of Directors may direct or approve; (c) A bond or agreement of indemnity in such form and amount, with or without such sureties as the Board of Directors may approve; or (d) The order or approval of a Court. The Corporation may recognize the person in whose name the new certificate, or any certificate thereafter is issued as owner of the shares described therein for all purposes until the owner of the original certificate or transferee thereof without notice and for value shall enjoin the Corporation and the holder of any new certificate, or any certificate issued in exchange or substitution therefrom, from so acting. Section 6. Transfer Agent and Register. The Board of Directors may --------------------------------------- appoint a transfer agent and/or a registrar of transfers and may require all certificates of shares to bear the signature of such transfer agent and of such registrar of transfers, or as the Board of Directors may otherwise direct. -12- 13 Section 7. Regulations. The Board of Directors shall have the power ----------------------- and authority to make all rules and regulations as the Board of Directors shall deem expedient regulating in the issue, transfer, and registration of certificates for shares in this Corporation. Section 8. Transfer Book. Transfer books shall be maintained under ------------------------- the direction of the Secretary, showing the ownership and transfer of all certificates of stock issued by the Corporation. ARTICLE X - DEALINGS WITH COMPANIES IN WHICH DIRECTORS MAY HAVE AN INTEREST ------------------------------ Inasmuch as the Directors of this Corporation are or may be persons of diversified business interests, and likely to be connected with other corporations with which from time to time this Corporation may have business dealings, no contract or other transaction between this Corporation and any other corporation shall be affected by the fact that Directors of this Corporation are interested in, or are directors or officers of such other corporation. ARTICLE XI - MISCELLANEOUS PROVISIONS ------------------------------------- Section 1. Fiscal Year. The fiscal year of the Corporation shall be ----------------------- determined by the Board of Directors. Section 2. Inspection of Books. The Directors shall determine from ------------------------------- time to time whether, and, if allowed, when and tinder what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection) or any of them shall be open to inspection of the shareholders, and shareholders' rights in this respect are and shall be restricted and limited accordingly. Section 3. Checks and Notes. All checks and drafts on the ---------------------------- Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be thereunto duly authorized from time to time by the Board of Directors; provided, that checks drawn on the Corporation's payroll, dividend and special accounts may bear the facsimile signatures, affixed thereto by a mechanical device, of such officers or agents as the Board of Directors may authorize. Section 4. Contracts. The Board of Directors may authorize any --------------------- officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 5. Loans. No material loans shall be contracted on behalf of ----------------- the Corporation and no material evidences of indebtedness shall be issued in its name unless authorized by resolution of the Board of Directors. Such authority may be general or confined to specific instances. -13- 14 Section 6. Dividends. The Board of Directors may declare such --------------------- dividends as they in their discretion see fit whenever the condition of the Corporation, in their opinion, shall warrant the same. The Board may declare dividends in cash, in property or in capital stock. Section 7. Notices. Whenever, under the provisions of these By-Laws ------------------- notice is required to be given to any Director, officer or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing by depositing the same in the post office or letter box, in a postpaid sealed wrapper addressed to such shareholder, officer or Director at such address as appears on the records of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed. ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS ------------------------------------------------------- Each Director and each officer, and his heirs, executors and administrators, shall be indemnified by Corporation against any costs and expenses, including counsel fees, reasonably incurred in connection with any civil, criminal, administrative or other claim, action, suit or proceeding in which he or they may become involved or with which he or they may be threatened by reason of his being or having been a Director or officer of the Corporation, and against any payments in settlement of any such claim, action, suit or proceeding or in satisfaction of any related judgment, fine or penalty, except costs, expenses or payments in relation to any matter as to which he shall be finally adjudged derelict in the performance of his duties to the Corporation, or in relation to any matter as to which there has been no adjudication with respect to his performance of his duties to the Corporation unless the Corporation shall receive an Opinion from independent counsel that the Director or officer has not been so derelict. In the case of a criminal action, suit or proceeding, a conviction or judgment (whether after trial or based on a plea of guilty or nolo contendere or its equivalent) shall not be deemed an adjudication that the Director or officer was derelict in the performance of his duties to the Corporation if he acted in good faith in what he considered to be the best interests of the Corporation and with no reasonable cause to believe the action was illegal. The foregoing right of indemnification shall not be exclusive of other rights to which Directors or officers may be entitled as a matter of law or otherwise. ARTICLE XIII - AMENDMENTS ------------------------- At any annual, regular or special meeting of the shareholders or of the Board of Directors, the shareholders or Board of Directors may repeal or amend these By-Laws or any part thereof or adopt new or additional By-Laws. -14- 15 ARTICLE XIV - SHAREHOLDERS' AGREEMENT ------------------------------------- Notwithstanding anything contained herein to the contrary, the provisions of these By-Laws shall be subject and subordinate to the provisions of any shareholders' agreement to which the Corporation is a party, which in the case of a conflict, shall control. Effective as of the 18th day of February 1999. -15- EX-10.1 3 1 LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement"), dated as of November 12, 1998, is entered into between ALLEGIANT BANCORP, INC., a Missouri corporation (the "Borrower"), and LASALLE NATIONAL BANK, a national banking association (the "Bank"). RECITALS A. The Borrower desires to borrow from the Bank, and the Bank desires to loan to the Borrower, a principal sum up to Fifteen Million Six Hundred Fifty Thousand and 00/100 Dollars ($15,650,000), all in accordance with the terms, subject to the conditions and in reliance on the representations, warranties and covenants set forth herein and in the other documents and instruments entered into or delivered in connection with or relating to the loans contemplated by this Agreement (collectively, including this Agreement, the "Loan Documents"). B. As collateral security for such extension of credit, the Borrower has agreed to grant to the Bank a security interest in 100% of the capital stock of Allegiant Bank, a Missouri state bank ("Allegiant Bank" or, the "Subsidiary"). NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENTS ARTICLE I LOANS AND NOTES SECTION 1.1 THE LOANS. (a) The Bank agrees to extend a loan (the "Term --------- Loan") to the Borrower in the principal amount of Thirteen Million Six Hundred Fifty Thousand and 00/100 Dollars ($13,650,000), to be evidenced by two Term Notes (as defined below), and secured by the Pledge Agreement (as defined below) in accordance with the terms and subject to the conditions set forth in this Agreement, the Term Notes, the Pledge Agreement and the other Loan Documents. (b) The Bank further agrees to extend a revolving line of credit (the "Revolving Loan" and, collectively with the Term Loan, the "Loans") to the Borrower in the principal amount of Two Million and 00/100 Dollars ($2,000,000) to be evidenced by the Revolving Note (as defined below), and secured by the Pledge Agreement in accordance with the terms and subject to the conditions set forth in this Agreement, the Revolving Note, the Pledge Agreement and the other Loan Documents. Subject to the terms and conditions of this Agreement and the Revolving Note, the Bank shall make disbursements of the Revolving Loan to Borrower on a revolving basis (each such disbursement of the proceeds of the Revolving Loan being referred to as a "Disbursement" and all such Disbursements, including disbursements of the Term Loan, being 2 collectively referred to as the "Disbursements"), from time to time, prior to the one year anniversary of the date of this agreement (the "Revolving Maturity Date"). Subject to the terms and conditions hereof, Borrower may borrow, repay and reborrow such sums from the Bank. As a condition precedent to the Bank's obligation to make any Disbursement, the Borrower must deliver to the Bank and the Bank must receive from the Borrower a request for such Disbursement in writing on or before noon on the business day prior to the business day on which the Borrower desires to receive such Disbursement. Such written request for a Disbursement must include whether the Borrower elects to set the interest rate for the Disbursement at the Euro-Dollar Rate (as defined below) or the Prime Rate (as defined below) and the duration of the repayment term applicable thereto. If the repayment term of a Disbursement is less than thirty (30) days, the interest rate for the Disbursement shall be at the Prime Rate. If the repayment term of a Disbursement is greater than thirty (30) days, then the Borrower may elect to set the interest rate at the Euro-Dollar Rate or the Prime Rate, provided, however, that a Disbursement bearing interest at the Euro-Dollar Rate shall have a fixed repayment term of 30, 60 or 90 days (the "Euro-Dollar Interest Rate Period"), and provided further that any Disbursement bearing interest at the Euro-Dollar Rate shall be at least $250,000 and in $100,000 increments in excess of such minimum amount. If such request is timely received by the Bank and the other conditions precedent to the making of a Disbursement set forth in this Agreement are satisfied, the Bank shall release the requested funds to the Borrower or its designee on the next business day, provided, however, that in no event shall the Bank be obligated to release funds to the Borrower in an amount which, when added to the total amount of the then outstanding principal balance under the Revolving Note, would cause the total outstanding principal balance of the Revolving Loan to exceed $2,000,000 (the "Maximum Availability"). In the event that a Disbursement request is received by the Bank after noon on any business day, it shall be deemed to have been received on the next business day. Each request for a Disbursement shall be accompanied by evidence satisfactory to the Bank, in its sole and absolute discretion, that such request has been duly and validly authorized, executed and delivered. Each Disbursement shall be evidenced by the Revolving Note. If, at any time, the outstanding principal balance under the Revolving Note exceeds the Maximum Availability, the Borrower will immediately pay the amount of such excess to the Bank. SECTION 1.2 NOTES EVIDENCING BORROWING. The Term Loan shall be -------------------------- evidenced by two promissory notes in the forms attached as Exhibit A and Exhibit B (individually, a "Term Note" and collectively, the "Term Notes") executed by the Borrower. One Term Note shall be in the principal amount of Ten Million Four Hundred Thousand and 00/100 Dollars ($10,400,000), and the second Term Note shall be in the principal amount of Three Million Two Hundred Fifty Thousand and 00/100 Dollars ($3,250,000). As a condition precedent to make a disbursement under the respective Term Note, the Bank must receive a written request for the disbursement on or before noon on the business day prior to the business day on which the Borrower desires to receive the principal under the respective Term Note, provided however, that the Bank shall have no obligation to make any disbursement under the first Term Note at any time after November 30, 1998 or under the second Term Note at any time after December 31, 1998. Disbursements under the Revolving Loan shall be evidenced by a promissory note in the form attached as Exhibit C (the "Revolving Note") executed by the Borrower in the principal amount of Two Million and 00/100 Dollars ($2,000,000). The term "Notes" as used in this Agreement shall include the two 2 3 Term Note and the Revolving Note and each promissory note delivered in substitution or exchange therefor. SECTION 1.3 INTEREST RATE AND PAYMENTS. (a) The Borrower shall pay -------------------------- interest on amounts outstanding under the Notes as described herein and as provided in the form of the Term Notes attached as Exhibit A and Exhibit B and the Revolving Note attached as Exhibit C. (b) The amounts outstanding from time to time under the Term Notes shall bear interest calculated on the actual number of days elapsed on the basis of a 360 day year, at a rate equal to 175 basis points in excess of the "Cost of Funds" (the "Term Loan Interest Rate") on the respective date that funds are disbursed to the Borrower under the two Term Notes (with respect to each of the two Term Notes, the respective "Term Loan Disbursement Date"). For purposes of this Agreement, the Cost of Funds shall mean the yield on three year U.S. Treasury Notes plus the corresponding swap spread, each as determined by Bloomberg Financial Commodities News as of the Term Loan Disbursement Date. Interest shall thereafter be payable quarterly, commencing on January 1, 1999, and continuing on the first day of each April, July, October and January thereafter, with a final payment of all outstanding amounts due under the Term Notes, including, but not limited to principal, interest and any other amounts owing under this Agreement, if not sooner paid, on the third anniversary of the Closing Date. No amount of principal repaid under either Term Note may be borrowed again. Principal payments shall be due and payable under the first Term Note as follows:
ON OR BEFORE AMOUNT ------------ ------ October 1, 1999 $ 500,000 October 1, 2000 $ 500,000 October 1, 2001 $1,000,000 The third anniversary The remaining balance of the Closing Date
The principal under the second Term Note shall be due and payable at the third anniversary of the Closing Date. 3 4 (c) Interest for the Revolving Note shall be computed on the actual number of days elapsed on the basis of a 360-day year on any and all principal amounts remaining unpaid hereunder from time to time outstanding from the date of borrowing until payment at a rate equal to either the rate of interest referred to by the Bank from time to time as its prime rate (the "Prime Rate") or the rate which is 200 basis points in excess of the London Interbank Offered Rate (the "Euro-Dollar Rate"), as selected by the Borrower upon Disbursement. The London Interbank Offered Rate (the "LIBOR") shall mean the rate per annum (rounded upward, if necessary, to the nearest 1/8 of 1%) at which deposits in dollars are offered by the Euro-Dollar Lending Office of the Bank to other prime banks in the London interbank market at approximately 11:00 a.m. London Time, on the first day of such Euro-Dollar Interest Rate Period in an amount approximately equal to the aggregate principal amount of the Disbursement to which such Euro-Dollar Interest Rate Period is to apply and for a period of time comparable to such Euro-Dollar Interest Rate Period (i) All new Disbursements and all outstanding Revolving Loan amounts shall be subject to the Prime Rate unless the Borrower provides notice of its exercise of the Euro-Dollar Rate with respect to such Disbursement. The Bank shall not be obligated to give notice of any change in the Prime Rate. Interest payable on any Disbursement at the Prime Rate shall be payable monthly, on the first day of each month, commencing on the first day of the first month beginning after the date of this Agreement. (ii) Interest payable on any Disbursement at the Euro-Dollar Rate for any Euro-Dollar Interest Rate Period shall be due and payable at the end of the applicable Euro-Dollar Interest Rate Period. Disbursements bearing interest at Euro-Dollar Rate may not be prepaid prior to the expiration of the applicable Euro-Dollar Interest Rate Period, notwithstanding anything to the contrary in the Agreement, without the prior written consent of the Bank. (iii) The Bank's obligation to make any Disbursement at the Euro-Dollar Rate shall be conditioned on all of the following: (A) No Default shall be in existence at the time of the Borrower's election to utilize a Euro-Dollar Rate for a Disbursement or as of the date of such Disbursement; (B) No portion of a Disbursement to which the Euro-Dollar Rate applies is subject to an existing Euro-Dollar Interest Rate Period, unless such election applies to the Euro-Dollar Business Day (any day on which commercial banks are open for business in London and Chicago) following the last day of the current Euro-Dollar Interest Rate Period or later; (C) The Bank shall not have determined, which determination shall be made in the Bank's absolute and sole discretion, that: (a) the Bank is unable to ascertain the LIBOR rate for any reason, or (b) the Euro-Dollar Rate will not, due to a change in any law, rule, regulation, directive, treaty, interpretation or guideline, adequately and fairly reflect the cost to the Bank of making available or maintaining the Euro-Dollar Rate with respect to the principal amount of such election; and 4 5 (D) no portion of the interest to accrue during the Euro-Dollar Interest Rate Period would, upon the advice of the Bank's legal counsel, be deemed to exceed the maximum allowed by law. (iv) If any new or existing statute, treaty or regulation (including any regulation promulgated by the Board of Governors of the Federal Reserve System (the "FRS") or the Office of the Comptroller of the Currency), or any interpretation thereof by any governmental authority charged with the administration thereof, or any action by any central bank or other fiscal authority having jurisdiction over the Bank or the Revolving Loan (or any part thereof), impose, modify, or deem applicable any tax or any reserve and/or special deposit requirement against any assets held by, or deposits in or for the amount of any Disbursement by the Bank (or any branch or affiliate of the Bank involved in transactions under or contemplated by the Revolving Note), except for such matters which have resulted in a change in the Euro-Dollar Rate pursuant to the definition of Euro-Dollar Rate contained herein, or any similar measure shall result in a reduction in the amount of principal or interest receivable by the Bank with respect to the Revolving Loan or an increase in the cost to the Bank with respect to the amount of principal or interest receivable by the Bank with respect to the Disbursement or an increase in the cost to the Bank of funding the Disbursement in the LIBOR market (whether or not such Disbursement is actually so funded) or engaging in any other transaction material to the maintenance of the Revolving Loan with interest thereon based on the Euro-Dollar Rate (such reduction in amounts receivable or increases in costs being hereinafter referred to as "Costs"), the Borrower shall fully indemnify the Bank for all such Costs and shall compensate the Bank as of the end of each period for which the Euro-Dollar Rate has been determined during which such measures were in effect for the Costs incurred during such period. All such Costs shall be determined by the Bank and a statement thereof showing how the Costs were calculated shall be sent by the Bank to the Borrower when such Costs have been determined, and such determinations shall be conclusive and binding on the Borrower in the absence of manifest error, but the Bank shall, as promptly as practicable, notify the Borrower of the existence of any event which would (if interest were to be accrued based on the Euro-Dollar Rate) require reimbursement by the Borrower of Costs incurred by the Bank. The Borrower shall have the right to audit the Bank's calculation of costs. The obligations set forth in this provision shall survive repayment of the amounts due under this Agreement and the Notes. If the Bank demands compensation under this Section, the Borrower may repay in full its then-outstanding Revolving Loans borrowed at the Euro-Dollar Rate, together with all accrued and unpaid interest thereon to the date of repayment, without penalty therefor. Concurrently with repaying such Revolving Loans pursuant to this Section, the Borrower may receive from the Bank a Disbursement at the Prime Rate in an equal principal amount and, if the Borrower so elects, the Bank shall make such a Disbursement at the Prime Rate to the Borrower. (v) In the event the Borrower has not properly elected a new Euro-Dollar Interest Period for any Disbursement prior to the expiration of the Euro-Dollar Interest Rate Period then in effect for such Disbursement, then, upon expiration of the Euro-Dollar Interest Rate Period then in effect, the interest rate for such Disbursement shall revert to the Prime Rate until such time as the Borrower provides notice to the Bank of the election of a new Euro-Dollar Interest Rate Period in the manner, and subject to the limitations, set forth in this Section. The Bank shall have no 5 6 obligation to inform the Borrower of the potential for reversion to the Prime Rate. (vi) The outstanding principal, interest, and any other amounts owing under the Revolving Note must be paid in full on the Revolving Maturity Date. (d) If any payment to be made by the Borrower hereunder shall become due on a Saturday, Sunday or bank holiday under the laws of the State of Illinois, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing any interest in respect of such payment. (e) Any amount of principal, interest, prepayment penalties (pursuant to Section 1.3(g)), expenses (pursuant to Section 1.5) or any commitment fee (pursuant to Section 1.7) payable hereunder which is not paid when due, whether at stated maturity, by acceleration or otherwise shall bear interest payable on demand at an interest rate equal at all times to two percent (2%) above the interest rate otherwise applicable to outstanding principal amounts under the corresponding Note. (f) All payments received by the Bank from or on behalf of the Borrower shall first be applied to amounts due under Section 1.5, second to accrued interest under the Notes, and then to principal amounts outstanding under the Notes; provided, however, that after the date on which the final payment of principal with respect to the either of the Loans is due, or following and during any Default (as defined below), all payments received on account of the Borrower's Liabilities (as defined below) shall be applied in whatever order, combination and amounts as the Bank, in its sole and absolute discretion, decides, to all costs, expenses and other indebtedness owing from the Borrower to the Bank. (g) Prepayments of principal amounts of the Term Loan are subject to the following conditions: (i) Not less than thirty (30) days prior to the date upon which the Borrower desires to make such prepayment, Borrower shall deliver to the Bank written notice of its intention to prepay, which notice shall be irrevocable and state the prepayment amount and the prepayment date (the "Prepayment Date"). (ii) The Borrower shall pay to the Bank, concurrently with such prepayment all accrued and unpaid interest on such amount plus a prepayment premium (the "Prepayment Premium") equal to the Yield Amount. The "Yield Amount" shall be the amount calculated as follows: (A) There shall first be determined, as of the Prepayment Date, the amount, if any, by which the applicable interest rate on the amount being prepaid exceeds the yield to maturity percentage (the "Current Yield") for the United States Treasury Note closest in maturity to the maturity of the Term Loan (the "Treasury Note") as published in The Wall Street Journal on the fifth business day preceding the Prepayment Date. If publication of (1) The Wall 6 7 Street Journal or (2) publication of the Current Yield of the Treasury Note in The Wall Street Journal is discontinued, the Bank, in its sole discretion, shall designate another daily financial or governmental publication of national circulation to be used to determine the Current Yield; (B) The difference calculated pursuant to clause (A) above shall be multiplied by the outstanding principal amount being prepaid; (C) The product calculated pursuant to clause (B) above shall be multiplied by the quotient, rounded to the nearest one-hundredth of one percent, obtained by dividing (1) the number of days from and including the Prepayment Date to and including the maturity of the Term Loan, by (2) 365; and (D) The sum calculated pursuant to clause (C) above shall be discounted at the annual rate of the Current Yield to the present value thereof as of the Prepayment Date, on the assumption that said sum would be received in equal monthly installments on each monthly anniversary of the Prepayment Date prior to the maturity date of the Term Loan, with the final such installment to be deemed received on the maturity date of the Term Loan; provided, however, that the Borrower shall not be entitled in any event to a credit against, or a reduction of, the indebtedness being prepaid if the Current Yield exceeds the applicable interest rate or for any other reason. (h) The Borrower will pay to the Bank in immediately available funds, at its office at the address specified in Section 6.3, or such other address as the Bank shall specify in writing, all amounts payable to it under the terms of the Notes then held by the Bank, without any presentation of such Notes. The Bank may, if it so determines, make notation of each payment of principal on the Notes, and it will promptly make such notation if the Borrower shall so request. The Bank may also, if it so determines, make notation on the face of the Notes or elsewhere of any modification, amendment, alteration, guaranty or assumption of the Notes. The aggregate unpaid principal amount shown on the face of, or elsewhere on, the Notes shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Notes. The failure to record any such amount on such schedule, however, shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Notes. SECTION 1.4 COLLATERAL. The Borrower's obligations under this ---------- Agreement, the Notes, the Pledge Agreement and any other Loan Documents (collectively, the "Borrower's Liabilities") shall be secured by a pledge of 100% of the capital stock of Allegiant Bank pursuant to the terms of a Pledge and Security Agreement dated as of the Closing Date between the Borrower and the Bank (the "Pledge Agreement") in the form attached as Exhibit D. SECTION 1.5 EXPENSES. Whether or not the Loans are made, the Borrower -------- shall: (a) pay all reasonable costs and expenses of the Bank incident to the transactions contemplated by this Agreement, including, but not limited to, all costs and expenses, incurred in connection with the negotiation, preparation and execution of this Agreement, or in connection with any modification, amendment, alteration or enforcement of any terms of the Loan Documents, 7 8 including, but not limited to, the Bank's out-of-pocket expenses and the charges of and disbursements to counsel retained by the Bank; and (b) pay and save the Bank and all other holders of the Notes harmless against any and all liability with respect to amounts payable as a result of: (i) any stamp or other similar taxes, but excluding taxes on income earned by the Bank, which may be determined to be payable in connection with the execution and delivery of, or any modification, amendment or alteration of, the terms or provisions of any of the Loan Documents; and (ii) any interest or penalties resulting from nonpayment or delay in payment of such expenses, charges, disbursements, liabilities or taxes. The obligations of the Borrower under this Section 1.5 shall survive the repayment in full of the Notes. SECTION 1.6 THE CLOSING. The execution of this Agreement and the ----------- delivery of the required supporting documents (the "Closing") will be made at the offices of the Bank, at the address specified in Section 6.3, on November 10, 1998 at 10:00 a.m., Chicago, Illinois, time (the "Closing Date"). SECTION 1.7 COMMITMENT FEE. There shall be no commitment fee for the -------------- Term Loan. A commitment fee shall be payable for the Revolving Loan in quarterly installments on each of the first day of January, April, July, 1999 and on the Revolving Maturity Date, in an amount equal to one quarter (1/4) of the product of .0025 times (a) $2,000,000 minus (b) the average outstanding principal balance of the Revolving Loan for the 90 day period immediately prior to each such date. ARTICLE II CONDITIONS Notwithstanding the earlier execution of this Agreement, the Bank's obligation to make the Loans shall be subject to the performance by the Borrower prior to the Closing Date of all of its agreements to be performed under this Agreement and to the satisfaction of the following further conditions precedent: SECTION 2.1 DOCUMENTS. The Bank shall have received all of the --------- following documents, each duly executed and dated the Closing Date, in form and substance satisfactory to the Bank and its counsel: (a) the Notes; (b) copies of the Certificate of Incorporation or other applicable charter documents of the Borrower and the Subsidiary certified in each case not more than 15 business days prior to the Closing Date by its respective chartering authority; (c) good standing certificates or their equivalent for the Borrower and the Subsidiary issued as of a recent date by the Secretary of State of the State of Missouri or by its respective chartering authority, if different; 8 9 (d) copies certified by the Secretary or an Assistant Secretary of the Borrower of the bylaws of the Borrower; (e) copies certified by the Secretary or an Assistant Secretary of the Borrower of resolutions of the board of directors of the Borrower authorizing the execution, delivery and performance, respectively, of this Agreement, the Notes, the Pledge Agreement and the other Loan Documents; (f) copies certified by the Secretary or an Assistant Secretary of the Borrower of all documents evidencing any necessary corporate action, consents and approvals of any federal or state governmental department, commission, board, regulatory authority or agency including, but not limited to, the FRS (and collectively with the foregoing, the "Governmental Agencies" or individually, a "Governmental Agency") with respect to this Agreement, the Notes, the Pledge Agreement or any other Loan Documents; (g) an incumbency certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names of the officer or officers of the Borrower authorized to sign this Agreement, the Notes, the Pledge Agreement, any Disbursement request and the other Loan Documents (and the Bank may conclusively rely on such certificate until formally advised by a like certificate of any changes therein); (h) the opinion of counsel for the Borrower, substantially in the form of Exhibit E; (i) the Pledge Agreement; and (j) a certificate signed by the President or a Vice President of the Borrower certifying that the conditions specified in Article II have been satisfied. SECTION 2.2 OTHER CONDITIONS OF BORROWING. Notwithstanding any other ----------------------------- provision of this Agreement, the Bank shall not be required to make the Loans or any Disbursement: (a) if the Bank has not received either the original certificate(s) representing all of the securities constituting the Pledged Securities (as defined in the Pledge Agreement) accompanied by corresponding irrevocable stock power(s) executed in blank or a letter of direction acknowledged by Mercantile (hereinafter defined), ordering Mercantile to release such certificates to the Bank; (b) if, between the date of this Agreement and the Closing Date or the date of any Disbursement, there has occurred, in the Bank's reasonable discretion, a material adverse change in the financial condition or affairs of the Borrower or the Subsidiary; (c) if any Default has occurred or any event that, with the giving of notice or lapse of time, or both, would constitute a Default; 9 10 (d) if any litigation or governmental proceeding has been instituted or threatened against the Borrower or Allegiant Bank or any of its respective directors, officers or shareholders which, in the Bank's reasonable discretion, will materially and adversely affect the financial condition or operations of the Borrower or the Subsidiary; (e) if all necessary or appropriate actions and proceedings shall not have been taken in connection with, or relating to the transactions contemplated by this Agreement, and all of the Loan Documents shall not have been completed and tendered for delivery, in substance and form satisfactory to the Bank; or (f) if the Bank shall not have received in substance and form reasonably satisfactory to the Bank, all certificates, affidavits, schedules, resolutions, opinions, notes, and/or other documents which are required by this Agreement, or which it may reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Bank to make the Loans provided for herein, the Borrower represents and warrants as of the date of this Agreement, the Closing Date and on the date of any Disbursement as set forth below: SECTION 3.1 CORPORATE ORGANIZATION. (a) The Borrower: (i) is a bank ---------------------- holding company duly organized and validly existing and in good standing under the laws of the State of Missouri; (ii) is duly qualified as a foreign corporation and in good standing in all states in which it is doing business, except where it is not required to qualify or where the failure to so qualify would not have a material adverse effect on it or its respective business; and (iii) has all requisite power and authority, corporate or otherwise, to own, operate and lease its properties and to carry on its business as now being conducted. The Borrower has made payment of all franchise and similar taxes in the State of Missouri, and in all of the jurisdictions in which it is incorporated or qualified, so far as such taxes are due and payable at the date of this Agreement; (b) Allegiant Bank: (i) is a state-chartered commercial bank duly organized and validly existing and in good standing under the laws of the State of Missouri; (ii) is duly qualified and in good standing in all states in which it is doing business, except where it is not required to qualify or where the failure to so qualify would not have a material adverse effect on it or its respective business; (iii) has all requisite power and authority, corporate or otherwise, to own, operate and lease its properties and to carry on its business as now being conducted; (iv) has its deposit accounts insured by the Federal Deposit Insurance Corporation (the "FDIC"); SECTION 3.2 CAPITALIZATION OF THE BORROWER AND SUBSIDIARY. All of the --------------------------------------------- capital stock of the Subsidiary has been duly authorized and validly issued, and is fully paid and nonassessable, and constitutes 100% of the issued and outstanding capital stock of the Subsidiary. None of such capital stock has been issued in violation of any shareholder's 10 11 preemptive rights. Borrower owns all of the issued and outstanding capital stock of the Subsidiary subject only to the security interest granted by the Borrower to Mercantile Bank National Association ("Mercantile") pursuant to that certain Amended and Restated Term Loan Agreement, dated May 31, 1995, and as amended by that certain Modification and Extension Agreement dated November 26, 1996. There are no outstanding options, rights or warrants obligating the Borrower to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Subsidiary or obligating the Borrower or the Subsidiary to grant, extend or enter into any such agreement or commitment. SECTION 3.3 USE OF PROCEEDS. --------------- (a) The proceeds of the Term Loan shall be used to repay a $10.4 million debt currently outstanding at Mercantile Bank, St. Louis, Missouri, and to redeem $3.25 million in outstanding subordinated debentures. The proceeds of the Revolving Loan shall be used for working capital. (b) The Borrower does not own any "margin security" as such term is defined in Regulation G of the FRB. The Borrower will not use any part of the proceeds of the Loans: (i) directly or indirectly to purchase or carry any security or reduce or retire any indebtedness originally incurred to purchase any such security within the meaning of Regulation G of the Board; or (ii) so as to involve the Borrower in a violation of Regulation T, U or X of the FRB. (c) The Borrower shall not use any proceeds from the Revolving Loan to pay any interest or principal due to the Bank under the Loans. SECTION 3.4 FINANCIAL STATEMENTS. The Borrower has delivered to the -------------------- Bank copies of financial statements of the Borrower and Allegiant Bank as of and for the year ending December 31, 1997, and as of and for the nine months ending September 30, 1998, audited in the case of the Borrower's year end financial statements by the Borrower's certified public accountants (the "Financial Statements"). The Financial Statements are true and correct, are in accordance with the respective books of account and records of the Borrower and Allegiant Bank, as the case may be, and have been prepared in accordance with generally accepted accounting principles ("GAAP"), or applicable banking rules and regulations, as the case may be, applied on a basis consistent with prior periods, and fairly and accurately present the financial condition of the Borrower and Allegiant Bank, respectively, and the respective assets and liabilities and results of operations of each as of such date. Since December 31, 1997, there has been no material adverse change in the financial condition, business, properties or operations of the Borrower or Allegiant Bank. The Financial Statements contain and reflect provisions for taxes, reserves and other liabilities of the Borrower and Allegiant Bank in accordance with GAAP or applicable banking rules and regulations, as the case may be. Neither the Borrower nor Allegiant Bank has any material debt, liability or obligation of any nature (whether accrued, contingent, absolute or otherwise) which is not provided for or disclosed in the Financial Statements. SECTION 3.5 TITLE TO PROPERTIES. ------------------- 11 12 (a) The Borrower and the Subsidiary have good and marketable fee title to all real property, and good and marketable title to all other property and assets reflected in the latest balance sheet referred to in Section 3.4 or purported to have been acquired by the Borrower or the Subsidiary subsequent to such date, except property and assets sold or otherwise disposed of subsequent to the date of such balance sheet in the ordinary course of business. All property and assets of any kind (real or personal, tangible or intangible) of the Borrower and the Subsidiary are free from any material liens, encumbrances or defects in title. (b) None of the assets or property the value of which is reflected in the latest balance sheet referred to in Section 3.4 is held by the Borrower or the Subsidiary as lessee under any lease, or as conditional vendee under any conditional sales contract or other title retention agreement. The Borrower and the Subsidiary enjoy peaceful and undisturbed possession under all of the leases under which they are operating, all of which permit the customary operations of the Borrower and the Subsidiary. None of such leases is in material default and no event has occurred which with the passage of time or the giving of notice, or both, would constitute a material default under any such lease. SECTION 3.6 LEGAL AND AUTHORIZED. The borrowing of the principal -------------------- amounts of the Loans, the execution and performance of this Agreement and the other Loan Documents and the compliance by the Borrower with all of the provisions of this Agreement and of the other Loan Documents are within the corporate powers of the Borrower. Each of this Agreement and the other Loan Documents has been duly authorized, executed and delivered and is the legal, valid and binding obligation of the Borrower, and is enforceable in accordance with its respective terms. SECTION 3.7 NO DEFAULTS OR RESTRICTIONS. Neither the execution and --------------------------- delivery of any of the Loan Documents nor compliance with their terms and conditions will conflict with or result in a material breach of, or constitute a material default under, any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, corporate charter, bylaw or any other agreement or instrument to which the Borrower or the Subsidiary is now a party or by which any of them or any of their respective properties is now bound or affected, or any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency binding on the Borrower or the Subsidiary, or result in the creation or imposition of any material lien, charge or encumbrance upon any property or asset of the Borrower or the Subsidiary under the terms or provisions of any of the foregoing. Neither the Borrower nor the Subsidiary is in material default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing indebtedness of any kind or pursuant to which any such indebtedness is issued, or other agreement or instrument to which the Borrower or the Subsidiary is a party or by which the Borrower or the Subsidiary or their respective properties is now bound or affected. SECTION 3.8 GOVERNMENTAL CONSENT. No governmental orders, permissions, -------------------- consents, approvals or authorizations are required to be obtained and no registrations or 12 13 declarations are required to be filed in connection with, or contemplation of, the execution and delivery of this Agreement or any of the other Loan Documents. SECTION 3.9 TAXES. The Borrower and the Subsidiary have filed all ----- United States income tax returns and all material state and municipal tax returns which are required to be filed, and have paid, or made provision for the payment of, all material taxes which have become due pursuant to any federal, state or municipal tax returns or pursuant to any assessment received by the Borrower or the Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The Borrower is unaware of any audit, assessment or other proposed action or inquiry of the Internal Revenue Service or any other taxing authority with respect to any tax liability of the Borrower or any of the Subsidiary. SECTION 3.10 COMPLIANCE WITH LAW. The Borrower and the Subsidiary have ------------------- complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective properties, except where any such failure would not have a material adverse effect on the Borrower or the Subsidiary. SECTION 3.11 ERISA. All employee benefit plans (as defined in Section ----- 3(3) of ERISA) established or maintained by the Borrower or the Subsidiary or to which either of them contributes, are in compliance in all material respects with all applicable requirements of ERISA, and are in compliance in all material respects with all applicable requirements (including qualification and non-discrimination requirements in effect as of the Closing) of the Internal Revenue Code of 1986, as amended (the "Code"), for obtaining the tax benefits the Code thereupon permits with respect to such employee benefit plans. For purposes of this Section, non-compliance with the Code and ERISA is material if such non-compliance would reasonably be expected to have a material adverse effect on the financial condition, assets or business of the Borrower or the Subsidiary. No such employee benefit plan has, or as of the Closing will have unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) for which the Borrower or the Subsidiary would be liable to any Person (as defined below) under Title IV of ERISA if any such employee benefit plan were terminated as of the Closing, which liabilities would be material to the Borrower or the Subsidiary. Such employee benefit plans are funded in accordance with Section 412 of the Code (if applicable). There would be no obligations which would be material to the Borrower or the Subsidiary under Title IV of ERISA relating to any such employee benefit plan that is a multi-employer plan if any such plan were terminated or if the Borrower or the Subsidiary withdrew from any such plan as of the Closing. SECTION 3.12 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, -------------------------- neither the business, operations, properties nor assets of the Borrower or the Subsidiary have been materially and adversely affected in any way as the result of any act or event, including, but not limited to, fire, explosion, accident, act of God, strike, lockout, flood, drought, storm, earthquake, combination of workers or other labor disturbance, riot, activity of armed forces or of the public enemy, embargo, or nationalization, condemnation, requisition or taking of property, or cancellation or modification of contracts, by any domestic or foreign government or any 13 14 instrumentality or agency thereof. SECTION 3.13 RESERVE FOR POSSIBLE LOAN AND LEASE LOSSES. The reserve for ------------------------------------------ possible loan and lease losses shown on the Consolidated Report of Income and Condition ("Call Report") of Allegiant Bank for the nine months ended September 30, 1998, is adequate in all respects to provide for possible or specific losses, net of recoveries relating to loans previously charged off, on loans outstanding, and contains an additional amount of unallocated reserves for unanticipated future losses at a level considered adequate based upon generally accepted safe and sound banking practices. SECTION 3.14 REGULATORY ENFORCEMENT ACTIONS. Neither the Borrower nor ------------------------------ any of its subsidiaries nor any of their respective officers or directors is now operating under any restrictions, agreements, memoranda, or commitments (other than restrictions of general application) imposed by any Governmental Agency, nor to Borrower's knowledge, are any such restrictions threatened or agreements, memoranda or commitments being sought by any Governmental Agency. SECTION 3.15 HAZARDOUS MATERIALS. Neither the Borrower nor any ------------------- Responsible Subsidiary (as defined below) is in violation of any applicable statute, regulation, ordinance or policy of any governmental entity relating to the ecology, human health, safety or the environment and no Hazardous Material (as defined below) is located on any real property owned or leased by the Borrower or any of its Responsible Subsidiaries or has been discharged from or to, or penetrated into, any real property (or surface or subsurface rivers or streams crossing or adjoining any real property) owned or leased by the Borrower or any of its Responsible Subsidiaries or the aquifer underlying any real property owned or leased by Borrower or any of its Responsible Subsidiaries except where any of the foregoing would not reasonably be expected to have a material adverse effect on the Borrower or any of its Responsible Subsidiaries. "Hazardous Material" as used herein means any asbestos, polychlorinated byphenyls and petroleum products, solid wastes, urea formaldehyde, discharges of sewer or effluent, paint containing lead and any other hazardous or toxic material, substance or waste which is defined, determined or identified by those or similar terms or is regulated as such under any statute, law, ordinance, rule or regulation or by any local, state or federal authority (whether as the result of any judicial or administrative interpretation of any such statute, law, ordinance, rule or regulation or otherwise) including, but not limited to, any material, substance or waste which is a hazardous substance within the meaning of 33 U.S.C. Sec.1251 et seq., as amended, or 42 U.S.C. Sec.9601 et seq., as amended, or is a hazardous waste within the meaning of 42 U.S.C. Sec.6901 et seq., as amended. For purposes of this Section 3.15, "Responsible Subsidiary" shall mean, as to any Person: (a) any corporation more than 25% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Responsible Subsidiaries of such Person; (b) any partnership, association, joint venture or other entity in which such Person and/or one or more Responsible Subsidiaries of such Person has more than a 25% equity interest 14 15 at the time; or (c) any Person which is at the time controlled, directly or indirectly, through either (i) that Person being a borrower of the Borrower and the Borrower as that Person's lender, actually influencing or altering such Person's procedures, methods or actions relating to the use, handling, generation, transportation, storage, treatment or disposal of Hazardous Materials, or (ii) common directors, officers or employees, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. For purposes of this Agreement, "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. SECTION 3.16 PENDING LITIGATION. Except as set forth in Schedule 3.16, ------------------ there are no actions, suits, proceedings or written agreements pending, or, to the best knowledge of the Borrower, threatened or proposed, against the Borrower or the Subsidiary, at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or other administrative agency, domestic or foreign; and neither the Borrower nor the Subsidiary is in default with respect to any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or foreign. SECTION 3.17 INVESTMENT COMPANY ACT. Neither the Borrower nor the ---------------------- Subsidiary is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. SECTION 3.18 NO MISSTATEMENT OF MATERIAL FACT. No information, exhibit, -------------------------------- report or document furnished by the Borrower to the Bank in connection with the negotiation or execution of this Agreement or any of the other Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading, all as of the date when furnished to the Bank. SECTION 3.19 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The foregoing ------------------------------------------ representations and warranties in this Article III shall survive the making of this Agreement, and execution and delivery of the Note and the Pledge Agreement, and shall be deemed to be continuing representations and warranties until such time as the Borrower has satisfied all of its obligations to the Bank, including, but not limited to the obligation to pay in full all principal, interest and other amounts in accordance with the terms of this Agreement or the Notes. ARTICLE IV COVENANTS SECTION 4.1 NEGATIVE COVENANTS. The Borrower agrees that until the ------------------ Borrower satisfies all of its obligations to the Bank, including, but not limited to, its obligations to pay in full all of the Borrower's Liabilities, the Borrower shall not itself, nor shall the Borrower cause, permit or allow Allegiant Bank to take any of the following actions, without the prior written consent of the Bank, which shall not be unreasonably withheld, delayed or conditioned by the Bank: 15 16 (a) create, assume, incur, have outstanding, or in any manner become liable in respect of any indebtedness for borrowed money, except in the case of Borrower, secured indebtedness under Subsection 4.1(b)(vi), other indebtedness not otherwise permitted by this Section 4.1(a) in an amount not to exceed $250,000.00 in the aggregate at any one time outstanding, and, in the case of the Subsidiary, indebtedness incurred in the ordinary course of its respective business and in accordance with applicable laws and regulations and safe and sound business practices, provided, that for purposes of this Agreement, the phrase "indebtedness" shall mean and include: (i) all items arising from the borrowing of money, which according to GAAP now in effect, would be included in determining total liabilities as shown on a balance sheet; (ii) all indebtedness secured by any lien on property owned by the respective debtor whether or not such indebtedness shall have been assumed; (iii) all guarantees and similar contingent liabilities in respect to indebtedness of others; and (iv) all other interest-bearing obligations evidencing indebtedness in others; (b) create, assume, incur, suffer or permit to exist any mortgage, pledge, deed of trust, encumbrance (including the lien or retained security title of a conditional vendor) security interest, assignment, lien or charge of any kind or character upon or with respect to any of its properties whether owned at the date hereof or hereafter acquired, or assigned or otherwise convey any right to receive income excepting only: (i) liens for taxes, assessments or other governmental charges not yet due or payable; (ii) liens for taxes, assessments or other governmental charges already due, but the validity of which is being contested at the time in good faith in such a manner as not to make the property forfeitable; (iii) liens and charges incidental to current operations which are not due or delinquent; (iv) liens for workmen's compensation awards not due or delinquent; (v) pledges or deposits to secure obligations under workers' compensation laws or similar legislation; (vi) purchase money mortgages or other liens on real property including 16 17 those incurred for the construction of a banking facility, and bank furniture and fixtures acquired or held in the ordinary course of business to secure the purchase price of such property or to secure the indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of any such property to be subject to such mortgages or other liens, or mortgages or other liens existing on any such property at the time of acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, however, no such mortgage or other liens shall extend to or cover any property other than the property being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the mortgage or lien being extended, renewed or replaced, and provided further, no such mortgage or lien shall exceed 75% of the price of acquisition, construction or improvement at the time of acquisition, construction or improvement, and provided further, that the aggregate principal amount of consolidated indebtedness at any one time outstanding and secured by mortgages, liens, conditional sale agreements and other security interests permitted by this clause (vi) shall not exceed 10% of the consolidated capital of the Borrower or the Subsidiary, as the case may be; (vii) liens existing on the date hereof as shown on the financial statements; and (viii) in the case of any Subsidiary, liens incurred in the ordinary course of its respective business and in accordance with applicable laws and regulations and safe and sound business practices; (c) dispose by sale, assignment, lease or otherwise property or assets now owned or hereafter acquired, outside the ordinary course of business in excess of 10% of its consolidated assets in any fiscal year; (d) merge into or consolidate with or into any other person, firm or corporation; (e) make any loans or advances whether secured or unsecured to any person, firm or corporation, other than loans or advances made by a Subsidiary in the ordinary course of its business and in accordance with applicable laws and regulations and safe and sound business practices; (f) engage in any business or activity not permitted by all applicable laws and regulations, including, but not limited to, the Bank Holding Company Act of 1956, the state banking laws of Missouri, the Federal Deposit Insurance Act and any regulations promulgated thereunder, where the engagement in such unpermitted business or act would reasonably be expected to have a material adverse effect on the Borrower or the Subsidiary; (g) make any loan or advance secured by five percent (5%) or more of the issued and outstanding capital stock of a bank or depository institution (except for loans made in the ordinary course of business), or acquire five percent (5%) or more of the issued and 17 18 outstanding capital stock, assets or obligations of or any interest in another bank or depository institution; (h) directly or indirectly create, assume, incur, suffer or permit to exist any pledge, encumbrance, security interest, assignment, lien or charge of any kind or character on the capital stock of the Subsidiary; (i) sell, transfer, issue, reissue, exchange or grant any option with respect to any capital stock of the Subsidiary; (j) redeem any of its capital stock or the capital stock of any Subsidiary or declare a stock dividend or split or otherwise change its capital structure or the capital structure of the Subsidiary; (k) breach or fail to perform or observe any of the terms and conditions of the Notes, the Pledge Agreement or any other Loan Document; (l) engage in any unsafe or unsound banking practice having a materially adverse effect on the Borrower or the Subsidiary; or (m) violate any law or regulation, or any condition imposed by or undertaking provided to any Government Agency having a materially adverse effect on the Borrower or the Subsidiary. SECTION 4.2 AFFIRMATIVE COVENANTS. The Borrower agrees that until the --------------------- Borrower satisfies all of its obligations to the Bank, including, but not limited to, its obligations to pay in full all principal, interest and other amounts due in accordance with the terms of the Agreement, the Notes and the Pledge Agreement, it shall: (a) furnish and deliver to the Bank: (i) as soon as practicable, and in no event later than forty-five (45) days after the end of each of the first three calendar quarterly periods of the Borrower and Allegiant Bank, a copy of: (1) the balance sheet, income statement, statements of changes in financial position and cash flow and any supporting schedules prepared in accordance with GAAP consistently applied and signed by the respective President and Chief Financial Officer of the Borrower and the Subsidiary; and (2) all financial statements, including, but not limited to, all Call Reports, filed with any state or federal bank regulatory authority; (ii) as soon as practicable, and in no event later than ninety (90) days after the end of each calendar year, a copy of: (1) the consolidated balance sheet as of the end of such year and of the consolidated income, changes in financial position and cash flow statements for the Borrower for such year audited by independent certified public accountants satisfactory to the Bank and accompanied by an unqualified opinion; and (2) all financial statements and 18 19 reports, including, but not limited to, Call Reports and annual reports, filed annually by any Subsidiary with state or federal regulatory authorities; (iii) at the Bank's request, copies of the then current loan/asset watch list, the substandard loan/asset list, the nonperforming loan/asset list and other real estate owned list of the Subsidiary engaged in the banking business; (iv) immediately after receiving knowledge thereof, notice in writing of all charges, assessments, actions, suits and proceeding that are proposed or initiated by, or brought before, any court or governmental department, commission, board or other administrative agency, in connection with the Borrower or the Subsidiary, other than ordinary course of business litigation not involving the FRS, the FDIC or any other Government Agency, which, if adversely decided, would not have a material effect on the financial condition or operations of the Borrower or the Subsidiary; and (v) promptly after the occurrence thereof, notice of any other matter which has resulted in a materially adverse change in the financial condition or operations of the Borrower or the Subsidiary; (b) within forty-five (45) days after the end of each calendar quarter, deliver to the Bank a certificate signed by the President and the Chief Financial Officer of the Borrower, containing a computation of the then current financial ratios specified in Subsections 4.2(d) through (g) of this Agreement, and stating that no Default or unmatured Default has occurred or is continuing, or, if there is any such event, describing such event, the steps, if any, that are being taken to cure it, and the time within which such cure will occur; (c) maintain such capital as is necessary to cause Allegiant Bank to be classified as a "well capitalized" institution in accordance with the regulations of the FDIC; (d) maintain such capital as is necessary to meet the following regulatory ratios on a consolidated basis as measured on the basis of information filed by the Borrower in its periodic financial reports filed with the Securities and Exchange Commission (the "SEC") as follows: (i) Total Capital to Risk-Weighted Assets of not less than 8.0%; (ii) Tier 1 Capital to Risk-Weighted Assets of not less than 4.0%; and (iii) Tier 1 Capital to Average Total Assets of not less than 4.0% (for the purposes of this Subsection 4.2(d)(iii), the Average Total Assets shall be determined on the basis of information for the four most recently ended calendar quarters as reflected in the financial reports filed with the SEC); (e) on a consolidated basis, cause the ratio of its nonperforming loans to its 19 20 primary capital to be not more than twenty percent (20%) at all times (for purposes of this Subsection 4.2(e), "primary capital" shall mean the sum of the common stock, surplus and retained earnings accounts plus the reserve for loan and lease losses, less goodwill, and "nonperforming loans" shall mean the sum of all non-accrual loans and loans on which any payment is ninety (90) or more days past due); (f) on a consolidated basis, cause the ratios of its loan and lease loss reserve to its total loans to be not less than one percent (1.0%) at all times; (g) on a consolidated basis, cause its Return on Assets, determined on the basis of information filed in its financial reports filed with the SEC, to be at least four tenths of one percent (0.40%) at the end of every calendar year; (h) promptly pay and discharge all material taxes, assessments and other governmental charges imposed upon the Borrower or the Subsidiary or upon the income, profits, or property of the Borrower or the Subsidiary and all material claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of the Borrower or the Subsidiary, provided, however, that neither the Borrower nor the Subsidiary shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof is being contested in good faith by appropriate proceedings, and reserves therefor are maintained on the books of the Borrower or the Subsidiary as are deemed reasonably adequate by the Bank; (i) maintain bonds and insurance with responsible and reputable insurance companies or associations in such amounts and covering such risk as is usually carried by owners of similar businesses and properties in the same general area in which the Borrower or any of its subsidiaries, respectively, operates, and such additional bonds and insurance as may be reasonably required by the Bank; (j) permit the Bank through its employees, attorneys, accountants or other agents, to inspect any of the properties, corporate books and financial books and records of the Borrower and the Subsidiary at such times and as often as the Bank reasonably may request; and (k) provide promptly to the Bank other information concerning the business, operations, financial condition and regulatory status of the Borrower and the Subsidiary as the Bank may from time to time reasonably request. ARTICLE 5 DEFAULT SECTION 5.1 EVENTS OF DEFAULT. The happening or occurrence of any of ----------------- the following events or acts shall each constitute a Default hereunder, and any such Default shall also constitute a Default under both the Term Note and the Revolving Note (or any replacement or substitute note therefor), the Pledge Agreement and any other Loan Document, without right to notice or time to cure in favor of the Borrower except as indicated below: 20 21 (a) if the Borrower fails to make any payment of principal or interest on either the Term Loan or the Revolving Loan or any other payment required under the terms of the Loan Documents when due and such payment remains unpaid for ten (10) days after the due date thereof; (b) if the Borrower shall fail to perform or observe, or cause or permit any Subsidiary to fail to perform or observe any covenants or obligations under this Agreement, other than those set forth in subsection (a) above, and including, but not limited to, all affirmative and negative covenants set forth in Article 4 of this Agreement, or under any of the other Loan Documents, and the same remains uncured for thirty (30) days after any executive officer of the Borrower or the Subsidiary knows or should have known of such failure; (c) if any representation or warranty made in any of the Loan Documents shall be false when made or at the time of any extension of the term of this Agreement (it being agreed that the Bank shall be under no obligation to grant any such extension) or at the time of any Disbursement; (d) if the Borrower fails to perform or observe any covenant or agreement contained in any other agreement between the Borrower or the Subsidiary and the Bank, or if any condition contained in any agreement between the Borrower or the Subsidiary and the Bank is not fulfilled and such failure remains uncured for thirty (30) days after any executive officer of the Borrower or the Subsidiary knows or should have known of such failure; (e) if the FRS, the FDIC or other Governmental Agency charged with the regulation of the Borrower or the Subsidiary: (i) issues to the Borrower or the Subsidiary, or initiates any action, suit or proceeding to obtain against, impose on or require from the Borrower or the Subsidiary, a cease and desist order or similar regulatory order, the assessment of material civil monetary penalties, articles of agreement, a memorandum of understanding, a capital directive, a capital restoration plan, restrictions that prevent or as a practical matter impair the payment of dividends by the Subsidiary or the payments of any debt by the Borrower, restrictions that make the payment of dividends by the Subsidiary or the payment of debt by the Borrower subject to prior regulatory approval, a notice or finding under Section 8(a) of the Federal Deposit Insurance Act or any similar enforcement action, measure or proceeding; or (ii) issues to any officer or director of the Borrower or the Subsidiary, or initiates any action, suit or proceeding to obtain against, impose on or require from any such officer or director, a cease and desist order or similar regulatory order, a removal order or suspension order or the assessment of material civil monetary penalties; (f) if the Subsidiary is notified that it is considered an institution in "troubled condition" within the meaning of 12 U.S.C. Section 1831i and the regulations promulgated 21 22 thereunder, or if a conservator or receiver is appointed for the Subsidiary; (g) if the Borrower or the Subsidiary becomes insolvent or is unable to pay its debts as they mature; or makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts as they mature; or suspends transaction of its usual business, or if a trustee of any substantial part of the assets of the Borrower or the Subsidiary is applied for or appointed, and if appointed in a proceeding brought against the Borrower or the Subsidiary, the Borrower or the Subsidiary, respectively, by any action or failure to act indicates its approval of, consent to or acquiescence in such appointment, or within thirty (30) days such appointment is not vacated or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect; (h) if any proceedings involving the Borrower or the Subsidiary are commenced by or against the Borrower or the Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute of the federal government or any state government and if such proceedings are instituted against the Borrower or the Subsidiary, the Borrower or the Subsidiary, respectively, by any action or failure to act indicates its approval of, consent to or acquiescence therein, or an order shall be entered approving the petition in such proceedings and within thirty (30) days after the entry thereof such order is not vacated or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect; or (i) if the Borrower or the Subsidiary continues to be in default in any payment of principal or interest for any other obligation, or in the performance of any other term, condition or covenant contained in any agreement (including, but not limited to, an agreement in connection with the acquisition of capital equipment on a title retention or net lease basis), under which any such obligation is created, the effect of which default is to cause or permit the holder of such obligation to cause such obligation to become due prior to its stated maturity. SECTION 5.2 REMEDIES OF THE BANK. Upon the occurrence of a Default, the -------------------- Bank shall have all rights and remedies provided by applicable law and, without limiting the generality of the foregoing, may, at its option, declare its commitments under the Loan Documents to be terminated hereunder and all the Term Notes and the Revolving Note shall thereupon be and become forthwith, immediately due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in the Notes or the Pledge Agreement or any other Loan Document to the contrary notwithstanding, and may also, without limitation, appropriate and apply toward the payment of the Notes any indebtedness of the Bank to the Borrower however created or arising, and may also, without limitation, exercise any and all rights in and to the collateral security referred to in Section 1.4 above and under the Pledge Agreement and any other collateral held by the Bank. There shall be no obligation to liquidate any such collateral in any order or with any priority or to exercise any remedy available to the Bank in any order. 22 23 ARTICLE VI MISCELLANEOUS Section 6.1 WAIVER BY THE BANK. No failure or delay on the part of the ------------------ Bank in exercising any right, power or remedy hereunder shall operate as a waiver thereof. No single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Time is of the essence in the performance of the covenants, agreements and obligations of the Borrower and the Bank. SECTION 6.2 ENTIRE AGREEMENT; MODIFICATION OF THE AGREEMENT. This ----------------------------------------------- Agreement constitutes the entire agreement between the parties and supersedes all prior agreements between the Bank and the Borrower with respect to the subject matter hereof. No amendment, modification, termination or waiver of any provision in this Agreement, the Pledge Agreement or the Notes, or consent to any departure by the Borrower therefrom, shall be effective except for the specific purpose for which given and only then if in writing and signed by the party intending to be bound. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. SECTION 6.3 NOTICES. All notices, requests, demands and other ------- communications provided for hereunder shall be: (a) in writing; (b) made in one of the following manners; and (c) deemed given (i) if and when personally delivered, (ii) on the next business day if sent by nationally recognized overnight courier addressed to the appropriate party as set forth below or (iii) on the fifth business day after being deposited in United States certified or registered mail, and addressed as follows: (a) If to the Borrower: Allegiant Bancorp, Inc. 2122 Kratky Road St. Louis, Missouri 63114 Attention: Sandra L. Friedman (b) If to the Bank: LaSalle National Bank 135 South LaSalle Street Chicago, Illinois 60603 Attention: Wayne Veselsky or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this subsection. 23 24 SECTION 6.4 COUNTERPARTS. This Agreement may be executed in any number ------------ of counterparts and by different parties hereto in separate counterparts, each of which when so constitute but one and the same instrument. SECTION 6.5 SUCCESSORS AND ASSIGNS. This Agreement shall become ---------------------- effective when it shall have been executed by the Borrower and the Bank and thereafter shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns, provided, that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Bank, which consent may be given or denied in the Bank's sole and absolute discretion. SECTION 6.6 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ------------- HAVE BEEN NEGOTIATED, EXECUTED AND DELIVERED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT, CHICAGO, ILLINOIS. THE LOANS PROVIDED FOR HEREIN ARE TO BE FUNDED AND REPAID AT, AND THIS AGREEMENT IS OTHERWISE TO BE PERFORMED AT, CHICAGO, ILLINOIS AND THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO: (a) ITS JUDICIALLY OR STATUTORILY PRONOUNCED RULES REGARDING CONFLICT OF LAWS OR CHOICE OF LAW; (b) WHERE ANY OTHER AGREEMENT IS EXECUTED OR DELIVERED; (c) WHERE ANY PAYMENT OR OTHER PERFORMANCE REQUIRED BY ANY SUCH AGREEMENT IS MADE OR REQUIRED TO BE MADE; (d) WHERE ANY BREACH OF ANY PROVISION OF ANY SUCH AGREEMENT OCCURS, OR ANY CAUSE OF ACTION OTHERWISE ACCRUES; (e) WHERE ANY ACTION OR OTHER PROCEEDING IS INSTITUTED OR PENDING; (f) THE NATIONALITY, CITIZENSHIP, DOMICILE, PRINCIPAL PLACE OF BUSINESS, OR JURISDICTION OR ORGANIZATION OR DOMESTICATION OF ANY PARTY; (g) WHETHER THE LAWS OF THE FORUM JURISDICTION OTHERWISE WOULD APPLY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS; OR (h) ANY COMBINATION OF THE FOREGOING. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER RECOGNIZES THAT THE BANK'S PRINCIPAL OFFICE IS LOCATED IN CHICAGO, ILLINOIS, AND THAT THE BANK MAY BE IRREPARABLY HARMED IF REQUIRED TO INSTITUTE OR DEFEND ANY ACTIONS AGAINST THE BORROWER IN ANY JURISDICTION OTHER THAN THE NORTHERN DISTRICT OF ILLINOIS OR COOK COUNTY, ILLINOIS; THEREFORE, THE BORROWER IRREVOCABLY: (i) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THE LOANS OR ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE NORTHERN DISTRICT OF ILLINOIS, IF FEDERAL JURISDICTION IS AVAILABLE, AND, OTHERWISE, IN THE CIRCUIT COURT OF COOK COUNTY, AT THE BANK'S OPTION; (ii) CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; (iii) WAIVES ANY OBJECTION WHICH THE BORROWER OR ALLEGIANT BANK MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH SUIT, 24 25 ACTION OR PROCEEDING IN EITHER SUCH COURT; AND (iv) AGREES TO JOIN THE BANK IN ANY PETITION FOR REMOVAL TO EITHER SUCH COURT BROUGHT BY THE BANK. THE BORROWER WAIVES TRIAL BY JURY AND ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 6.7 SEVERABILITY. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. SECTION 6.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants, ------------------------------------------ agreements, representations and warranties made by the Borrower herein shall, notwithstanding any investigation by or knowledge on the part of the Bank, be deemed material and relied on by the Bank and shall survive the making of this Agreement, and execution and delivery of the Notes and the Pledge Agreement, and shall be deemed to be continuing representations and warranties until such time as the Borrower has satisfied all of its obligations to the Bank, including, but not limited to, the obligation to pay in full all principal, interest and other amounts due in accordance with the terms of this Agreement and the Notes. SECTION 6.9 EXTENSIONS AND RENEWALS. This Agreement shall govern the ----------------------- terms of any extensions or renewals to the Notes, subject to any additional terms and conditions imposed by the Bank in connection with any such extension or renewal. SECTION 6.10 INTEREST RATE REGULATION. The Borrower hereby represents ------------------------ that the indebtedness evidenced hereby constitutes a loan made by the Bank to enable the Borrower to carry on a commercial enterprise for the purpose of investment or profit; and that such loan is a loan for business purposes under the intent and purview of 815 Ill. Comp. Stat. 205/4. SECTION 6.11 ACCOUNTING TERMS. Any accounting term not specifically ---------------- defined herein shall be construed in accordance with GAAP which are applied in the preparation of the financial statements referred to in Section 3.4, and all finan-cial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. SECTION 6.12 PARTICIPATIONS. The Bank reserves the right to sell -------------- participations in the Loans or otherwise assign, transfer or hypothecate all or any part of the Loans along with the corresponding rights in the Loan Documents. 25 26 SECTION 6.13 ADDITIONAL ACTIONS. The Borrower agrees to do such further ------------------ acts and things and to execute and deliver to the Bank such additional assignments, agreements, powers and instruments, as the Bank may reasonably require or deem advisable to carry into effect the purposes of this Agreement, the Notes, the Pledge Agreement or any agreement or instrument in connection herewith. Such further actions may include, but not be limited to, the filing of UCC-1 financing statements, in form satisfactory to the Bank and its counsel, with the Secretaries of State of the States of Missouri and Illinois in favor of the Bank with respect to the Pledged Security and any proceeds therefrom. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 26 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. ALLEGIANT BANCORP, INC. LASALLE NATIONAL BANK By: /s/ Sandra L. Friedman By: /s/ Wayne J. Yeselsky ---------------------------- ------------------------- Name: Sandra L. Friedman Name: Wayne J. Yeselsky ---------------------------- ------------------------- Title: SVP and CFO Title: SVP ---------------------------- ------------------------- 27 28 EXHIBIT A TERM NOTE $10,400,000 CHICAGO, ILLINOIS NOVEMBER 12, 1998 FOR VALUE RECEIVED, the undersigned, ALLEGIANT BANCORP, INC., a Missouri corporation with its principal place of business located at 2122 Kratky Road, St. Louis, Missouri 63114 (the "Borrower"), hereby promises to pay to the order of LaSalle National Bank, a national banking association with its main office located in Chicago, Illinois (the "Bank"), the principal sum of Ten Million Four Hundred Thousand United States Dollars ($10,400,000), or whatever lesser amount of principal remains unpaid and owing from time to time under the terms of this Term Note, payable as follows:
ON OR BEFORE AMOUNT ------------ ------ October 1, 1999 $ 500,000 October 1, 2000 $ 500,000 October 1, 2001 $ 1,000,000 November 12, 2001 $ 8,400,000
This Term Note is referred to in, and was executed and delivered pursuant to, that certain Loan Agreement of even date herewith between the Borrower, and the Bank (as amended, restated, supplemented or modified from time to time, the "Agreement"), to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby is to be repaid and for a statement of remedies upon the occurrence of a "Default" as defined therein. The Agreement is incorporated herein by reference in its entirety. All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Agreement shall be used in this Term Note as defined in the Agreement. The unpaid principal balance plus all accrued but unpaid interest hereunder shall be due and payable on November 12, 2001, or such earlier date on which such amount shall become due and payable on account of acceleration by the Bank. The Borrower promises to pay to the Bank interest on the outstanding unpaid principal amount hereof from the date of disbursement until payment in full at the rates and payable at the times provided in the Agreement. Interest shall be calculated on the basis of a 360-day year, counting the actual number of days elapsed. Upon the occurrence of any Default, the interest rate as provided in Section 1.3(e) of the Agreement shall apply. Interest due hereunder may, at the Bank's option and subject to the terms of the Agreement, be charged to any account maintained by the Borrower with the Bank. 29 It is the intention of the parties hereto to conform strictly to applicable usury laws as in effect from time to time during the term of the Loan. Accordingly, if any transaction contemplated hereby would be usurious under applicable law (including the laws of the United States of America, or of any other jurisdiction whose laws may be mandatorily applicable), then, in that event, notwithstanding anything to the contrary in the Agreement or this Term Note, it is agreed that the aggregate of all consideration that constitutes interest under applicable law that is contracted for, charged or received under the Agreement or this Term Note or otherwise in connection with the Agreement or this Term Note shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited to the Borrower by the Bank (or if such consideration shall have been paid in full, such excess refunded to the Borrower by the Bank). All sums paid, or agreed to be paid, to the Bank for the use, forbearance and detention of the indebtedness of the Borrower by the Bank shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform during the full term thereof. To the extent permitted by applicable law, the Borrower, for itself and its legal representatives, predecessors, successors and assigns, expressly waives presentment, demand, protest, notice of dishonor, notice of nonpayment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, diligence in collection and the benefit of any exemption under the homestead exemption laws, if any, or any other exemption or insolvency laws, and further agrees that the Bank may release or surrender, exchange or substitute any real estate and/or personal property or other collateral security now held or which may hereafter be held as security for the payment of this Term Note, and may extend the time for payment or (with the consent of Borrower) otherwise modify the terms of payment for any part or the whole of the indebtedness evidenced hereby. The principal amount of this Term Note may be prepaid pursuant to certain optional prepayment provisions of the Agreement. Upon or at any time after the occurrence or existence of a Default, the Bank shall be entitled, at its option, to accelerate the then outstanding indebtedness hereunder and take such other action as provided for in the Agreement. THIS TERM NOTE HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT, CHICAGO, ILLINOIS. THE LOAN REFERENCED HEREIN IS TO BE FUNDED AND REPAID AT, AND THIS TERM NOTE IS OTHERWISE TO BE PERFORMED AT, CHICAGO, ILLINOIS, AND THIS TERM NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO: (i) ITS JUDICIALLY OR STATUTORILY PRONOUNCED RULES REGARDING CONFLICT OF LAWS OR CHOICE OF LAW; (ii) WHERE ANY OTHER INSTRUMENT IS EXECUTED OR DELIVERED; (iii) WHERE ANY PAYMENT OR OTHER PERFORMANCE REQUIRED BY ANY SUCH INSTRUMENT IS MADE OR REQUIRED TO BE MADE; (iv) WHERE ANY BREACH OF ANY PROVISION OF ANY SUCH INSTRUMENT OCCURS, OR ANY CAUSE OF ACTION OTHERWISE ACCRUES; (v) WHERE ANY ACTION OR OTHER PROCEEDING IS INSTITUTED OR PENDING; (vi) THE NATIONALITY, CITIZENSHIP, DOMICILE, PRINCIPAL PLACE OF BUSINESS, OR JURISDICTION OR ORGANIZATION OR 2 30 DOMESTICATION OF ANY PARTY; (vii) WHETHER THE LAWS OF THE FORUM JURISDICTION OTHERWISE WOULD APPLY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS; OR (viii) ANY COMBINATION OF THE FOREGOING. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER RECOGNIZES THAT THE BANK'S PRINCIPAL OFFICE IS LOCATED IN CHICAGO, ILLINOIS, AND THAT THE BANK MAY BE IRREPARABLY HARMED IF REQUIRED TO INSTITUTE OR DEFEND ANY ACTIONS AGAINST THE BORROWER IN ANY JURISDICTION OTHER THAN THE NORTHERN DISTRICT OF ILLINOIS OR COOK COUNTY, ILLINOIS; THEREFORE, THE BORROWER IRREVOCABLY (a) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THE TERM NOTE AND/OR THE LOAN EVIDENCED HEREBY MAY BE BROUGHT IN THE NORTHERN DISTRICT OF ILLINOIS, IF FEDERAL JURISDICTION IS AVAILABLE, AND, OTHERWISE, IN THE CIRCUIT COURT OF COOK COUNTY, AT THE BANK'S OPTION; (b) CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; (c) WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING IN EITHER SUCH COURT; AND (d) AGREES TO JOIN THE BANK IN ANY PETITION FOR REMOVAL TO EITHER SUCH COURT BROUGHT BY THE BANK. THE BORROWER WAIVES TRIAL BY JURY AND ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the Borrower has caused this Term Note to be duly executed as of the date first above written. ATTEST: ALLEGIANT BANCORP, INC. By: /s/ Sandra L. Friedman By: /s/ Wayne J. Yeselsky ---------------------------- ------------------------- Name: Sandra L. Friedman Name: Wayne J. Yeselsky ---------------------------- ------------------------- Title: SVP and CFO Title: SVP ---------------------------- ------------------------- 3 31 EXHIBIT B TERM NOTE $3,250,000 CHICAGO, ILLINOIS NOVEMBER 12, 1998 FOR VALUE RECEIVED, the undersigned, ALLEGIANT BANCORP, INC., a Missouri corporation with its principal place of business located at 2122 Kratky Road, St. Louis, Missouri 63114 (the "Borrower"), hereby promises to pay to the order of LaSalle National Bank, a national banking association with its main office located in Chicago, Illinois (the "Bank"), the principal sum of Three Million Two Hundred Fifty Thousand United States Dollars ($3,250,000), or whatever lesser amount of principal remains unpaid and owing from time to time under the terms of this Term Note, shall be due and payable on November 10, 2001. This Term Note is referred to in, and was executed and delivered pursuant to, that certain Loan Agreement of even date herewith between the Borrower, and the Bank (as amended, restated, supplemented or modified from time to time, the "Agreement"), to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby is to be repaid and for a statement of remedies upon the occurrence of a "Default" as defined therein. The Agreement is incorporated herein by reference in its entirety. All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Agreement shall be used in this Term Note as defined in the Agreement. The unpaid principal balance plus all accrued but unpaid interest hereunder shall be due and payable on November 10, 2001, or such earlier date on which such amount shall become due and payable on account of acceleration by the Bank. The Borrower promises to pay to the Bank interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rates and payable at the times provided in the Agreement. Interest shall be calculated on the basis of a 360-day year, counting the actual number of days elapsed. Upon the occurrence of any Default, the interest rate as provided in Section 1.3(e) of the Agreement shall apply. Interest due hereunder may, at the Bank's option and subject to the terms of the Agreement, be charged to any account maintained by the Borrower with the Bank. It is the intention of the parties hereto to conform strictly to applicable usury laws as in effect from time to time during the term of the Loan. Accordingly, if any transaction contemplated hereby would be usurious under applicable law (including the laws of the United States of America, or of any other jurisdiction whose laws may be mandatorily applicable), then, in that event, notwithstanding anything to the contrary in the Agreement or this Term Note, it is agreed that the aggregate of all consideration that constitutes interest under applicable law that is contracted for, charged or received under the Agreement or this Term Note or otherwise in connection with the Agreement or this Term Note shall under no circumstances exceed the maximum amount of interest 32 allowed by applicable law, and any excess shall be credited to the Borrower by the Bank (or if such consideration shall have been paid in full, such excess refunded to the Borrower by the Bank). All sums paid, or agreed to be paid, to the Bank for the use, forbearance and detention of the indebtedness of the Borrower by the Bank shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform during the full term thereof. To the extent permitted by applicable law, the Borrower, for itself and its legal representatives, predecessors, successors and assigns, expressly waives presentment, demand, protest, notice of dishonor, notice of nonpayment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, diligence in collection and the benefit of any exemption under the homestead exemption laws, if any, or any other exemption or insolvency laws, and further agrees that the Bank may release or surrender, exchange or substitute any real estate and/or personal property or other collateral security now held or which may hereafter be held as security for the payment of this Term Note, and may extend the time for payment or (with the consent of Borrower) otherwise modify the terms of payment for any part or the whole of the indebtedness evidenced hereby. The principal amount of this Term Note may be prepaid pursuant to certain optional prepayment provisions of the Agreement. Upon or at any time after the occurrence or existence of a Default, the Bank shall be entitled, at its option, to accelerate the then outstanding indebtedness hereunder and take such other action as provided for in the Agreement. THIS TERM NOTE HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT, CHICAGO, ILLINOIS. THE LOAN REFERENCED HEREIN IS TO BE FUNDED AND REPAID AT, AND THIS TERM NOTE IS OTHERWISE TO BE PERFORMED AT, CHICAGO, ILLINOIS, AND THIS TERM NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO: (i) ITS JUDICIALLY OR STATUTORILY PRONOUNCED RULES REGARDING CONFLICT OF LAWS OR CHOICE OF LAW; (ii) WHERE ANY OTHER INSTRUMENT IS EXECUTED OR DELIVERED; (iii) WHERE ANY PAYMENT OR OTHER PERFORMANCE REQUIRED BY ANY SUCH INSTRUMENT IS MADE OR REQUIRED TO BE MADE; (iv) WHERE ANY BREACH OF ANY PROVISION OF ANY SUCH INSTRUMENT OCCURS, OR ANY CAUSE OF ACTION OTHERWISE ACCRUES; (v) WHERE ANY ACTION OR OTHER PROCEEDING IS INSTITUTED OR PENDING; (vi) THE NATIONALITY, CITIZENSHIP, DOMICILE, PRINCIPAL PLACE OF BUSINESS, OR JURISDICTION OR ORGANIZATION OR DOMESTICATION OF ANY PARTY; (vii) WHETHER THE LAWS OF THE FORUM JURISDICTION OTHERWISE WOULD APPLY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS; OR (viii) ANY COMBINATION OF THE FOREGOING. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER RECOGNIZES THAT THE BANK'S PRINCIPAL OFFICE IS LOCATED IN CHICAGO, ILLINOIS, AND THAT THE BANK MAY BE IRREPARABLY HARMED IF REQUIRED TO INSTITUTE OR DEFEND ANY ACTIONS AGAINST THE BORROWER IN ANY JURISDICTION OTHER THAN THE NORTHERN DISTRICT OF ILLINOIS OR 2 33 COOK COUNTY, ILLINOIS; THEREFORE, THE BORROWER IRREVOCABLY (a) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THE TERM NOTE AND/OR THE LOAN EVIDENCED HEREBY MAY BE BROUGHT IN THE NORTHERN DISTRICT OF ILLINOIS, IF FEDERAL JURISDICTION IS AVAILABLE, AND, OTHERWISE, IN THE CIRCUIT COURT OF COOK COUNTY, AT THE BANK'S OPTION; (b) CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; (c) WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING IN EITHER SUCH COURT; AND (d) AGREES TO JOIN THE BANK IN ANY PETITION FOR REMOVAL TO EITHER SUCH COURT BROUGHT BY THE BANK. THE BORROWER WAIVES TRIAL BY JURY AND ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the Borrower has caused this Term Note to be duly executed as of the date first above written. ATTEST: ALLEGIANT BANCORP, INC. By: /s/ Sandra L. Friedman By: /s/ Wayne J. Yeselsky ---------------------------- ------------------------- Name: Sandra L. Friedman Name: Wayne J. Yeselsky ---------------------------- ------------------------- Title: SVP and CFO Title: SVP ---------------------------- ------------------------- 3 34 EXHIBIT C REVOLVING NOTE $2,000,000 CHICAGO, ILLINOIS NOVEMBER 12, 1998 FOR VALUE RECEIVED, the undersigned, ALLEGIANT BANCORP, INC., a Missouri corporation with its principal place of business located at 2122 Kratky Road, St. Louis, Missouri 63114 (the "Borrower"), hereby promises to pay to the order of LaSalle National Bank, a national banking association with its main office located in Chicago, Illinois (the "Bank"), the principal sum of Two Million United States Dollars ($2,000,000), or whatever lesser amount of principal remains unpaid and owing from time to time under the terms of this Revolving Note. This Revolving Note is referred to in, and was executed and delivered pursuant to, that certain Loan Agreement of even date herewith between the Borrower, and the Bank (as amended, restated, supplemented or modified from time to time, the "Agreement"), to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby is to be repaid and for a statement of remedies upon the occurrence of a "Default" as defined therein. The Agreement is incorporated herein by reference in its entirety. All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Agreement shall be used in this Revolving Note as defined in the Agreement. The Borrower agrees that in any action or proceeding instituted to collect or enforce collection of this Revolving Note, the amount endorsed by the Bank on the schedule attached to this Revolving Note shall be prima facie evidence of the unpaid principal balance of this Revolving Note. The unpaid principal balance plus all accrued but unpaid interest hereunder shall be due and payable on November 5, 1999, or such earlier date on which such amount shall become due and payable on account of acceleration by the Bank. The Borrower shall make all payments of principal due under the terms of this Revolving Note at the times, in the manner and in the amounts provided in the Agreement. The Borrower promises to pay to the Bank interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rates and payable at the times provided in the Agreement. Interest shall be calculated on the basis of a 360-day year, counting the actual number of days elapsed. Upon the occurrence of any Default, the interest rate as provided in Section 1.3(e) of the Agreement shall apply. Interest due hereunder may, at the Bank's option and subject to the terms of the Agreement, be charged to any account maintained by the Borrower with the Bank. It is the intention of the parties hereto to conform strictly to applicable usury laws as in effect from time to time during the term of the Loan. Accordingly, if any transaction contemplated hereby would be usurious under applicable law (including the laws of the United States of America, 35 or of any other jurisdiction whose laws may be mandatorily applicable), then, in that event, notwithstanding anything to the contrary in the Agreement or this Revolving Note, it is agreed that the aggregate of all consideration that constitutes interest under applicable law that is contracted for, charged or received under the Agreement or this Revolving Note or otherwise in connection with the Agreement or this Revolving Note shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited to the Borrower by the Bank (or if such consideration shall have been paid in full, such excess refunded to the Borrower by the Bank). All sums paid, or agreed to be paid, to the Bank for the use, forbearance and detention of the indebtedness of the Borrower by the Bank shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform during the full term thereof. To the extent permitted by applicable law, the Borrower, for itself and its legal representatives, predecessors, successors and assigns, expressly waives presentment, demand, protest, notice of dishonor, notice of nonpayment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, diligence in collection and the benefit of any exemption under the homestead exemption laws, if any, or any other exemption or insolvency laws, and further agrees that the Bank may release or surrender, exchange or substitute any real estate and/or personal property or other collateral security now held or which may hereafter be held as security for the payment of this Revolving Note, and may extend the time for payment or (with the consent of Borrower) otherwise modify the terms of payment for any part or the whole of the indebtedness evidenced hereby. This Revolving Note may not be prepaid in whole or in part. Upon or at any time after the occurrence or existence of a Default, the Bank shall be entitled, at its option, to accelerate the then outstanding indebtedness hereunder and take such other action as provided for in the Agreement. THIS REVOLVING NOTE HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT, CHICAGO, ILLINOIS. THE LOAN REFERENCED HEREIN IS TO BE FUNDED AND REPAID AT, AND THIS REVOLVING NOTE IS OTHERWISE TO BE PERFORMED AT, CHICAGO, ILLINOIS, AND THIS REVOLVING NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO: (i) ITS JUDICIALLY OR STATUTORILY PRONOUNCED RULES REGARDING CONFLICT OF LAWS OR CHOICE OF LAW; (ii) WHERE ANY OTHER INSTRUMENT IS EXECUTED OR DELIVERED; (iii) WHERE ANY PAYMENT OR OTHER PERFORMANCE REQUIRED BY ANY SUCH INSTRUMENT IS MADE OR REQUIRED TO BE MADE; (iv) WHERE ANY BREACH OF ANY PROVISION OF ANY SUCH INSTRUMENT OCCURS, OR ANY CAUSE OF ACTION OTHERWISE ACCRUES; (v) WHERE ANY ACTION OR OTHER PROCEEDING IS INSTITUTED OR PENDING; (vi) THE NATIONALITY, CITIZENSHIP, DOMICILE, PRINCIPAL PLACE OF BUSINESS, OR JURISDICTION OR ORGANIZATION OR DOMESTICATION OF ANY PARTY; (vii) WHETHER THE LAWS OF THE FORUM JURISDICTION OTHERWISE WOULD APPLY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS; OR (viii) ANY COMBINATION OF THE FOREGOING. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER RECOGNIZES THAT THE BANK'S PRINCIPAL OFFICE IS LOCATED IN CHICAGO, ILLINOIS, AND THAT THE BANK MAY BE IRREPARABLY HARMED IF REQUIRED TO INSTITUTE OR DEFEND ANY ACTIONS AGAINST THE BORROWER IN 2 36 ANY JURISDICTION OTHER THAN THE NORTHERN DISTRICT OF ILLINOIS OR COOK COUNTY, ILLINOIS; THEREFORE, THE BORROWER IRREVOCABLY (a) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THE REVOLVING NOTE AND/OR THE LOAN EVIDENCED HEREBY MAY BE BROUGHT IN THE NORTHERN DISTRICT OF ILLINOIS, IF FEDERAL JURISDICTION IS AVAILABLE, AND, OTHERWISE, IN THE CIRCUIT COURT OF COOK COUNTY, AT THE BANK'S OPTION; (b) CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; (c) WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING IN EITHER SUCH COURT; AND (d) AGREES TO JOIN THE BANK IN ANY PETITION FOR REMOVAL TO EITHER SUCH COURT BROUGHT BY THE BANK. THE BORROWER WAIVES TRIAL BY JURY AND ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to beduly executed as of the date first above written. ATTEST: ALLEGIANT BANCORP, INC. By: /s/ Sandra L. Friedman By: /s/ Wayne J. Yeselsky ---------------------------- ------------------------- Name: Sandra L. Friedman Name: Wayne J. Yeselsky ---------------------------- ------------------------- Title: SVP and CFO Title: SVP ---------------------------- ------------------------- 3 EX-10.2 4 1 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "Pledge Agreement") dated as of November 12, 1998, is made by ALLEGIANT BANCORP, INC., a Missouri corporation (the "Pledgor"), for the benefit of LASALLE NATIONAL BANK, a national banking association (the "Bank"). RECITALS A. The Pledgor is a bank holding company owning 100% of the capital stock of each of Allegiant Bank, a Missouri state bank ("Allegiant Bank" or, the "Subsidiary"). B. In order to repay certain debt, redeem certain outstanding subordinated debentures and to provide finds for working capital, the Pledgor requested that the Bank lend to the Pledgor the principal sum of up to Fifteen Million Six Hundred Fifty Thousand Dollars ($15,650,000). C. The Bank agreed to lend to the Pledgor the principal sum of up to Thirteen Million Six Hundred Fifty Thousand Dollars ($13,650,000) and provide a separate line of credit of Two Million Dollars ($2,000,000) in accordance with the terms, subject to the conditions and in reliance on the representations, warranties and covenants set forth in the Loan Agreement (as defined below) between the Pledgor and the Bank and contained in all of the other documents and instruments entered into or delivered in connection with or relating to the loans contemplated in the Loan Agreement. D. The Pledgor has agreed to provide security for the loans contemplated in the Loan Agreement in accordance with the terms of this Pledge Agreement. NOW, THEREFORE, in order to induce the Bank to make the loans contemplated in the Loan Agreement and in consideration of the mutual representations, warranties, covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT SECTION 1. GRANT OF SECURITY INTEREST. To secure the Obligations (as -------------------------- defined below), the Pledgor hereby pledges and grants to the Bank a security interest in and prior to the first disbursement contemplated by the Loan Agreement will transfer and deliver to the Bank the following: (a) 57 shares of common stock, $12,875.00 par value per share, of Allegiant Bank, which shares constitute one hundred percent (100%) of the issued and outstanding capital stock of Allegiant Bank and any and all shares of the capital stock of Allegiant Bank that Pledgor subsequently acquires, directly or indirectly; (b) any and all other shares of capital stock hereinafter issued by the Subsidiary, whether now or hereafter in the possession of the Pledgor or the Bank, including all substitutions of, and additions to, such stock; (c) certificates representing the shares of capital stock described in clauses (a) and (b) of this Section (the items described in clauses (a) 2 through (c) of this Sectio are collectively referred to as the "Pledged Stock"); (d) executed and undated irrevocable stock powers for the capital stock described in clauses (a) and (b) of this Section 1, in form and content satisfactory to the Bank duly executed in blank and with all requisite federal and state stock transfer tax stamps, if any; (e) all income and profits thereof, all distributions thereon, all other proceeds thereof and all rights, benefits and privileges pertaining to or arising from the Pledged Stock; and (f) such other collateral that may be provided after the date hereof to secure the Obligations, provided, however, that in the event that the Pledgor cannot deliver any of the above because Mercantile Bank National Association ("Mercantile") has the Pledged Stock in its possession, then the Pledgor shall deliver to the Bank a letter of direction, acknowledged by Mercantile, in the form provided by the Bank, which provides for Mercantile to deliver the Pledged Stock to the Bank as soon as possible after such first disbursement. All property at any time pledged with the Bank hereunder or in which the Bank is granted a security interest hereunder (whether described herein or not), and subject to the provisions of Section 3 below, all income therefrom and proceeds thereof, may be referred to collectively as the "Pledged Security." SECTION 2. OBLIGATIONS. The obligations secured by this Pledge ----------- Agreement are the following (referred to collectively hereafter as the "Obligations"): (a) all obligations and agreements of the Pledgor contained in (including, without limitation, the payment of all indebtedness of the Pledgor in respect of) that certain Loan Agreement dated of even date herewith by and between the Pledgor and the Bank and any and all amendments, modifications or renewals thereof (the "Loan Agreement"); (b) all principal, interest and other amounts due to the Bank under those certain Term Notes, one in the principal amount of $10,400,000 and the other in the principal amount of $3,250,000, from the Pledgor to the Bank and any and all modifications, extensions, renewals or refinancings thereof (individually, the "Term Note," and collectively, the "Term Notes"); (c) all principal, interest and other amounts due to the Bank under that certain Revolving Note of even date herewith in the principal amount of $2,000,000 from the Pledgor to the Bank and any and all modifications, extensions, renewals or refinancings thereof (the "Revolving Note," and collectively, with the Term Notes, the "Notes"). (d) all sums advanced by, or on behalf of, the Bank in connection with, or relating to, the Loan Agreement, the Notes or the Pledged Security including, but not limited to, any and all sums advanced to preserve the Pledged Security, or to perfect the Bank's security interest in the Pledged Security; (e) in the event of any proceeding to enforce the satisfaction of the Obligations, or any of them, or to preserve and protect its rights under the Loan Agreement, the Notes, this Pledge Agreement or any other agreement, document or instrument relating to the transactions contemplated in the Loan Agreement, the reasonable expenses of retaking, holding, preparing for 2 3 sale, selling or otherwise disposing of or realizing on the Pledged Security, or of any exercise by the Bank of its rights, together with reasonable attorneys' fees, expenses and court costs; and (f) any indebtedness, obligation or liability of the Pledgor or the Subsidiary to the Bank, whether direct or indirect, joint or several, absolute or contingent, now or hereafter existing, however created or arising and however evidenced. SECTION 3. ADDITIONAL TERMS. (a) The Pledgor agrees that the Bank ---------------- shall have full and irrevocable right, power and authority, to collect, withdraw or receipt for all amounts due or to become due and payable upon, in connection with, or relating to, the Pledged Security, to execute any withdrawal receipts respecting the Pledged Security, and to endorse the name of the Pledgor on any or all documents, instruments or commercial paper given in payment thereof, and at the Bank's discretion to take any other action, including, without limitation, the transfer of any Pledged Security into the Bank's own name or the name of any nominee for the Bank, which the Bank may deem necessary or appropriate to preserve or protect the Bank's interest in any of the Pledged Security. (b) Unless a Default (as hereinafter defined) shall have occurred, the Pledgor shall be entitled to vote any and all shares of the Pledged Stock and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast, no consent, waiver or ratification shall be given and no action shall be taken by the Pledgor which would violate or be inconsistent with any of the terms of the Loan Agreement, the Notes or this Pledge Agreement, or which would have the effect of impairing the position or interests of the Pledgor or any holder of the Notes. All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease upon the occurrence of a Default. (c) Unless a Default shall have occurred, all dividends and other distributions payable in respect of the Pledged Security shall be paid to the Pledgor. Upon the occurrence of a Default, all such dividends and other distributions and payments shall be paid to the Bank. After a Default shall have occurred, all such amounts paid in respect of the Pledged Security shall, until paid or delivered to the Bank, be held in trust for the benefit of the Bank as additional Pledged Security to secure the Obligations. SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Pledgor ----------------------------------------- further represents, warrants and agrees that: (a) The Pledgor owns all of the issued and outstanding capital stock of the Subsidiary subject only to the security interest granted by the Pledgor to Mercantile pursuant to that certain Amended and Restated Term Loan Agreement, dated May 31, 1995, and as amended by that certain Modification and Extension Agreement, dated November 26, 1996. (b) Without the prior written consent of the Bank, the Pledgor will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged 3 4 Security, nor will it create, incur or permit to exist any lien, claim, security interest or other encumbrance with respect to any of the Pledged Security, or any interest therein, or any proceeds thereof, except for the security interests provided for by this Pledge Agreement and permitted by Section 4(a) hereof. Without the prior written consent of the Bank, the Pledgor agrees that it will not, and it will cause the Subsidiary not to: (i) issue or reissue any capital stock or other securities (or warrants therefor or other rights with respect thereto) in addition to or issue other securities of any nature in exchange or substitution for any of the Pledged Security; (ii) redeem any of the Pledged Security; or (iii) declare any stock dividend or split or otherwise change the capital structure of the Subsidiary. (c) The Pledged Stock is genuine and in all respects represents what it purports to be and all the shares of the Pledged Stock have been duly and validly issued, and are fully paid and non-assessable. (d) The pledge, assignment and delivery of the Pledged Security pursuant to this Pledge Agreement creates a valid perfected security interest in the Pledged Security, and the proceeds thereof, subject to no prior lien, claim, security interest or other encumbrance or to any agreement purporting to grant to any third party a security interest in the assets of the Pledgor which would include any of the Pledged Security, other than the security interest permitted by Section 4(a) hereof. The Pledgor will at all times defend the Bank's right, title and security interest in and to the Pledged Security and the proceeds thereof against any and all claims and demands of any person adverse to the claims of the Bank. (e) The Pledgor will take, and will cause the Subsidiary to take, such action and to execute such documents as the Bank may from time to time request relating to the Pledged Security or the proceeds thereof, including, but not limited to, the filing of UCC-1 financing statements in form satisfactory to the Bank and its counsel, with the Secretary of State of the State of Missouri in favor of the Bank with respect to the Pledged Securities and the proceeds thereof. (f) The Pledgor has full right, power and authority to enter into, to execute and to deliver this Pledge Agreement and this Pledge Agreement is binding upon, and enforceable against the Pledgor in accordance with its terms. (g) The Pledgor shall pay any fees, assessments, charges or taxes arising with respect to the Pledged Security. In case of failure by the Pledgor to pay any such fees, assessments, charges or taxes, the Bank shall have the right, but shall not be obligated, to pay such fees, assessments, charges or taxes, as the case may be, and, in that event, the cost thereof shall be payable by the Pledgor to the Bank immediately upon demand together with interest at the rate equal to the Prime Rate (or, after the occurrence of a Default, the Default Rate) (Prime Rate and Default Rate shall have the meanings provided in the Loan Agreement) from the date of disbursement by the Bank to the date of payment by the Pledgor. 4 5 (h) None of the Pledged Stock constitutes margin stock, as defined in Regulation U of the Board of Governors of the Federal Reserve System. SECTION 5. EVENTS OF DEFAULT. The Pledgor shall be in default under ----------------- this Pledge Agreement upon the occurrence of any one or more of the following events or conditions (each a "Default"): (a) any "Default" under the terms of and as defined in the Loan Agreement; (b) nonpayment of any of the Obligations when due, whether by acceleration or otherwise and such nonpayment continues for ten (10) days after the date due; (c) if there continues to exist thirty (30) days after an executive officer of the Pledgor knows or should have known thereof, any breach of any obligation or covenant (other than with respect to the nonpayment of any Obligation) made by the Pledgor in this Pledge Agreement; (d) if any representation or warranty made by the Pledgor in this Pledge Agreement shall be false when made; (e) any breach of any warranty, representation, obligation or covenant made by the Pledgor in any instrument, document or agreement between the Pledgor and the Bank (other than the Loan Documents), which breach remains uncured beyond the applicable cure period, if any, specifically provided therefor; (f) any misrepresentation made by the Pledgor or in any document (other than the Loan Documents) furnished by the Pledgor, or on the Pledgor's behalf, to the Bank in connection with this Pledge Agreement or the Pledged Security, which misrepresentation remains uncured beyond the applicable time period, if any, specifically provided therefor; or (g) the claim or creation of any lien, claim, security interest or other encumbrance upon any of the Pledged Security, other than the lien permitted in Section 4(a) hereof, or the making of any levy, judicial seizure or attachment thereof or thereon. SECTION 6. RIGHTS OF PARTIES UPON DEFAULT. (a) In the event of the ------------------------------ occurrence of a Default, in addition to all the rights, powers and remedies the Bank shall be entitled to exercise, whether vested in the Bank by the terms of this Pledge Agreement, the Loan Agreement or the Notes, or by law, equity or statute (including, but not limited to, Article 9 of the Missouri Uniform Commercial Code) or otherwise, for the protection and enforcement of its rights in respect of the Pledged Security, the Bank may be entitled to, without limitation (but is under no obligation to the Pledgor so to do): (i) transfer all or any part of the Pledged Security into the Bank's name or the name of its nominee or nominees; 5 6 (ii) after first obtaining all necessary regulatory approvals, vote all or any part of the Pledged Security (whether or not transferred into the name of the Bank or any nominee) and give all consents, waivers and ratifications in respect of the Pledged Security and otherwise act with respect thereto as though it were the outright owner thereof; (iii) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Pledged Security, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk and for such price or prices and on such terms as the Bank in its absolute discretion may determine, provided that unless, in the sole discretion of the Bank, the Pledged Security threatens to decline in value or is or becomes a type sold on a recognized market, the Bank will give the Pledgor reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any requirements of reasonable notice shall be met if such notice is mailed to the Pledgor as provided in Section 14 below, at least ten (10) days before the time of the sale or disposition. Any sale of any of the Pledged Security conducted in conformity with customary practices of banks, insurance companies or other financial institutions disposing of property similar to the Pledged Security shall be deemed to be commercially reasonable. Any remaining Pledged Security shall remain subject to the terms of this Pledge Agreement; and (iv) collect any and all money due or to become due and enforce in the Pledgor's name all rights with respect to the Pledged Security. (b) Pledgor agrees and agrees to cause the Subsidiary, to give the Bank, any prospective purchaser (pursuant to Section 6(a)(iii) above) of the Pledged Security and their respective representatives, full access to further information (including, but not limited to, records, files, correspondence, tax work papers and audit work papers) relating to or concerning the Pledgor or the Subsidiary. SECTION 7. REMEDIES CUMULATIVE. Each right, power and remedy of the ------------------- Bank provided in this Pledge Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Pledge Agreement or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or partial exercise by the Bank of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by the Bank of all such other rights, powers or remedies, and no failure or delay on the part of the Bank to exercise any such right, power or remedy shall operate as a waiver thereof. 6 7 SECTION 8. WAIVER OF DEFENSES. No renewal or extension of the time ------------------ of payment of the Obligations; no release or surrender of, or failure to perfect or enforce, any security interest for the Obligations; no release of any person primarily or secondarily liable on the Obligations (including any maker, endorser, or guarantor); no delay in enforcement of payment of the Obligations; and no delay or omission in exercising any right or power with respect of the Obligations or any security agreement securing the Obligations shall affect the rights of the Bank in the Pledged Security. SECTION 9. WAIVER. Waiver by the Bank of any Default hereunder, or ------ of any breach of the provisions of this Pledge Agreement by the Pledgor, or any right of the Bank hereunder, shall not constitute a waiver of any other Default or breach or right, nor the same Default or breach or right on a future occasion. SECTION 10. SEVERABILITY. Whenever possible, each provision of this ------------ Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but, if any provision of this Pledge Agreement shall be held to be prohibited or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement. SECTION 11. PLEDGOR'S OBLIGATIONS ABSOLUTE. The obligations of the ------------------------------ Pledgor under this Pledge Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way impaired by any circumstance whatsoever, including without limitation: (a) any amendment or modification of the Notes, the Loan Agreement, or any document or instrument provided for herein or therein or related thereto, or any assignment, transfer or other disposition of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such document or instrument or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of any such document or instrument or this Pledge Agreement; (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding with respect to the Pledgor or any of its properties or creditors; or (d) any limitation on the Pledgor's liabilities or obligations under any such instrument or any invalidity or unenforceability, in whole or in part of any such document or instrument or any term thereof; whether or not the Pledgor shall have notice or knowledge of the foregoing. SECTION 12. TERMINATION. This Pledge Agreement shall terminate upon ----------- the receipt by the Bank of evidence satisfactory to the Bank in the Bank's sole and absolute discretion of the payment in full of the Obligations. At the time of such termination, the Bank, at the request and expense of the Pledgor, will execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Pledge Agreement, and will duly assign, transfer and deliver to the Pledgor such of the Pledged Security as has not yet theretofore been sold or otherwise applied or released pursuant to this Pledge Agreement. SECTION 13. FURTHER ASSURANCES. The Pledgor, at its expense, will ------------------ duly execute, acknowledge and deliver all such instruments and take all such action as the Bank from time to time 7 8 may request in order further to effectuate the purposes of this Pledge Agreement and to carry out the terms hereof. The Pledgor, at its expense, will at all times cause this Pledge Agreement (or a proper notice or statement, in respect hereof) to be duly recorded, published and filed and rerecorded, republished and refiled in such manner and in such places, if any, and will pay or cause to be paid all such recording, filing and other taxes, fees and charges, if any, and will comply with all such statutes and regulations, if any, as may be required by law in order to establish, perfect, preserve and protect the rights and security interests of the Bank hereunder. SECTION 14. NOTICES. All communications provided for or related ------- hereto shall be given in accordance with Section 6.3 of the Loan Agreement. SECTION 15. AMENDMENTS. Any term of this Pledge Agreement may be ---------- amended only with the written consent of the Pledgor and the Bank. Any amendment effected in accordance with this Section shall be binding upon each holder of the Note at the time outstanding, each future holder of the Note and the Pledgor. SECTION 16. ASSIGNS. This Pledge Agreement and all rights and ------- liabilities hereunder and in and to any and all Pledged Security shall inure to the benefit of the Bank and its successors and assigns, and shall be binding on the Pledgor and the Pledgor's successors and assigns; provided, however, the Pledgor may not assign its rights or liabilities hereunder or to any of the Pledged Security without the written consent of the Bank. SECTION 17. MISCELLANEOUS. This Pledge Agreement embodies the entire ------------- agreement and understanding between the Bank and the Pledgor and supersedes all prior agreements and understandings relating to the subject matter hereof. The headings in this Pledge Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 18. GOVERNING LAW. THIS PLEDGE AGREEMENT HAS BEEN NEGOTIATED, ------------- EXECUTED AND DELIVERED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT, CHICAGO, ILLINOIS. THE LOANS REFERENCED HEREIN ARE TO BE FUNDED AND REPAID AT, AND THIS PLEDGE AGREEMENT IS OTHERWISE TO BE PERFORMED AT, CHICAGO, ILLINOIS, AND THIS PLEDGE AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO: (a) ITS JUDICIALLY OR STATUTORILY PRONOUNCED RULES REGARDING CONFLICT OF LAWS OR CHOICE OF LAW; (b) WHERE ANY OTHER AGREEMENT IS EXECUTED OR DELIVERED; (c) WHERE ANY PAYMENT OR OTHER PERFORMANCE REQUIRED BY ANY SUCH AGREEMENT IS MADE OR REQUIRED TO BE MADE; (d) WHERE ANY BREACH OF ANY PROVISION OF ANY SUCH AGREEMENT OCCURS, OR ANY CAUSE OF ACTION OTHERWISE ACCRUES; (e) WHERE ANY ACTION OR OTHER PROCEEDING IS INSTITUTED OR PENDING; (f) THE NATIONALITY, CITIZENSHIP, DOMICILE, PRINCIPAL PLACE OF BUSINESS, OR JURISDICTION OR ORGANIZATION OR DOMESTICATION OF ANY PARTY; (g) WHETHER THE LAWS OF THE FORUM JURISDICTION OTHERWISE WOULD APPLY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS; OR (h) ANY COMBINATION OF THE FOREGOING. AS PART OF THE 8 9 CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE PLEDGOR RECOGNIZES THAT THE BANK'S PRINCIPAL OFFICE IS LOCATED IN CHICAGO, ILLINOIS AND THAT THE BANK MAY BE IRREPARABLY HARMED IF REQUIRED TO INSTITUTE OR DEFEND ANY ACTIONS AGAINST THE PLEDGOR IN ANY JURISDICTION OTHER THAN THE NORTHERN DISTRICT OF ILLINOIS OR COOK COUNTY, ILLINOIS; THEREFORE, THE PLEDGOR IRREVOCABLY: (i) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THE PLEDGE AGREEMENT AND/OR THE LOANS REFERENCED HEREIN MAY BE BROUGHT IN THE NORTHERN DISTRICT OF ILLINOIS, IF FEDERAL JURISDICTION IS AVAILABLE, AND, OTHERWISE, IN THE CIRCUIT COURT OF COOK COUNTY, AT THE BANK'S OPTION; (ii) CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; (iii) WAIVES ANY OBJECTION WHICH THE PLEDGOR MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING IN EITHER SUCH COURT; AND (iv) AGREES TO JOIN THE BANK IN ANY PETITION FOR REMOVAL TO EITHER SUCH COURT BROUGHT BY THE BANK. THE PLEDGOR WAIVES TRIAL BY JURY AND ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE PLEDGOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 9 10 The Pledgor acknowledges that this Pledge Agreement is and shall be effective upon execution by the Pledgor and delivery to and acceptance hereof by the Bank, and it shall not be necessary for the Bank to execute any acceptance hereof or otherwise to signify or express its acceptance hereof to the Pledgor. ALLEGIANT BANCORP, INC. LASALLE NATIONAL BANK By: /s/ Sandra L. Friedman By: /s/ Wayne J. Yeselsky ---------------------------- ------------------------- Name: Sandra L. Friedman Name: Wayne J. Yeselsky ---------------------------- ------------------------- Title: SVP and CFO Title: SVP ---------------------------- ------------------------- 10 EX-13 5 PORTIONS OF ANNUAL REPORT 1 Financial Highlights
Year ended December 31, (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- Balance sheet data (at year-end): Total assets $ 596,274 $ 608,237 $ 377,564 $ 280,386 $ 171,927 Investment securities 54,780 76,869 60,559 73,211 40,888 Total loans 495,669 484,862 291,926 181,544 121,393 Total deposits 450,766 484,641 308,670 231,309 134,884 Long-term debt 40,275 23,275 14,663 19,719 9,804 Shareholders' equity 48,104 42,071 16,386 13,938 8,453 Average assets 619,016 463,029 308,984 228,130 133,466 Average shareholders' equity 44,721 25,292 14,851 11,737 8,080 Income Statement Data: Interest income $ 49,218 $ 37,765 $ 25,056 $ 19,252 $ 9,994 Interest expense 27,267 21,466 14,999 11,206 4,584 - - -------------------------------------------------------------------------------------------------------------------------------- Net interest income 21,951 16,299 10,057 8,046 5,410 Provisions for possible loan losses 2,420 2,397 1,448 977 849 - - -------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision 19,531 13,902 8,609 7,069 4,561 - - -------------------------------------------------------------------------------------------------------------------------------- Other operating income 9,324 3,298 1,393 654 513 Other operating expenses 21,295 13,069 7,019 5,625 3,764 - - -------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 7,560 4,131 2,983 2,098 1,310 Provision for income taxes 3,026 1,716 1,175 823 509 - - -------------------------------------------------------------------------------------------------------------------------------- Net income $ 4,534 $ 2,415 $ 1,808 $ 1,275 $ 801 ================================================================================================================================ Shares outstanding at period end 6,536,164 6,111,743 3,405,696 3,281,905 2,349,065 Average shares outstanding 6,250,910 4,885,303 3,708,821 3,086,215 2,262,322 Per Share Data: Book value per common share $ 7.36 $ 6.88 $ 4.80 $ 4.25 $ 3.60 Basic earnings per share 0.72 0.54 0.55 0.42 0.35 Diluted earning per share 0.68 0.49 0.48 0.42 0.35 Cash dividends declared per share 0.12 0.08 0.06 0.04 0.02 Market value at year-end $ 9.48 $ 11.25 $ 8.17 $ 7.28 $ 3.58 Dividend payout ratio 20.22% 13.77% 10.34% 8.86% 7.24% Selected Financial Ratios: Return on average total assets 0.73% 0.52% 0.59% 0.56% 0.60% Return on average shareholders' equity 10.14% 9.55% 12.17% 10.86% 9.91% Net interest margin 3.82% 3.71% 3.39% 3.71% 4.27% Efficiency ratio 68.07% 66.69% 61.30% 64.66% 63.55% Total operating expenses to total average assets 3.44% 2.82% 2.27% 2.47% 2.82% Average assets per employee $ 2,879 $ 2,215 $ 2,835 $ 2,480 $ 2,301 Equity to assets ratio 7.22% 5.46% 4.81% 5.14% 6.05% Asset Quality Ratios: Loan loss reserve to total loans 1.30% 1.07% 1.06% 1.17% 1.20% Non-performing loans to total loans 0.36% 0.28% 0.24% 0.17% 0.14% Loan loss reserve to total non-performing loans 362.32% 377.12% 447.98% 691.56% 841.04% Net charge offs to average loans 0.24% 0.19% 0.21% 0.19% 0.19% Company Capital Ratios: Risk-based capital ratio 8.68% 8.14% 8.55% 11.51% 8.58% Tier 1 capital ratio 7.42% 6.39% 6.10% 7.98% 7.24% Leverage ratio 5.83% 6.15% 4.38% 5.12% 4.98% Bank Capital Ratios: Risk-based capital ratio 10.93% 9.35% 10.06% 14.40% 13.10% Tier 1 capital ratio 9.68% 8.27% 8.87% 13.13% 11.77% Leverage ratio 7.61% 7.76% 6.37% 8.63% 8.02% All share and per share amounts have been restated to reflect: (i) a six-for-five stock split effected in January 1994; (ii) a five-for- three stock split effected in January 1995; (iii) a 10% stock dividend paid in January 1996; (iv) a 10% stock dividend paid in January 1997; (v) a five-for-four stock split effected in January 1998; and (vi) a six-for-five stock split effected in January 1999.
page Allegiant Bancorp, Inc. - - -------------------------------------------------------------------- 10 1998 Annual Report Financial Highlights 2 Management's Discussion and Analysis This report contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company and its subsidiaries. These forward looking statements involve certain risks and uncertainties. For example, by accepting fixed rate deposits, at different times and for different terms, and lending funds at fixed rates for fixed periods, a bank accepts the risk that the cost of funds may rise and the use of funds may be at a fixed rate. Similarly, the cost of funds may fall, but a bank may have committed by virtue of the term of a deposit to pay what becomes an above-market rate. Investments may decline in value in a rising interest rate environment. Loans, and the reserve for loan losses, have the risk that the borrower will not repay all funds in a timely manner as well as the risk of total loss. Collateral may or may not have the value attributed to it. The loan loss reserve, while believed adequate, may prove inadequate if one or more large borrowers, or numerous mid-range borrowers, or a combination of both, experience financial difficulty for individual, national or international reasons. Because the business of banking is highly regulated, decisions of governmental authorities, such as the rate of deposit insurance, can have a major effect on operating results. Unanticipated events associated with Year 2000 compliance, relating to work on computer systems and software, including work performed by suppliers or vendors, could affect the Company's future financial condition and operating results. All these uncertainties, as well as others, are present in a banking operation and shareholders are cautioned that management's view of the future may prove to be other than anticipated. Results of Operations EARNINGS SUMMARY Allegiant Bancorp, Inc. (the "Company") reported record earnings for 1998. Consolidated net income was $4.534 million, an increase of 87.74% over the 1997 level of $2.415 million. The 1998 results represent the seventh consecutive year of record earnings by the Company. Net income has increased at a compound rate of 78.24% over the last five years. Basic earnings per share were $0.72 compared to $0.54 in 1997, an increase of 33.33%. A similar increase was achieved in diluted earnings per share with 1998 results of $0.68 increasing 38.78% compared to the $0.49 recorded for 1997. Diluted earnings per share have grown at a compound rate of 33.56% during the last five years. Return on average assets for 1998 was 0.73%, an improvement from 0.52% recorded for 1997 and 0.59% for 1996. As will be further discussed in greater detail, the improvement in return on assets was the result of lower asset growth, improved net interest income, improved mix of earning assets and a considerable increase in shareholders' equity. Return on average shareholder's equity was 10.14% in 1998, compared to 9.55% in 1997 and 12.17% in 1996. The improvement in 1998 was achieved despite a 76.82% increase in average equity between 1998 and 1997. Net interest income in 1998 increased to $21.951 million from $16.299 million in 1997, a 34.68% change. The net interest margin improved by 11 basis points to 3.82% compared to 3.71% for the year of 1997. This improvement in net interest margin together with strong earning asset growth resulted in the increase in net interest income. The provision for loan losses was $2.420 million, substantially the same as the $2.397 million in 1997 and an increase from the $1.448 million expensed in 1996. The level of the allowance for loan losses was increased by this provision, with the allowance representing 1.30% of loans outstanding at December 31, 1998. This reserve level is higher than historical levels due to the change in the mix of the loan portfolio. This change is discussed in greater depth under the "Balance Sheet Analysis" caption. Non-interest income increased by 182.72% in 1998 following an increase of 136.76% in 1997 and a 113.00% increase in 1996. Excluding securities gains and other non-recurring gains, other income increased $2.505 million in 1998 to $5.774 million, an increase of 76.63% compared to $3.269 million in 1997. The major fee income producing areas all showed increases during 1998. See the discussion of "Other Income" for further information. Non-interest expense increased $8.226 million to $21.295 million, an increase of 62.94%. This compares to 1997 non-interest expense of $13.069 million and the 1996 level of $7.019 million. All major categories of expense showed significant increases and are the result of technological upgrades, acquisitions and branch expansions initiated in late 1997 and 1998. See the discussion of "Other Expense" for comprehensive detail of these increases. NET INTEREST INCOME This discussion should be read with reference to the table titled "Distribution of Average Assets, Liabilities and Shareholders' Equity and Interest Rates." Net interest income totaled $21.951 million, an increase of $5.652 million in 1998 compared to increases of $6.242 million in 1997 and $2.011 million in 1996. The net interest spread increased by 13 basis points and the net interest margin increased by 11 basis points from the prior year. All of these increases are the result of a relatively stable rate environment, the shifting of earning assets into higher yielding loans and overall growth in average earning assets and interest bearing liabilities. Partially offsetting these positive factors were the small declines in the prime lending rate which effected the Company's floating rate loans, the decline in the ratio of earning assets to total assets and a decline in non-interest bearing demand deposits to total deposits. Net interest margin and net interest spread were fairly stable throughout the year, with only minor quarterly fluctuations. The increase in net interest spread is due to the yields on earning assets declining only 2 basis points year to year compared to a decline of 15 basis points on interest bearing liabilities. In 1997, the spread increased 28 basis points as a result of similar changes on both sides of the balance sheet, earning assets increasing 14 basis points and interest bearing liabilities decreasing 14 basis points. 1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 11 3 cont'd Management's Discussion and Analysis - - -------------------------------------------- Distribution of Average Assets, Liabilities and Shareholders' Equity and Interest Rates
Year ended December 31, 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ (IN THOUSANDS OF DOLLARS) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE - - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Interest earning assets: Loans $493,619 $44,411 9.00% $365,615 $33,473 9.16% $232,314 $21,428 9.22% Taxable investment securities 70,079 4,223 6.03 64,384 3,910 6.07 59,882 3,428 5.72 Non-taxable investment securities 1,494 73 4.89 1,130 56 4.96 1,115 49 4.39 Federal funds sold 9,036 511 5.66 8,492 326 3.84 3,079 151 4.90 - - ------------------------------------------------------------------------------------------------------------------------------------ Total interest earning assets 574,228 49,218 8.57 439,621 37,765 8.59 296,390 25,056 8.45 Non-interest earning assets: Cash and due from banks 12,230 9,341 6,382 Premises and equipment 10,994 6,869 4,698 Other assets 27,238 11,065 3,915 Reserve for possible loan losses (5,674) (3,867) (2,401) - - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $619,016 $463,029 $308,984 ==================================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Money market/NOW accounts $126,829 $ 5,221 4.12% $ 95,431 $ 4,092 4.29% $ 70,948 $ 3,218 4.54% Savings deposits 16,524 425 2.57 9,665 279 2.89 6,985 227 3.25 Certificates of deposit 224,661 12,878 5.73 162,870 9,436 5.79 104,283 6,149 5.90 Certificates of deposit over $100,000 39,581 2,198 5.55 48,358 2,686 5.55 36,387 2,001 5.50 IRA certificates 20,584 1,227 5.96 12,780 760 5.95 7,673 465 6.06 - - ------------------------------------------------------------------------------------------------------------------------------------ Total interest bearing deposits 428,179 21,949 5.13 329,104 17,253 5.24 226,276 12,060 5.33 Federal funds purchased, repurchase agreements, and other short-term borrowings 52,855 2,624 4.96 52,702 2,895 5.49 27,481 1,542 5.61 Long-term borrowings 39,403 2,694 6.84 16,658 1,318 7.91 17,482 1,397 7.99 - - ------------------------------------------------------------------------------------------------------------------------------------ Total interest bearing liabilities 520,437 27,267 5.24 398,464 21,466 5.39 271,239 14,999 5.53 - - ------------------------------------------------------------------------------------------------------------------------------------ Non-interest bearing liabilities and equity: Demand deposits 47,560 36,966 21,312 Other liabilities 6,298 2,307 1,582 Shareholders' equity 44,721 25,292 14,851 - - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $619,016 $463,029 $308,984 ==================================================================================================================================== Net interest income $21,951 $16,299 $10,057 ==================================================================================================================================== Net interest spread 3.33% 3.20% 2.92% ==================================================================================================================================== Net interest margin 3.82% 3.71% 3.39% ==================================================================================================================================== Including non-accrual loans
page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------- 12 1998 Annual Report Management's Discussion and Analysis 4 In 1998, the yield on loans declined by 16 basis points. However, this decline was offset by an increase in the ratio of loans to total earning assets improving to 85.96% in 1998 compared to 83.17% in 1997. Generally flat or lower rates were paid on all categories of interest bearing liabilities. Total cost of deposits declined 11 basis points due to a reduction of rates paid on money market/NOW accounts, savings deposits and retail certificates of deposit. Further reduction in the costs of short-term and long-term borrowings also helped lower the overall costs of funds, despite the substantial increase in long-term debt. The detail of the effects of changes in rates and average volumes can been seen in the table titled "Rate/Volume Analysis" in this section. Average earning assets increased $134.607 million or 30.62% during 1998 compared to an increase of $143.231 million or 48.33% in 1997. Average loans increased 35.01% or $128.004 million compared to growth of 57.35% or $133.301 million in 1997. The growth in average loans includes the bulk sale of mortgage loans that occurred during the second and third quarter of 1998. These sales, of $77.043 million, decreased average loans outstanding for the year by approximately $34.317 million. The Company's securities portfolio (held-to-maturity and available-for-sale) increased 9.25% during 1998 compared to an increase of 7.41% in 1997. Average investment securities represented 12.46% of earning assets during 1998 compared to 14.91% during 1997. This decline in the relative amount of investment securities is directly correlated to the increase in the percentage of loans to earning assets mentioned above. In essence, strong loan growth necessitated the reduction in the growth of the securities portfolio. Earning assets as a percentage of total assets declined again in 1998 to 92.76% from 94.94% in 1997, which also represented a decline from 95.92% in 1996. The increase in non-earning assets is the result of opening additional branch locations as well as acquisitions, which increased the number of branches and intangible assets. This growth was somewhat mitigated by the sale of branches located outside the St. Louis metropolitan area which occurred in December of 1998. The impact of this change to average balances was minimal due to the timing of consummation. Average interest-bearing liabilities increased 30.61% or $121.973 million for 1998 compared to an increase of $127.225 million or 46.91% in 1997. Average deposits increased 29.96% to $475.739 million compared to $366.070 million in 1997. As was the case in 1997, only moderate changes occurred in the mix of deposits. During 1998, certificates of deposit over $100,000 declined as a percent of total deposits while retail certificates of deposit increased. Non-interest bearing deposits as a percentage of total deposits declined only 10 basis points to 10.00% from 10.10%. The substantial growth in average deposits and the relatively stable mix allowed for the average cost of interest-bearing deposits to decline by 11 basis points. Average short-term borrowings were flat during the year averaging $52.855 million during 1998 compared to $52.702 million during 1997. This followed an increase in 1997 of $25.221 million or 91.78% compared to 1996. The level of short-term borrowings during 1998 was consistent throughout the year with only minor fluctuations between quarters. See the discussion under "Liquidity Management" for further details of short-term borrowings during 1998 and 1997. Average long-term debt for 1998 increased 136.54% or $22.745 million. The majority of this increase is due to long-term borrowings from the Federal Home Loan Bank of $26.625 million at period ending 1998, a $17.000 million change from period ending 1997. The Company continues to utilize the Federal Home Loan Bank as a cost-effective source of funding loans. Additionally, during November of 1998, the Company refinanced a portion of its long-term debt and its entire issue of subordinated debentures with a $13.650 million, 7.00% fixed rate, three-year note. This reduction in the cost of borrowed funds will produce annual savings of $148,000 at current market rates. 1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 13 5 cont'd Management's Discussion and Analysis - - -------------------------------------------- The following table sets forth for the periods indicated the changes in interest income and interest expense which were attributable to changes in average volume and changes in average rates: Rate/Volume Analysis
YEAR ENDED DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE COMPARED TO THE YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996 - - ----------------------------------------------------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS) VOLUME RATE NET CHANGE VOLUME RATE NET CHANGE - - ----------------------------------------------------------------------------------------------------------------- INTEREST EARNED ON: Loans $11,533 $ (595) $10,938 $12,186 $(141) $12,045 Taxable investment securities 340 (27) 313 267 216 482 Non-taxable securities 17 -- 17 1 6 7 Federal funds sold and other investments 24 161 185 213 (39) 175 - - ----------------------------------------------------------------------------------------------------------------- Total interest income 11,914 (461) 11,453 12,667 42 12,709 ================================================================================================================= INTEREST PAID ON: Money market/NOW accounts 1,298 (169) 1,129 1,047 (173) 874 Savings deposits 180 (34) 146 79 (27) 52 Certificates of deposit 3,539 (97) 3,442 3,404 (117) 3,287 Certificates of deposit over $100,000 (488) -- (488) 666 19 685 IRA certificates 465 2 467 303 (8) 295 Federal funds purchased, repurchase agreements and other short-term borrowings 8 (279) (274) 1,386 (33) 1,353 Long-term borrowings 1,577 (201) 1,376 (65) (14) (79) - - ----------------------------------------------------------------------------------------------------------------- Total interest expense 6,579 (778) 5,801 6,820 (353) 6,467 - - ----------------------------------------------------------------------------------------------------------------- Net interest income $ 5,335 $ 317 $ 5,652 $ 5,847 $ 395 $ 6,242 ================================================================================================================= Note: The change in interest due to the combined rate-volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of the changes in each. Interest on non-accruing loans is not included for purposes of the table above.
OTHER INCOME Other income increased 182.72% totaling $9.324 million in 1998 compared to $3.298 million in 1997 and $1.393 million in 1996. Included in other income in 1998 are $3.550 million of non-recurring gains, specifically: $2.370 million from the sale of branches; $1.112 million from the sale of mortgage loans; and $68,000 from securities transactions. Eliminating all one-time or discretionary gains, 1998 other income was $5.772 million compared to $3.269 million in 1997 and $1.245 million in 1996. The increases in 1998 and 1997 were due to substantial growth in mortgage banking revenues, leasing revenues, deposit service charges and brokerage revenues. Recurring other income has increased at a compound growth rate of 82.93% over the last five years. The Company completed the sale of its branches located outside the greater St. Louis metropolitan area in order to focus on and expand its market share in its principal trade area. During the fourth quarter of 1998, the Company sold its Kahoka, Palmyra and Monroe City branches. This sale generated a reduction in loans of $13.515 million, a reduction in deposits of $39.992 million and a pre-tax gain of $2.370 million. Also during the year, the Company completed two significant sales of a large portion of its one- to four-family adjustable rate mortgage loans. These sales generated a pre-tax gain of $1.112 million. While the Company had sold some of its mortgage loans in previous years, the 1998 bulk sales reflect a shift in strategy by the Company from originating and holding mortgage loans to increasing its lending emphasis on more profitable commercial loan relationships. Mortgage banking revenues increased 76.85% in 1998 to $2.299 million. This compares to $1.300 million in 1997 which represented an increase of 316.67% compared to 1996. The increases in both years are attributable to a continued favorable economic environment of low unemployment and stable, low long-term interest rates. The Company's two mortgage subsidiaries have benefited from these macro economic trends as well as an increased customer base in the St. Louis market resulting from additional branch locations. Leasing revenues totaled $1.527 million, an increase of 252.66% compared to 1997's level of $433,000. The company entered the retail leasing business during 1997 and the 1998 results reflect a full year of business operation compared to a partial year in 1997. During the latter part of 1998, a decision was made to curtail this line of business because of declining profit margins. page Allegiant Bancorp, Inc. - - -------------------------------------------------------------------------- 14 1998 Annual Report Management's Discussion and Analysis 6 Service charges on deposit accounts increased 51.92% to $1.387 million in 1998 compared to $913,000 in 1997 and $612,000 in 1996. The increases in 1998 and 1997 are due to additional branch locations generating a larger base of transaction deposits as well as the benefit of a full year of the Bank's revised fee structure. The previously mentioned sale of branches should have minimal impact on service charge growth as the majority of deposits sold were non-transaction deposits. Brokerage revenues increased 84.62% to $312,000 compared to $169,000 in 1997. Part of this increase reflects a full year of operation in 1998 compared to nine months of operation in 1997 and higher transaction volumes. The following table sets forth the Company's summary of other income for the years indicated:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------------- Other income: Gain on sale of branches $2,370 $ -- $ -- Mortgage banking revenues 2,299 1,300 312 Leasing revenues 1,527 433 -- Service charges on deposits 1,387 913 612 Gain on sale of mortgage loans 1,112 27 99 Brokerage division revenues 312 169 6 Gain on the sale of securities 68 2 49 Other non-interest income 249 454 315 - - --------------------------------------------------------------------------------- Total other income $9,324 $3,298 $1,393 =================================================================================
OTHER EXPENSES Total operating expenses increased 62.94% or $8.226 million during 1998, totaling $21.295 million compared to $13.069 million in 1997 which represented an increase of 86.19% compared to 1996 results. Operating expenses have increased at a 52.93% five year annual compound growth rate. The Company's efficiency ratio for 1998 was 68.09%, up slightly from 66.69% in 1997 and 61.30% in 1996. The increase in this ratio is the result of acquisitions, deposit purchases, start-up costs associated with new lines of business and costs resulting from additional banking locations. Salaries and employee benefits showed the largest dollar increase year to year, increasing $3.471 million to $9.663 million compared to $6.192 million in 1997 and $3.455 million in 1996. The percentage increase for 1998 was 56.06% compared to the 1997 increase of 79.22%. The increase in 1998 is due to additional staffing resulting from acquisitions and new locations. Also included in this caption is a payout related to a phantom stock plan for the President of the Company. Amounts expensed under this plan, which expired as of December 31, 1998, were $45,000 in 1998, $225,000 in 1997 and $55,000 in 1996. Average full-time equivalent employees for 1998 were 237 compared to 146 in 1997, a 62.33% increase. At December 31, 1998 the Company had 215 full-time equivalent employees compared to 209 at year-end 1997. Furniture and equipment expenses increased $809,000 to $1.752 million in 1998. This follows an increase of $254,000 in 1997. The increase in 1998 was the result of acquisitions in 1997 and branch openings in 1998 and 1997. Additionally, investments in computer resources in both years also contributed to the large increase. Occupancy expenses totaled $1.523 million, an increase of $785,000 or 106.37% during 1998 following an increase of $290,000 or 64.73% in 1997. These increases are attributable to acquisitions and branch openings, as mentioned above. Depreciation of the assets held for operating leases increased $946,000 in 1998 compared to 1997. As discussed in the other income section, the retail leasing business was started in late 1997 so that 1998 reflects a full year of operations. Expense for the amortization of goodwill increased 154.19% during 1998 or $552,000, totaling $910,000 compared to $358,000 in 1997 and $67,000 in 1996. This increase is the result of acquisitions and deposit purchases undertaken during 1997 and reflecting a full year of amortization during 1998. In 1998, operating losses totaled $450,000, as compared to $870,000 in 1997. Of the amount in 1997, $752,000 was considered systemic and non-recurring due to integration of two branch acquisitions and difficulties associated with upgrading its computer systems to an entirely new operating system. Excluding non-recurring items in 1997, the increase in operating losses in 1998 was $332,000. The 1998 operating losses relate to inconsistent operating procedures as a result of expanding the number of branches and number of employees. Throughout 1998 the Company has reengineered several operational processes in an effort to improve quality and control. Additionally, training has been a focus for 1998 and the Company believes that these types of losses will be substantially reduced in 1999. Other non-interest expense increased $1.818 million in 1998 compared to 1997. This growth in expenses was associated with an increase in employees, an increase in the number of deposit and loan accounts, and physical locations as compared to prior years. Specifically, postage and courier costs increased $152,000, telephone expense increased $146,000, travel and automobile costs increased $120,000 and loan and recording expenses increased $110,000. Accounting and professional expense increased $538,000 compared to 1997 as a result of costs associated with establishing a real estate investment trust and the costs associated with changing public accounting firms. Data processing expenses increased $224,000 because of system conversion expenses and Year 2000 expenses. Another factor for 1998 was a $215,000 increase in advertising costs compared to 1997. The Company expanded the advertising program to attract additional core deposits. The following table sets forth the Company's summary of other expenses for the years indicated:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------------- Other expenses: Salaries and employee benefits $ 9,663 $ 6,192 $3,455 Furniture and equipment 1,752 943 689 Occupancy 1,523 738 448 Depreciation of operating leases 1,340 394 -- Goodwill amortization 910 358 67 Operating losses - other 450 870 61 Operating losses-overdrawn customer accounts 272 68 83 Supplies 489 428 202 Other non-interest expense 4,896 3,078 2,014 - - --------------------------------------------------------------------------------- Total other expenses $21,295 $13,069 $7,019 =================================================================================
1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 15 7 cont'd Management's Discussion and Analysis - - -------------------------------------------- Balance Sheet Analysis SECURITIES PORTFOLIO The Company's securities portfolio consists of securities classified as held- to-maturity and available-for-sale. The Company designates these securities upon purchase into one of these two categories. At December 31, 1998 held-to- maturity securities amounted to $12.040 million representing those securities the Company intends to hold to maturity. Securities designated as available- for-sale totaled $42.740 million representing securities which the Company may sell to meet liquidity needs or in response to significant changes in interest rates or prepayment patterns. For purposes of this discussion, held-to-maturity and available-for-sale securities are described as the securities portfolio. At December 31, 1998, the securities portfolio totaled $54.780 million, a decline of 28.74% from the preceding year. The decline in the securities portfolio occurred in the fourth quarter of 1998, as maturing securities were not reinvested in order to fund the previously mentioned branch sales. While average balances for 1998 were higher than 1997, the relative percentage of securities to earning assets declined to 12.46% in 1998 compared to 14.91% in 1997. This decline reflected management's decision to allow maturing securities to be reinvested in higher yielding commercial loans. The Company maintains a traditional short-term laddered portfolio investment strategy to insure adequate liquidity while minimizing interest rate risk. The carrying value of securities portfolio for the periods indicated were as follows: Securities Portfolio
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------------- U.S. government and agency securities $37,021 $48,354 $36,492 State and municipal securities 1,464 1,563 1,199 Mortgage-backed securities 11,930 18,548 18,202 Federal Home Loan Bank stock 3,574 7,033 4,462 Other securities 791 1,371 205 - - --------------------------------------------------------------------------------- Total $54,780 $76,869 $60,560 =================================================================================
Maturities and yield information of the securities portfolio as of December 31, 1998 was as follows: Securities Portfolio -- Maturities and Yields
WEIGHTED OVER ONE WEIGHTED OVER FIVE WEIGHTED WEIGHTED ONE YEAR AVERAGE THROUGH AVERAGE THROUGH AVERAGE OVER 10 AVERAGE (IN THOUSANDS OF DOLLARS) OR LESS YIELD FIVE YEARS YIELD 10 YEARS YIELD YEARS YIELD - - -------------------------------------------------------------------------------------------------------------------------------- U.S. government and agency securities $24,549 5.89% $12,472 5.94% $ -- --% $ -- --% States and municipal securities 324 4.87 281 5.08 859 4.87 -- -- Mortgage-backed securities 6,579 6.42 5,294 5.86 57 9.68 Federal Home Loan Bank stock 3,574 6.55 -- -- -- -- -- -- Other securities -- -- 791 6.21 -- -- -- -- - - -------------------------------------------------------------------------------------------------------------------------------- Total investment securities $35,026 6.05% $18,838 5.91% $916 5.17% $ -- --% ================================================================================================================================ Total portfolio $54,780 5.99% ================================================================================================================================ Maturities are shown in this table by expected maturity. Expected maturities differ from contractual maturities due to the right to call or prepay obligations.
LOANS Loans have historically been the primary component of earning assets. At December 31, 1998 loans totaled $495.669 million, an increase of 2.23% from year-end 1997. This small increase includes the sale of $78.4 million of mortgage loans. Without this sale, year-end 1998 loans would have increased 18.40% compared to year-end 1997. Average loans increased 35.01% during 1998 compared to a 57.38% increase in 1997. Loans have increased at 48.01% compound average growth rate over the last five years. Substantially all of these loans are originated in the Company's primary market areas. The Company has no foreign loans and a minor amount of participations purchased. The largest increase in loans involved commercial real estate loans, which increased $61.093 million or 45.10% in 1998. Traditional commercial loans showed the second largest increase of $16.302 million or 14.83%. Growth in both of these categories reflected management's decision to focus on the more profitable commercial relationships instead of emphasizing one- to four-family mortgage loans. The growth in the commercial sectors was accomplished by hiring additional commercial lending personnel and directing existing staff toward commercial relationship procurement. As a result of this emphasis, commercial real estate loans now comprise 39.65% of the loan portfolio compared to 27.94% in 1997. Traditional commercial loans comprise 25.47% of the portfolio versus 22.67% in 1997. Additionally, construction loans, which can be viewed as commercially oriented, increased 34.62%, totaling $36.590 million at year-end 1998 compared to $27.181 million at year-end 1997. Finally, consumer loans increased $4.087 million dollars or 24.30% during 1998, reaching $20.908 million at December 31, 1998 compared to $16.821 million at December 31, 1997. Offsetting the substantial loan growth mentioned above was the decline in one- to four-family residential loans. This category of loans declined $79.673 million during 1998. This decline was accomplished by the bulk sales of loans mentioned before as well as normal pay-offs and amortization. This category now represents 23.46% of total loans at year-end 1998 compared to 40.42% of total loans at year-end 1997. page Allegiant Bancorp, Inc. - - ---------------------------------------------------------------------------- 16 1998 Annual Report Management's Discussion and Analysis 8 The following table summarizes the composition of the Company's loan portfolio at the dates indicated: Loan Portfolio -- Types of Loans
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 1995 1994 - - --------------------------------------------------------------------------------------------------------------------- Commercial, financial, agricultural, municipal and industrial development $126,239 $109,937 $ 75,129 $ 40,518 $ 30,353 Real estate -- construction 36,590 27,181 8,763 8,777 5,504 Real estate -- mortgage One- to-four family residential 116,291 195,964 121,386 71,260 47,109 Multi-family and commercial 196,545 135,452 74,721 52,795 31,813 Consumer and other 20,908 16,821 12,084 8,379 6,881 Less unearned income (904) (493) (157) (185) (267) - - --------------------------------------------------------------------------------------------------------------------- Total loans $495,669 $484,862 $291,926 $181,544 $121,393 ===================================================================================================================== The Bank had no outstanding foreign loans at the dates reported.
Loan Portfolio -- Maturities and Sensitivities of Loans
December 31, 1998 MATURING IN MATURING AFTER ONE YEAR MATURING AFTER ONE YEAR OR LESS THROUGH FIVE YEARS FIVE YEARS - - -------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS) FIXED-RATE VARIABLE FIXED-RATE VARIABLE TOTAL - - -------------------------------------------------------------------------------------------------------------------------------- Commercial, financial, agricultural, municipal and industrial development $ 77,816 $ 27,224 $19,800 $1,399 $ -- $126,239 Real estate 139,487 126,450 52,403 5,278 25,808 349,426 Consumer and other 9,655 11,085 -- 168 -- 20,908 Less unearned income (904) -- -- -- -- (904) - - -------------------------------------------------------------------------------------------------------------------------------- Total loans $226,054 $164,759 $72,203 $6,845 $25,808 $495,669 ================================================================================================================================
ASSET QUALITY Non-performing assets, consisting of loans past due 90 days or greater, non- accrual loans, restructured loans and other real estate owned increased slightly to $1.778 million at December 31, 1998 compared to $1.707 million at December 31, 1997. At December 31, 1998 non-performing assets represented 0.30% of total assets compared to 0.28% of total assets at December 31, 1997. Non-accrual loans were $1.495 million at December 31, 1998 compared to $559,000 at December 31, 1997. This increase was offset by declines in loans delinquent 90 days or more, reflecting migration to non-accrual status, and by the elimination of other real estate owned. The Company has one loan relationship, not included in the past-due, restructured or non-accrual categories, where known information about possible credit problems causes management to be uncertain as to the ability of the borrower to comply with the present loan repayment terms over the next six months. This collateralized loan relationship totals $2.3 million. The Company continually analyzes its loan portfolio to identify potential risk elements. The loan portfolio is reviewed by lending management and the Company's internal loan review staff. As an integral part of their examination process, the various regulatory agencies periodically review the Company's reserve for possible loan losses. The Company believes that its allowance for loan losses at December 31, 1998 was consistent with applicable regulatory requirements. 1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 17 9 cont'd Management's Discussion and Analysis - - -------------------------------------------- The following table summarizes for the periods presented non-performing assets by category: Risk Elements -- Nonaccrual, Past Due and Restructured Loans
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 1995 1994 - - --------------------------------------------------------------------------------------------------------------------------------- Commercial, financial, agricultural, municipal and industrial development Past due 90 days or more $ -- $ 341 $ 5 $ 113 $ -- Non-accrual 962 360 207 109 40 Restructured terms -- -- -- -- -- Real estate -- construction: Past due 90 days or more -- -- 264 36 90 Non-accrual -- 108 84 20 35 Restructured terms -- -- -- 3 - Real estate -- mortgage: Past due 90 days or more 283 456 -- -- -- Non-accrual 471 70 -- -- -- Restructured terms -- -- -- -- -- Consumer and other: Past due 90 days or more -- 21 23 12 8 Non-accrual 62 21 109 15 -- Restructured terms -- -- -- -- -- - - --------------------------------------------------------------------------------------------------------------------------------- Total non-performing loans 1,778 1,377 692 308 173 - - --------------------------------------------------------------------------------------------------------------------------------- Other real estate owned -- 330 -- 10 25 - - --------------------------------------------------------------------------------------------------------------------------------- Total non-performing assets $ 1,778 $ 1,707 $ 692 $ 318 $ 198 ================================================================================================================================= Balance sheet information (at year-end): Total assets $596,274 $608,237 $377,564 $280,386 $171,927 Loans outstanding 495,669 484,862 291,926 181,544 121,393 Shareholders' equity 48,104 42,071 16,386 13,938 8,453 Allowance for possible loan losses 6,442 5,193 3,100 2,130 1,455 Ratios: Non-performing loans to total loans outstanding 0.36% 0.28% 0.24% 0.17% 0.14% Non-performing assets to total assets 0.30 0.28 0.18 0.11 0.12 Non-performing loans to shareholders' equity 3.70 3.27 4.22 2.21 2.05 Allowance for possible loan losses to total loans 1.30 1.07 1.06 1.17 1.20 Allowance for possible loan losses to non-performing loans 362.32 377.12 447.98 691.56 841.04
ALLOWANCE FOR POSSIBLE LOAN LOSSES The Company's allowance for possible loan losses increased 24.05% from $5.193 million on December 31, 1997 to $6.442 million on December 31, 1998. This follows an increase of 67.52% in 1997. The provision charged to expense was $2.420 million in 1998, similar to the $2.397 million expensed in 1997. This level, coupled with the bulk sales of loans previously mentioned, allowed the level of the allowance to increase to 1.30% of total loans at December 31, 1998 compared to 1.07% at December 31, 1997. As mentioned above in the loan discussion, the Company has shifted its lending focus to higher yielding commercial relationships. This shift, while providing higher earnings potential, does entail greater risk than traditional residential mortgage loans. Because of this shift, the overall level of the allowance for loan losses was increased. Additionally, as can be seen from the allocation of the allowance, additional weight has been given to the increased risks associated with the commercial real estate portfolio that is reflected in the real estate -- mortgage category. Net charge-offs for 1998 were 24 basis points of average loans outstanding. Although up from 1997's level of 19 basis points, net charge-offs in 1998 were low and consistent with the Company's historically low charge-off ratio. At year-end 1998, the Company's allowance represented 377.12% of non-performing loans compared to 309.66% at year-end 1997. The allowance for loan losses is provided at a level considered adequate to provide for potential loan losses and, among other things, is based on management's evaluation of the anticipated impact on the loan portfolio of current economic conditions, changes in the character and size of the loan portfolio, evaluation of potential problem loans identified based on existing circumstances known to management, potential future loan losses on loans to specific customers or industries and recent loan loss experience. page Allegiant Bancorp, Inc. - - ---------------------------------------------------------------------------- 18 1998 Annual Report Management's Discussion and Analysis 10 The following table summarizes the allocation of the allowance for possible loan losses by major category and identifies the percentage of each loan category to the total loan portfolio balance: Allocation of the Allowances for Possible Loan Losses
December 31, 1998 1997 1996 1995 1994 - - ------------------------------------------------------------------------------------------------------------------------------------ PERCENT PERCENT PERCENT PERCENT PERCENT ALLOCATED OF ALLOCATED OF ALLOCATED OF ALLOCATED OF ALLOCATED OF (IN THOUSANDS OF DOLLARS) RESERVES LOANS RESERVES LOANS RESERVES LOANS RESERVES LOANS RESERVES LOANS - - ------------------------------------------------------------------------------------------------------------------------------------ Commercial, financial, agricultural, municipal and industrial development $1,327 25.47% $1,352 22.67% $ 833 25.73% $ 467 22.32% $ 315 25.00% Real estate -- construction 347 7.38 303 5.60 124 3.00 281 4.83 74 4.53 Real estate -- mortgage 4,105 63.11 2,208 68.36 1,153 67.18 818 68.33 471 65.02 Consumer and other 162 4.04 179 3.37 142 4.09 90 4.52 93 5.45 Unallocated 501 -- 1,151 -- 848 -- 474 -- 502 -- - - ------------------------------------------------------------------------------------------------------------------------------------ Total $6,442 100.00% $5,193 100.00% $3,100 100.00% $2,130 100.00% $1,455 100.00% ====================================================================================================================================
The following table summarizes, for the periods indicated, activity in the allowance for possible loan losses, including amounts of loans charged off, amounts of recoveries and additions to the allowance charged to operating expenses: Summary of Loan Loss Experience and Related Information
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 1995 1994 - - ----------------------------------------------------------------------------------------------------------------------------- Allowance for possible loan losses beginning of year $ 5,193 $ 3,100 $ 2,130 $ 1,455 $ 775 Loans charged off: Commercial, financial, agricultural, municipal and industrial development (632) (536) (113) (183) (165) Real estate -- mortgage (447) (110) (364) (82) (31) Consumer (136) (113) (68) (58) (10) Other loans (11) -- -- -- -- - - ----------------------------------------------------------------------------------------------------------------------------- Total loans charged off (1,226) (759) (545) (323) (206) - - ----------------------------------------------------------------------------------------------------------------------------- Recoveries of loans previously charged off: Commercial, financial, agricultural, municipal and industrial development 4 12 54 11 35 Real estate -- mortgage 40 10 3 -- -- Consumer 11 30 10 10 2 - - ----------------------------------------------------------------------------------------------------------------------------- Total recoveries 55 52 67 21 37 - - ----------------------------------------------------------------------------------------------------------------------------- Net loans charged off (1,171) (707) (478) (302) (169) - - ----------------------------------------------------------------------------------------------------------------------------- Acquired subsidiary balance -- 403 -- -- -- Provision for possible loan losses 2,420 2,397 1,448 977 849 - - ----------------------------------------------------------------------------------------------------------------------------- Allowance for possible loan losses end of year $ 6,442 $ 5,193 $ 3,100 $ 2,130 $ 1,455 ============================================================================================================================= Loans outstanding: Average $493,619 $365,615 $232,314 $158,503 $ 88,654 End of year 495,669 484,862 291,926 181,544 121,393 Ratios: Net charge-offs to average loans outstanding 0.24% 0.19% 0.21% 0.19% 0.19% Net charge-offs to provision for loan losses 48.39 29.50 33.01 30.91 19.91 Provision for loan losses to average loans outstanding 0.49 0.66 0.62 0.62 0.96 Allowance for loan loss to total loans outstanding 1.30 1.07 1.06 1.17 1.20
1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 19 11 cont'd Management's Discussion and Analysis - - -------------------------------------------- DEPOSITS As shown below, total deposits declined $33.875 million or 6.99% in 1998 compared to 1997. As previously mentioned, this decline in year-end numbers is the result of the sale of branches. This sale reduced total deposits at December 31, 1998 by $39.992 million. The majority of deposits sold were in the certificate of deposit category, which caused the decline in certificates of deposit as a percent of total deposits to 41.55% at December 31, 1998 from 47.79% at December 31, 1997. Absent the sale, deposits would have increased slightly during 1998. Average deposits for 1998 were $475.739 million compared to $366.070 million in 1997. The increase in average deposits is the result of acquisitions and deposit purchases that occurred during the third quarter of 1997. The effect of these 1997 acquisitions increased averages for the full year of 1998. Changes in the mix of average deposits were concentrated in both categories of certificates of deposit. On average, retail certificates of deposit increased as a percentage of total deposits to 47.22% in 1998 from 44.49% in 1997. Certificates of deposit over $100,000 declined to 8.32% of total deposits in 1998 from 13.21% of total deposits in 1997. The reduction in large certificates of deposit was the result of management's intent to replace these rate sensitive funds with core deposits. Amounts and Maturities of Time Deposits of $100,000 or More
(IN THOUSANDS OF DOLLARS) December 31, 1998 - - --------------------------------------------------------------------------- Three months or less $14,387 Over three months through six months 5,658 Over six months through 12 months 5,905 Over 12 months 5,223 - - --------------------------------------------------------------------------- Total $31,173 ===========================================================================
INTEREST RATE SENSITIVITY The Company's asset/liability strategy is to minimize the sensitivity of earnings to changes in interest rates while maintaining a net interest margin within the range of Company objectives. The Company's asset/liability committee monitors the interest rate sensitivity of the balance sheet on a bi-weekly basis. The committee reviews asset and liability repricing in the context of current and possible future interest rate scenarios affecting the economic climate in the Company's market. The Company's pricing policy is that all earning assets and interest bearing liabilities be either based on floating rates or have a fixed rate not exceeding five years. Real estate mortgage loans held by the Company, while having long final maturities, are comprised of one-, two- or three-year adjustable rate loans. The adjustable basis of these loans significantly reduces interest rate risk. Deposits
December 31, 1998 1997 - - --------------------------------------------------------------------------------------------------------------------- PERCENT PERCENT OF TOTAL OF TOTAL (IN THOUSANDS OF DOLLARS) AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE - - --------------------------------------------------------------------------------------------------------------------- Demand deposits $ 55,417 12.60% --% $ 50,060 10.33% --% Money market and NOW accounts 142,902 31.58 4.12 115,856 23.91 4.29 Savings deposits 14,917 3.29 2.57 16,157 3.33 2.89 Certificates of deposit 187,886 41.55 5.73 231,601 47.79 5.79 Certificates of deposit over $100,000 31,173 6.90 5.55 52,211 10.77 5.55 IRA Certificates 18,471 4.08 5.96 18,756 3.87 5.95 - - --------------------------------------------------------------------------------------------------------------------- Total deposits $450,766 100.00% 5.13% $484,641 100.00% 5.24% =====================================================================================================================
page Allegiant Bancorp, Inc. - - ---------------------------------------------------------------------------- 20 1998 Annual Report Management's Discussion and Analysis 12 As the following table shows, the Company has a slight bias for falling interest rates in the most immediate time frame. This structure is similar to the positioning of the Company at the beginning of 1998; however, the bias to falling rates has been reduced to mitigate the impact of any increases in short-term rates. The cumulative gap positions in all time frames presented are well within the Company's asset/liability guidelines.
ZERO TO THREE FOUR TO 12 ONE TO FIVE OVER (IN THOUSANDS OF DOLLARS) MONTHS MONTHS YEARS FIVE YEARS TOTAL - - ------------------------------------------------------------------------------------------------------------------------------ Earning Assets: Loans $246,622 $ 77,989 $164,213 $ 6,845 $495,669 Investment securities 11,857 23,169 18,838 916 54,780 Federal funds sold 3,430 -- -- -- 3,430 - - ------------------------------------------------------------------------------------------------------------------------------ Total earning assets $261,909 $101,158 $183,051 $ 7,761 $553,879 ============================================================================================================================== Funding Sources: Money market accounts 123,827 -- -- -- 123,827 NOW accounts 19,075 -- -- -- 19,075 Savings 14,917 -- -- -- 14,917 Time deposits 62,880 65,993 58,636 377 187,886 Time deposits over $100,000 15,037 11,865 3,929 342 31,173 IRAs 4,601 4,645 8,928 297 18,471 Repurchase agreements 13,745 297 -- -- 14,042 Short-term borrowings -- other -- -- -- -- -- Short-term FHLB borrowings 27,000 12,500 -- -- 39,500 Long-term FHLB borrowings -- -- 15,125 11,500 26,625 Long-term borrowings -- other -- 500 13,150 -- 13,650 - - ------------------------------------------------------------------------------------------------------------------------------ Total funding sources $281,082 $ 95,800 $ 99,768 $12,516 $489,166 ============================================================================================================================== Interest sensitivity gap -- $ $(19,173) $ 5,358 $ 83,283 $(4,755) $ 64,713 Interest sensitivity gap -- % 93.18% 105.59% 183.48% 62.01% 113.23% Cumulative gap -- $ $(19,173) $(13,815) $ 69,468 $64,713 Cumulative gap -- % 93.18% 96.33% 114.57% 113.23% Cumulative gap as a percentage of total earning assets (3.46)% (2.49)% 12.54% 11.68% Investment securities include mortgage-backed securities which have effective maturities based upon current market conditions. This stratification is based on management's estimates in relation to the historical trends of these types of securities.
The following table provides additional information about the Company's financial instruments. For loans, securities and liabilities with contractual maturities, the table presents principal cash flow and related weighted- average interest rates by contractual maturities. Core deposits that have no contractual maturity are subject to immediate withdrawal or repricing.
YEAR OF CONTRACTUAL MATURITY - - ------------------------------------------------------------------------------------------------------------------------------ (IN THOUSANDS OF DOLLARS) 1999 2000 2001 2002 2003 THEREAFTER TOTAL - - ------------------------------------------------------------------------------------------------------------------------------ RATE SENSITIVE ASSETS: Fixed rate loans $ 70,498 $63,377 $56,938 $25,309 $24,468 $ 6,845 $247,435 Average interest rate 8.07% 8.48% 8.40% 8.40% 8.29% 8.35% 8.37% Variable rate loans $155,556 $31,913 $15,494 $ 8,594 $16,202 $20,475 $248,234 Average interest rate 8.45% 8.01% 8.24% 8.50% 7.78% 8.40% 8.33% Fixed rate securities $ 7,739 $ 6,450 $ 4,403 $ 5,223 $10,240 $ 8,629 $ 42,684 Average interest rate 6.11% 6.34% 6.00% 6.09% 5.62% 5.98% 5.98% Variable rate securities -- $ 4,000 -- -- -- $ 8,096 $ 12,096 Average interest rate -- 4.85% -- -- -- 6.82% 6.17% Federal funds sold and other Overnight investments $ 3,430 -- -- -- -- -- $ 3,430 Average interest rate 4.55% -- -- -- -- -- 4.55% RATE SENSITIVE LIABILITIES: Non-interest-bearing deposits $ 55,417 -- -- -- -- -- $ 55,417 Savings and interest-bearing checking $157,819 -- -- -- -- -- $157,819 Average interest rate 3.89% -- -- -- -- -- 3.89% Time deposits $165,021 $41,452 $18,513 $ 6,126 $ 5,402 $ 1,016 $237,530 Average interest rate 5.48% 5.41% 5.79% 5.96% 5.67% 6.12% 5.51% Fixed interest rate borrowings $ 17,042 $20,000 $12,650 $ 625 $ 1,500 $42,000 $ 93,817 Average interest rate 4.19% 5.70% 7.00% 5.87% 5.62% 5.01% 5.29%
1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 21 13 cont'd Management's Discussion and Analysis - - -------------------------------------------- LIQUIDITY MANAGEMENT Long-term liquidity is a function of the core deposit base and an adequate capital base. The Company is committed to growth of its core deposit base. This growth is both internally generated through product pricing and product development and externally generated through acquisition. During 1998, both of these elements contributed heavily to developing and maintaining long-term liquidity. The capital position of the Company has been maintained through earnings retention and raising of capital. See "Capital Resources." Short-term liquidity needs arise from continuous fluctuations in the flow of funds on both sides of the balance sheet resulting from growth, seasonal, and cyclical customer demands. The securities portfolio provides stable long-term earnings as well as being a primary source of liquidity. The designation of securities as available-for-sale and held-to-maturity does not impact the portfolio as a source of liquidity due to the ability to transact repurchase agreements using those securities. Average short-term borrowings were virtually unchanged in comparing 1998 levels to 1997 levels. The 1998 level was also consistent throughout the year with only small quarterly fluctuations in average balances. Due to favorable rate differentials, slightly more repurchase agreements and borrowings from the Federal Home Loan Bank (FHLB) were utilized instead of federal funds being purchased. The Company experienced strong loan demand during 1998 and anticipates the continuation of this demand during 1999. Based on this demand, the Company expects to continue to utilize borrowings from the FHLB as a funding vehicle in advance of the slower growth rate obtainable in core deposits. The following table summarizes short-term borrowings for the periods indicated: Average Short-Term Borrowings
Year ended December 31, 1998 1997 1996 - - --------------------------------------------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE (IN THOUSANDS OF DOLLARS) BALANCE RATE BALANCE RATE BALANCE RATE - - --------------------------------------------------------------------------------------------------------------------------- Federal funds purchased $ 1,272 5.56% $ 2,851 5.14% $ 2,737 5.33% Securities sold under agreement to repurchase and other short-term borrowings 51,583 4.95 49,851 5.51 24,744 5.65 - - --------------------------------------------------------------- --------- --------- Total $52,855 4.96% $52,702 5.49% $27,481 5.61% =============================================================== ========= ========= Maximum short-term borrowings outstanding at any month-end during the year $63,449 $71,496 $51,060
CAPITAL RESOURCES Total shareholders' equity was $48.104 million at December 31, 1998, an increase of 14.34% over 1997's level of $42.071 million which represented an increase of 156.75% compared to year-end 1996. The increase in total equity is the result of earnings retention and the exercise of stock options and warrants. The increase in 1997 was the result of two common stock rights offerings and an acquisition effected by the issuance of common stock. Total shareholders' equity has increased at a five-year compound growth rate of 45.07%. Average shareholders' equity showed a substantial increase of 76.82% during 1998 compared to 1997. Shareholders' equity averaged $44.721 million during 1998 compared to $25.292 million in 1997. The large increase in average equity is related to the timing of the events during 1997 mentioned above. The acquisition occurred during the third quarter of 1997 and one of the rights offerings was completed during December of 1997. The average for 1998 therefore includes a full year's effect of these transactions compared to only a partial effect on 1997 averages. Average shareholders' equity has increased at a five-year compound growth rate of 57.52%. The Company's average equity to asset ratio improved to 7.22% in 1998 from 5.46% in 1997. Dividends paid during 1998 were $0.12, an increase of 50.00% compared to the $0.08 paid during 1997 which was a 33.33% increase over the $0.06 paid in 1996. The Company's dividend payout ratio was 20.22% in 1998 compared to 13.77% during 1997 and 10.34% in 1996. The Company also analyzes its capital and the capital position of its subsidiaries in terms of regulatory risked-based capital guidelines. This analysis of capital is dependent upon a number of factors including asset quality, earnings strength, liquidity, economic conditions and combinations thereof. The Federal Reserve Board has issued standards for measuring capital adequacy for bank holding companies. These standards are designed to provide risk-responsive capital guidelines and to incorporate a consistent framework for use by financial institutions. Management believes that, as of December 31, 1998 the Company and its subsidiaries met all capital adequacy requirements. As of December 31, 1998, the Company and the Bank's capital ratios were as follows:
COMPANY ALLEGIANT BANK - - ------------------------------------------------------------------------------ Total capital (to risk-weighted assets) 8.68% 10.93% Tier 1 capital (to risk-weighted assets) 7.42 9.68 Tier 1 capital (to average assets) 5.83 7.61
page Allegiant Bancorp, Inc. - - ---------------------------------------------------------------------------- 22 1998 Annual Report Management's Discussion and Analysis 14 Impact of Year 2000 GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND COMPANY READINESS The Year 2000 issue is a result of computer programs being written using two digits rather than four digits to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process transactions, or engage in similar normal business activities. To mitigate the risk of disruption, a Year 2000 plan has been developed and implemented. The plan is comprised of five phases, with completion of all five necessary to protect the Company against potential Year 2000 failures. The Company's plan to resolve the Year 2000 issue involves the following five phases: awareness, assessment, remediation, testing, and implementation. During the awareness phase, a comprehensive strategy for addressing the Year 2000 issue was formulated. The Company has fully completed its assessment of all systems that could be significantly affected by the Year 2000. The completed assessment indicated that most of the significant information technology systems could be affected, including the loan, deposit, general ledger, and billing systems. All software and hardware systems have been provided by third party vendors; therefore, the remediation of systems primarily involves the installation of upgraded systems that have been certified by the vendor as Year 2000 compliant. The Company is in the process of testing all hardware and software systems to validate that systems have been renovated. In addition, testing will validate the compatibility of system interfaces. After all testing is completed, all systems will be implemented, which will include certification that all systems are Year 2000 compliant. YEAR 2000 STATUS, INCLUDING TIMETABLE FOR COMPLETION To date, the awareness and assessment phases are 100% complete. The remediation phase is substantially complete, with only one less significant software system requiring an upgrade. It is anticipated that this system will be upgraded no later than April 30, 1999. Testing of the Company's systems are accomplished after upgrades are provided by and certified as Year 2000 compliant by a third party vendor. To date, approximately 80% of all internal systems have been tested. Testing the mission critical systems was substantially complete as of December 31, 1998. It is anticipated that testing of all systems will be substantially completed by April 30, 1999, with the implementation phase to be completed by May 31, 1999. IMPORTANCE TO THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR 2000 The Company has some systems that interface directly with significant third party vendors. This would include the Electronic Fund Transfer (EFT) systems related to wire transfers, automated teller machine and debit card transactions, in addition to Trust system software. These third parties have completed or are in the process of making their systems Year 2000 compliant. The Company is in the process of working with these third party vendors to ensure that the third party systems interface properly with the Company's systems. Testing for these systems will be accomplished using actual and proxy testing. Proxy testing is testing that takes place in a controlled environment using similar software/hardware that the Company and third party vendors utilize. These tests are anticipated to be completed by April 30, 1999. The Company has also gathered information about the Year 2000 compliance status of customers with significant credit relationships. In addition, significant suppliers and other third parties that do not share information with the Company's systems (external agents) have been queried to assess their Year 2000 status. To date, there is no evidence of any Year 2000 risk related to significant customers or external agents that would materially impact the Company's operations, liquidity, or capital resources. However, the company has no means of ensuring that these entities will be Year 2000 ready. The inability of third parties and external agents to complete their Year 2000 resolution process in a timely fashion, could materially impact the Company. The effect of non-compliant third parties and external agents is not determinable. YEAR 2000 COSTS The Company will utilize both internal and external resources to reprogram, replace, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project is estimated at $232,000 and is being funded through operating cash flows. To date, the Company has incurred approximately $187,000 ($92,000 expensed and $95,000 capitalized for new systems and equipment) related to all phases of the Year 2000 project. The total remaining project costs, which approximates $45,000, is attributable to the testing and validation phases of the project and will be expensed as incurred. OVERALL YEAR 2000 RISKS Management believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, all necessary phases of the Year 2000 program have not yet been completed. In the event that additional phases are not completed, the Company could experience system failures that would have a significant impact on the Company's financial condition. In addition, disruptions in the economy generally resulting from Year 2000 issues could also materially adversely affect the Company. The Company could be subject to litigation for computer system product failures. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. CONTINGENCY PLANNING The Company has contingency plans for certain mission critical applications and is working on such plans for all other systems. These contingency plans involve, among other actions, manual workarounds and adjusting staffing strategies. In addition, funding plans are being developed to insure that adequate levels of liquid assets are available in the event of significant customer withdrawals of cash items as a result of Year 2000 issues. 1998 Annual Report Management's Discussion and Analysis page -------------------------------------------------------------------- Allegiant Bancorp, Inc. 23 15 Statement by Management and Report of Independent Auditors Statement by Management The financial statements and related financial information presented here were prepared by management in accordance with generally accepted accounting principles and include amounts that are based on management's best estimates and judgements. The Company maintains an accounting system and related controls that are sufficient to provide reasonable assurance that assets are safeguarded and that transactions are properly authorized and recorded. The concept of reasonable assurance is based on the recognition that the cost of an accounting and control system must be related to the benefits derived. The accounting system and related controls are monitored by an internal audit program and by the Company's independent auditors in accordance with generally accepted auditing standards. The Company's internal auditor and independent auditors meet regularly with the Audit Committee of the Board of Directors to ensure that respective responsibilities are being properly discharged and to discuss the results of examinations. Report of Independent Auditors Shareholders and Board of Directors Allegiant Bancorp, Inc. We have audited the accompanying consolidated balance sheet of Allegiant Bancorp, Inc. as of December 31, 1998 and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. 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 audit. The consolidated balance sheets as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for the two-year period ended December 31, 1997, were audited by other auditors whose report dated March 13, 1998 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Allegiant Bancorp, Inc. at December 31, 1998 and the consolidated results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP St. Louis, Missouri January 21, 1999 page Allegiant Bancorp, Inc. - - ------------------------------------------------------------------ 24 1998 Annual Report Statement by Management and Report of Independent Auditors 16 Consolidated Balance Sheets
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------------------------------------------------------------- ASSETS: Cash and due from banks $ 13,693 $ 14,872 $ 7,554 Federal funds sold and other overnight investments 3,430 1,600 10,775 Investment securities: Available-for-sale (at estimated market value) 42,740 44,918 22,073 Held-to-maturity (estimated market value of $12,132 in 1998, $32,146 in 1997 and $38,500 in 1996) 12,040 31,951 38,487 Loans, net of allowance for possible loan losses of $6,442 in 1998, $5,193 in 1997 and $3,100 in 1996 489,227 479,669 288,826 Premises and equipment 11,010 10,801 5,514 Accrued interest and other assets 11,438 10,837 4,055 Intangible assets 12,696 13,589 280 - - --------------------------------------------------------------------------------------------------------------------------------- Total assets $596,274 $608,237 $377,564 ================================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Non-interest bearing $ 55,417 $ 50,060 $ 29,406 Interest bearing 364,176 382,370 228,439 Certificates of deposit of $100,000 or more 31,173 52,211 50,825 - - --------------------------------------------------------------------------------------------------------------------------------- Total deposits 450,766 484,641 308,670 - - --------------------------------------------------------------------------------------------------------------------------------- Short-term borrowings 53,542 53,579 36,137 Long-term debt 40,275 23,275 14,663 Accrued expenses and other liabilities 3,587 4,671 1,708 - - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 548,170 566,166 361,178 Shareholders' equity: Common Stock, $.01 par value -- authorized 7,800,000 shares; issued 6,536,164 shares, 6,111,743 shares and 3,405,696 shares, respectively 65 61 34 Capital surplus 41,898 39,484 15,972 Retained earnings 6,058 2,441 357 Net unrealized appreciation on securities available- for-sale (net of tax) 83 85 23 - - --------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 48,104 42,071 16,386 - - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $596,274 $608,237 $377,564 ================================================================================================================================= See accompanying notes to consolidated financial statements.
1998 Annual Report Consolidated Balance Sheets page ------------------------------------------------------------- Allegiant Bancorp, Inc. 25 17 Consolidated Statements of Income
Years ended December 31, (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996 - - --------------------------------------------------------------------------------------------------------------------------------- Interest income: Interest and fees on loans $44,412 $33,473 $21,428 Investment securities 4,295 3,966 3,477 Federal funds sold and overnight investments 511 326 151 - - --------------------------------------------------------------------------------------------------------------------------------- Total interest income 49,218 37,765 25,056 - - --------------------------------------------------------------------------------------------------------------------------------- Interest expense: Interest on deposits 21,948 17,253 12,060 Interest on short-term borrowings 2,625 2,895 1,542 Interest on long-term debt 2,694 1,318 1,397 - - --------------------------------------------------------------------------------------------------------------------------------- Total interest expense 27,267 21,466 14,999 - - --------------------------------------------------------------------------------------------------------------------------------- Net interest income 21,951 16,299 10,057 Provision for possible loan losses 2,420 2,397 1,448 - - --------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for possible loan losses 19,531 13,902 8,609 - - --------------------------------------------------------------------------------------------------------------------------------- Other income: Service charges on deposits 1,387 913 612 Net gain on sale of securities 68 2 49 Other income 7,869 2,383 732 - - --------------------------------------------------------------------------------------------------------------------------------- Total other income 9,324 3,298 1,393 - - --------------------------------------------------------------------------------------------------------------------------------- Other expenses: Salaries and employee benefits 9,663 6,192 3,455 Occupancy and furniture and equipment 3,275 1,681 1,137 Other expenses 8,357 5,196 2,427 - - --------------------------------------------------------------------------------------------------------------------------------- Total other expenses 21,295 13,069 7,019 - - --------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 7,560 4,131 2,983 Provision for income taxes 3,026 1,716 1,175 - - --------------------------------------------------------------------------------------------------------------------------------- Net income $ 4,534 $ 2,415 $ 1,808 ================================================================================================================================= Basic earnings per share $ 0.72 $ 0.54 $ 0.55 Diluted earnings per share 0.68 0.49 0.48 See accompanying notes to consolidated financial statements.
page Allegiant Bancorp, Inc. - - -------------------------------------------------------------------------- 26 1998 Annual Report Consolidated Statements of Income 18 Consolidated Statements of Shareholders' Equity
ACCUMULATED COMMON STOCK OTHER TOTAL ---------------- CAPITAL RETAINED COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE (IN THOUSANDS OF DOLLARS) SHARES PAR SURPLUS EARNINGS INCOME EQUITY INCOME - - ------------------------------------------------------------------------------------------------------------------------------------ Balance, January 1, 1996 as originally reported 1,989,033 $20 $13,542 $ 467 $(91) $13,938 Reflect 5-for-4 stock split 497,259 5 (5) -- -- -- Reflect 6-for-5 stock split 497,259 5 (5) -- -- -- - - ------------------------------------------------------------------------------------------------------------------------------------ Adjusted January 1, 1996 2,983,551 30 13,532 467 (91) 13,938 Net income -- -- -- 1,808 -- 1,808 $1,808 Change in net unrealized gains (losses) on available-for-sale securities -- -- -- -- 114 114 114 - - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income $1,922 - - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared -- -- - (187) -- (187) Issuance of Common Stock for: Stock dividend declared 309,518 3 1,728 (1,731) -- -- Conversion of subordinated debentures 86,592 1 503 -- -- 504 Exercise of stock warrants/options 17,771 -- 25 -- -- 25 Various stock issuance plans 8,264 -- 184 -- -- 184 - - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1996 3,405,696 34 15,972 357 23 16,386 Net income -- -- -- 2,415 -- 2,415 $2,415 Change in net unrealized gains (losses) on available-for-sale securities -- -- -- -- 62 62 62 - - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income $2,477 - - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared -- -- -- (331) -- (331) Issuance of Common Stock for: Rights offerings 1,523,037 15 11,226 -- -- 11,241 Acquisition of Reliance Financial, Inc. 898,689 9 10,578 -- -- 10,587 Exercise of stock warrants/options 260,414 3 1,509 -- -- 1,512 Various stock issuance plans 23,907 -- 199 -- -- 199 - - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1997 6,111,743 61 39,484 2,441 85 42,071 Net income -- -- -- 4,534 -- 4,534 $4,534 Change in net unrealized gains (losses) on available-for-sale securities -- -- -- -- (2) (2) (2) - - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income $4,532 - - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared -- -- -- (917) -- (917) Issuance of Common Stock for: Exercise of stock warrants/options 384,785 4 2,112 -- -- 2,116 Various stock issuance plans 39,636 -- 302 -- -- 302 - - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1998 6,536,164 $65 $41,898 $6,058 $ 83 $48,104 ==================================================================================================================================== Year ended December 31 (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------------------ Reclassification adjustments: Unrealized gains (losses) on available-for-sale securities $39 $63 $144 Less: Reclassification adjustment for gains realized included in net income 41 1 30 - - ------------------------------------------------------------------------------------------------------------------------------------ Net unrealized gains (losses) on available-for-sale securities $(2) $62 $114 ==================================================================================================================================== See accompanying notes to consolidated financial statements.
1998 Annual Report Consolidated Statements of Shareholders' Equity page --------------------------------------------------------------------------- Allegiant Bancorp, Inc. 27 19 Consolidated Statements of Cash Flows
Years ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 4,534 $ 2,415 $ 1,808 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,366 1,057 536 Provision for possible loan losses 2,420 2,397 1,448 Net realized gains on securities available-for-sale (68) (2) (49) Deferred tax benefit (496) (685) (282) Net gain on sale of mortgage loans (1,112) -- -- Net gain on disposition of branches (2,370) -- -- Changes in assets and liabilities: Accrued interest receivable and other assets 811 (1,077) (938) Accrued expenses and other liabilities (745) 623 768 - - -------------------------------------------------------------------------------------------------------------------------- Cash provided by operating activities 7,340 4,728 3,291 - - -------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Net cash received in acquisition of Reliance Financial, Inc. -- 1,533 -- Net cash received in acquisition of branches -- 83,596 -- Net cash paid in disposition of branches (22,662) Proceeds from maturities of securities held-to-maturity 22,885 17,019 41,343 Purchase of investment securities held-to-maturity (2,974) (10,396) (25,279) Proceeds from maturities of securities available-for-sale 87,840 25,020 36,797 Proceeds from sales of securities available-for-sale 8,989 2,949 3,882 Purchase of investments securities available-for-sale (94,586) (39,211) (34,457) Loans made to customers, net of repayments (102,815) (175,387) (120,070) Proceeds from sale of mortgage loans 78,374 -- -- Purchases of assets held for operating leases, net (2,959) (2,992) -- Additions to premises and equipment (3,186) (4,710) (1,574) - - -------------------------------------------------------------------------------------------------------------------------- Cash used in investing activities (31,094) (102,579) (99,358) - - -------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net increase in deposits 5,201 57,518 77,362 Net increase in short-term borrowings 338 17,442 22,029 Proceeds from issuance of long-term debt 31,150 8,625 -- Repayment of long-term debt (13,650) (13) (4,552) Proceeds from issuance of common stock 2,283 12,753 61 Payment of dividends (917) (331) (187) - - -------------------------------------------------------------------------------------------------------------------------- Cash provided by financing activities 24,405 95,994 94,713 - - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 651 (1,857) (1,354) Cash and cash equivalents, beginning of year 16,472 18,329 19,683 - - -------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 17,123 $ 16,472 $ 18,329 ========================================================================================================================== See accompanying notes to consolidated financial statements.
page Allegiant Bancorp, Inc. - - --------------------------------------------------------------------------- 28 1998 Annual Report Consolidated Statements of Cash Flows 20 Notes to Consolidated Financial Statements Note 1 - - ------------------------- Accounting Policies BASIS OF PRESENTATION. The accompanying consolidated financial statements include the accounts of Allegiant Bancorp, Inc. (the "Company") and its subsidiaries. The financial statements have been prepared in conformity with generally accepted accounting principles and reporting practices applicable to the banking industry. All significant intercompany transactions and balances have been eliminated. The significant accounting policies are summarized below. BUSINESS. The Company's bank subsidiary (the "Bank") provides a full range of banking services to individual and corporate customers in the St. Louis, Missouri metropolitan area. The Bank is subject to intense competition from other financial institutions. The Bank also is subject to the regulations of certain federal and state agencies and undergoes periodic examination by those regulatory authorities. ACCOUNTING ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. RECLASSIFICATIONS. Certain reclassifications have been made to the 1996 and 1997 financial statements to conform to the 1998 presentation. These reclassifications had no effect on net income. INVESTMENT SECURITIES. Securities are classified as held-to-maturity or available-for-sale. Only those securities which management has the intent and ability to hold to maturity are classified as held-to-maturity and are reported at amortized cost. Securities that are purchased with the intent to hold for an indefinite period of time, including securities that management intends to use as part of its asset/liability strategy or that may be sold to meet liquidity needs, are classified as available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, reported in other comprehensive income. Interest and dividends on securities, including amortization of premium and accretion of discounts, are reported in interest income using the interest method. Realized securities gains or losses are reported in the Consolidated Statements of Income. Gains and losses on securities are determined on an identified certificate basis. LOANS HELD-FOR-SALE. In its lending activities, the Company originates residential mortgage loans intended for sale in the secondary market. Loans held-for-sale are carried at the lower of cost or fair value, which is determined on an aggregate basis. Gains or losses on the sale of loans held- for-sale are determined on a specific identification method. LOANS. Interest income on loans is generally accrued on a simple interest basis. Loan fees and direct costs of loan originations are deferred and amortized over the estimated life of the loans under methods approximating the interest method. When, in management's opinion, the collection of interest on a loan will not be collected in the normal course of business, or when either principal or interest is past due over 90 days, that loan is generally placed on a non- accrual status. When a loan is placed on non-accrual status, accrued interest for the current year is reversed and charged against current earnings, and accrued interest from prior years is charged against the reserve for possible loan losses. Interest payments received on non-accrual loans are applied to principal if there is doubt as to the collectibility of such principal; otherwise, these receipts are recorded as interest income. A loan remains on non-accrual status until the loan is current as to payment of both principal and interest, and/or the borrower demonstrates the ability to pay and remain current. All non-accrual and renegotiated commercial-related loans are considered impaired. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, or at the loan's observable market price, or the fair value of the collateral, if the loan is collateral dependent. ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is increased by the provision charged to expense and decreased by charge-offs, net of recoveries. Management's periodic evaluation of the adequacy of the allowance is based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay, the estimated value of any underlying collateral and current economic conditions. PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less accumulated depreciation. The provision for depreciation is computed using the straight-line method over the estimated useful lives of the individual assets for book purposes and accelerated methods for tax purposes. Ordinary maintenance and repairs are charged to expense as incurred. REAL ESTATE OWNED. Real estate acquired in foreclosure or other settlement of loans is initially recorded at the lower of fair market value of the assets received (less estimated selling costs) or the recorded investment in the loan at the date of transfer. Any adjustment to fair market value at the date of transfer is charged against the allowance for loan losses. Subsequent write-downs are charged to operating expense including charges relating to operating, holding or disposing of the property. Real estate owned was approximately $0, $330,000, and $0 at December 31, 1998, 1997 and 1996, respectively. INTANGIBLE ASSETS. Intangible assets consist primarily of goodwill and mortgage servicing assets. Goodwill, the excess of cost over the net assets acquired in business combinations accounted for as purchases, is amortized using the straight-line method over the estimated period to be benefited, but not exceeding 15 years. Management reviews goodwill for possible impairment if there is a significant event that detrimentally affects operations. Impairment is measured using estimates of the discounted future earnings potential of the entity or assets acquired. 1998 Annual Report Notes to Consolidated Financial Statements page -------------------------------------------------------------------------- Allegiant Bancorp, Inc. 29 21 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- Mortgage servicing assets represent recorded value associated with the contractual right to service loans in return for a fee. These assets may be purchased and recorded at fair value or result from the sale of loans, where servicing is retained and recorded at an allocated carrying amount based on the relative fair value of the assets sold. This intangible is amortized using the level-yield method over the estimated lives of the related loans. The carrying value of mortgage servicing assets is subject to periodic adjustment based upon changing market conditions. At December 31, 1998, the Company had no capitalized mortgage servicing assets compared to $182,000 at December 31, 1997 and $280,000 at December 31, 1996. INCOME TAXES. Income taxes are accounted for under the liability method in which deferred income taxes are recognized as a result of temporary differences between the financial reporting basis and the tax basis of the assets and liabilities of the Company. CASH EQUIVALENTS. For purposes of the Consolidated Statements of Cash Flows, the Company considers cash and due from banks, federal funds sold and other overnight investments to be cash equivalents. NEW ACCOUNTING PRONOUNCEMENTS. Effective January 1, 1998, the Company adopted the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130 requires the reporting of comprehensive income and its components in the 1998 financial statements. Comprehensive income is defined as the change in equity from transactions and other events and circumstances from non-owner sources, and excludes investments by and distributions to owners. Comprehensive income also includes net income and other items of comprehensive income meeting the above criteria. The Company's most significant component of other comprehensive income is the unrealized holding gains and losses on available-for-sale securities. Effective January 1, 1998, the Company adopted the Financial Accounting Standards Board's SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (Statement 131). Statement 131 superseded FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise. Statement 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Statement 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. Based on an analysis of Statement 131, the Company has one operating segment; therefore, no additional disclosures of segment information are presented. The adoption of Statement 131 did not affect results of operations or financial position. In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company expects to adopt the new statement effective January 1, 2000. Statement 133 will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of Statement 133 will have a significant effect on its results of operations or financial position. Note 2 - - ----------------------------------- Acquisitions and Divestitures In August 1997, the Company acquired all the outstanding capital stock of Reliance Financial, Inc. in exchange for 599,126 shares of the Company's Common Stock. In September 1997, the Company purchased two bank branch offices from Roosevelt Bank. As part of the agreement, the Company assumed deposits of $96.076 million in exchange for loans of $3.017 million, premises and equipment of $537,000 and cash of $84.035 million. Total goodwill and core deposit intangible assets recorded by the Company in connection with this acquisition were $8.833 million. Both acquisitions were recorded using the purchase method of accounting. Results of operations of companies and branches acquired in purchase business combinations are included from the date of acquisition. In December 1998, the Company sold three out-of-market branches to another financial institution. The book value of assets disposed of totaled $17.492 million, the book value of liabilities transferred totaled $39.992 million and the net cash paid for the divestiture was $22.662 million. A $2.370 million gain was recognized from the sale. page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------------- 30 1998 Annual Report Notes to Consolidated Financial Statements 22 Note 3 - - --------------------------- Investment Securities Debt and equity securities have been classified in the Consolidated Balance Sheets according to management's intent. The carrying amount of securities and their approximate fair values at December 31 were as follows:
December 31, 1998 - - --------------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY - - --------------------------------------------------------------------------------------------------------------------------------- GROSS GROSS GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR (IN THOUSANDS OF DOLLARS) COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE - - --------------------------------------------------------------------------------------------------------------------------------- U.S. government and agency securities $29,269 $217 $ (51) $29,436 $ 7,585 $ 30 $ (21) $ 7,595 State and municipal securities 598 9 -- 606 858 28 -- 886 Mortgage-backed securities 8,360 38 (65) 8,333 3,597 55 -- 3,651 Federal Home Loan Bank stock 3,574 -- -- 3,574 -- -- -- -- Other securities 791 -- -- 791 -- -- -- -- - - --------------------------------------------------------------------------------------------------------------------------------- Total $42,592 $264 $(116) $42,740 $12,040 $113 $ (21) $12,132 ================================================================================================================================= December 31, 1997 - - --------------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY - - --------------------------------------------------------------------------------------------------------------------------------- GROSS GROSS GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE - - --------------------------------------------------------------------------------------------------------------------------------- U.S. government and agency securities $26,545 $106 $ (9) $26,642 $21,712 $ 50 $(131) $21,631 State and municipal securities 597 -- -- 597 966 24 -- 990 Mortgage-backed securities 9,243 33 (1) 9,275 9,273 253 (1) 9,525 Federal Home Loan Bank stock 7,033 -- -- 7,033 -- -- -- -- Other securities 1,371 -- -- 1,371 -- -- -- -- - - --------------------------------------------------------------------------------------------------------------------------------- Total $44,789 $139 $ (10) $44,918 $31,951 $327 $(132) $32,146 ================================================================================================================================= December 31, 1996 - - --------------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY - - --------------------------------------------------------------------------------------------------------------------------------- GROSS GROSS GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE - - --------------------------------------------------------------------------------------------------------------------------------- U.S. government and agency securities $15,432 $ 28 $ (64) $15,396 $21,096 $ 35 $(229) $20,902 State and municipal securities -- -- -- -- 1,199 20 -- 1,219 Mortgage-backed securities 1,939 71 -- 2,010 16,192 227 -- 16,419 Federal Home Loan Bank stock 4,462 -- -- 4,462 -- -- -- -- Other securities 205 -- -- 205 -- -- -- -- - - --------------------------------------------------------------------------------------------------------------------------------- Total $22,038 $ 99 $ (64) $22,073 $38,487 $282 $(229) $38,540 =================================================================================================================================
1998 Annual Report Notes to Consolidated Financial Statements page ------------------------------------------------------------------------ Allegiant Bancorp, Inc. 31 23 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- Gross realized gains and losses on the sale of securities available-for-sale were $71,000 and $3,000, respectively, in 1998, $15,000 and $13,000, respectively, in 1997, and $56,000 and $7,000, respectively, in 1996. Held-to-maturity and available-for-sale securities with a carrying value of $33.579 million, $47.373 million and $52.121 million at December 31, 1998, 1997 and 1996, respectively, were pledged to secure public deposits and short-term borrowings. The contractual maturities of securities held-to-maturity and securities (other than Federal Home Loan Bank stock and other investments) available- for-sale at December 31, 1998 were as follows:
December 31, 1998 SECURITIES SECURITIES AVAILABLE-FOR-SALE HELD-TO-MATURITY - - --------------------------------------------------------------------------------------------------------------------------- AMORTIZED FAIR AMORTIZED FAIR (IN THOUSANDS OF DOLLARS) COST VALUE COST VALUE - - --------------------------------------------------------------------------------------------------------------------------- Due in one year or less $ 5,503 $ 5,538 $ 1,818 $ 1,829 Due from one year to five years 21,561 21,646 6,294 6,302 Due from five years to 10 years 3,396 3,446 305 323 Due after 10 years 198 203 26 27 - - --------------------------------------------------------------------------------------------------------------------------- Subtotal 30,658 30,883 8,443 8,481 Mortgage-backed securities 8,360 8,333 3,597 3,651 - - --------------------------------------------------------------------------------------------------------------------------- Total $39,018 $39,166 $12,040 $12,132 ===========================================================================================================================
Note 4 - - ----------- Loans The components of loans in the Consolidated Balance Sheets were as follows:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------- Commercial $126,239 $109,937 $ 75,129 Real estate mortgage 312,836 331,416 196,107 Real estate construction 36,590 27,181 8,763 Consumer and other 20,908 16,821 12,084 Net deferred loan fees, premiums and discounts (904) (493) (157) - - -------------------------------------------------------------------------- Total loans 495,669 484,862 291,926 Allowance for possible loan losses (6,442) (5,193) (3,100) - - -------------------------------------------------------------------------- Net loans $489,227 $479,669 $288,826 ==========================================================================
An analysis of the change in the allowance for possible loan losses follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------- Balance, beginning of year $ 5,193 $3,100 $2,130 Acquired subsidiary balance -- 403 -- Loans charged off (1226) (759) (545) Recoveries 55 52 67 - - -------------------------------------------------------------------------- Net loans charged off (1,171) (707) (478) Provision for possible loan losses 2,420 2,397 1,448 - - -------------------------------------------------------------------------- Balance, end of year $ 6,442 $5,193 $3,100 ==========================================================================
The recorded investment in loans that were considered to be impaired under SFAS No. 114, as amended by SFAS No. 118, was $1.495 million in 1998, $559,000 in 1997 and $400,000 in 1996 (these impaired loans were all classified as non-accrual loans). The related allowance for these impaired loans was $269,000 in 1998, $86,000 in 1997 and $41,000 in 1996. Interest income that would have been recognized for non-accrual loans was $72,000 in 1998, $57,000 in 1997 and $57,000 in 1996. Cash basis income on non-accrual loans was not significant for 1998, 1997 or 1996. The Company and the Bank have entered into transactions with their directors, significant shareholders and affiliates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. The aggregate amount of loans to such related parties at December 31, 1998, 1997 and 1996 was $35.930 million, $16.432 million, and $15.488 million, respectively. During 1998, $26.049 million of new loans and $6.551 million of repayments were made on related party loans. Prior year numbers have been reclassified for those directors and executive officers who no longer hold such positions. As of December 31, 1998, a $166,000 related party loan was past due 90 days or more. This loan has subsequently been brought current. No related party loans were past due more than 90 days as of December 31, 1997 or 1996. page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------------- 32 1998 Annual Report Notes to Consolidated Financial Statements 24 Note 5 - - ---------------------------- Premises and Equipment Components of premises and equipment as of December 31, 1998, 1997 and 1996 were as follows:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------- Land $ 2,546 $ 2,618 $ 1,515 Bank premises 5,657 5,019 2,542 Furniture, equipment and automobiles 6,537 5,630 3,379 - - -------------------------------------------------------------------------- Total cost 14,740 13,267 7,436 Less accumulated depreciation (3,730) (2,466) (1,922) - - -------------------------------------------------------------------------- Net book value $11,010 $10,801 $ 5,514 ==========================================================================
The bank leases various banking facilities and one piece of equipment under agreements, which expire at various dates through September 2012. These agreements have options to renew. Future minimum lease payments required under operating leases which have initial or remaining non-cancelable terms in excess of one year as of December 31, 1998 were approximately as follows:
MINIMUM (IN THOUSANDS OF DOLLARS) RENTAL - - ---------------------------------------------------------------------- 1999 $ 201 2000 217 2001 234 2002 224 2003 192 2004 and later 1,399 - - ---------------------------------------------------------------------- Total $2,467 ======================================================================
Rental expense for all operating leases was $327,000 in 1998, $210,000 in 1997 and $149,000 in 1996. Note 6 - - -------------- Deposits Deposits consisted of the following:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Non-interest bearing $ 55,417 $ 50,060 $ 29,406 Interest bearing demand 19,075 18,448 10,711 Money market accounts 123,827 97,408 74,490 Savings 14,917 16,157 6,083 Time and IRA certificates under $100,000 206,357 250,357 137,155 - - --------------------------------------------------------------------------- Total core deposits 419,593 432,430 257,845 Time certificates $100,000 and over 31,173 52,211 50,825 - - --------------------------------------------------------------------------- Total deposits $450,766 $484,641 $308,670 ===========================================================================
The scheduled maturities of the Company's consumer time certificates under $100,000 and time certificates $100,000 and over as of December 31, 1998 are as follows:
SCHEDULED MATURITY (IN THOUSANDS OF DOLLARS) AMOUNT - - ---------------------------------------------------------------------- 1999 $165,023 2000 41,452 2001 18,513 2002 6,126 2003 5,402 2004 and later 1,014 - - ---------------------------------------------------------------------- Total $237,530 ======================================================================
Note 7 - - ------------------ Income Taxes The Company's results include income tax expense (benefit) as follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------- Current $3,522 $2,401 $1,457 Deferred (496) (685) (282) - - -------------------------------------------------------------------------- Total $3,026 $1,716 $1,175 ==========================================================================
The tax effects of temporary differences that gave rise to the deferred tax assets and liabilities are presented below:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Deferred tax assets: Reserve for possible loan losses $2,217 $1,536 $ 811 Deferred loan fees -- 194 52 Deferred compensation -- 74 32 Accrued expenses -- 63 41 Mark-to-market securities adjustments -- 44 12 Other 116 72 69 - - --------------------------------------------------------------------------- Total deferred tax assets 2,333 1,983 1,017 - - --------------------------------------------------------------------------- Deferred tax liabilities: Depreciation (119) (461) (226) Investments in debt and equity securities -- SFAS No. 115 (50) -- -- Discount accretion (83) -- -- Other (10) (29) (15) - - --------------------------------------------------------------------------- Total deferred tax liabilities (262) (490) (241) - - --------------------------------------------------------------------------- Net deferred tax assets $2,071 $1,493 $ 776 ===========================================================================
1998 Annual Report Notes to Consolidated Financial Statements page ------------------------------------------------------------------------- Allegiant Bancorp, Inc. 33 25 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. The Company has not established a valuation allowance as of December 31, 1998, 1997 or 1996, due to management's belief that all criteria for recognition have been met, including the existence of a history of taxes paid sufficient to support the realization of the deferred tax assets. Income tax expense as reported differs from the amounts computed by applying the statutory federal income tax rate to pre-tax income as follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - -------------------------------------------------------------------------- Computed expected tax expense $2,646 $1,405 $1,014 Tax-exempt income (157) (38) (19) State and local income taxes, net of federal tax benefits 314 258 143 Goodwill amortization 318 24 23 Other, net (95) 67 14 - - -------------------------------------------------------------------------- Total tax expense $3,026 $1,716 $1,175 ==========================================================================
Note 8 - - --------------------------- Short-term Borrowings Short-term borrowings were as follows:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Securities sold under agreements to repurchase $14,042 $ 8,252 $11,637 Federal funds purchased -- 6,500 -- Federal Home Loan Bank advances 39,500 37,850 24,500 Other short-term borrowings -- 977 -- - - --------------------------------------------------------------------------- Total short-term borrowings $53,542 $53,579 $36,137 ===========================================================================
As collateral for the Federal Home Loan Bank advances, the Bank has entered into a blanket agreement that pledges first mortgage loans with principal balances aggregating 130% of the outstanding advances. The weighted average rate paid on short-term borrowings at year-end 1998, 1997 and 1996 were 4.85%, 5.15% and 5.55%, respectively. Note 9 - - -------------------- Long-Term Debt Long-term debt consisted of the following at year-end:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------------------ Notes payable to a financial institution, interest payable quarterly (7% on December 31, 1998), balance outstanding payable on November 12, 2001, secured by Bank stock $13,650 $ -- $ -- Note payable to a financial institution, interest payable quarterly at prime less one half of one percent (7.25% on December 31, 1998), balance outstanding payable on December 31, 1999, secured by Bank stock -- 10,400 4,400 Notes payable to FHLB, interest payable monthly at rates varying from 5.05% to 6.27%, principal balance due at maturity ranging from April 3, 2000 to January 16, 2008 secured by stock in FHLB and certain loans 26,625 9,625 7,000 Subordinated debentures with certain shareholders, interest payable quarterly at prime plus 3% (with a minimum floor of 10%), called in 1998 -- 3,250 3,263 - - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term debt $40,275 $23,275 $14,663 ====================================================================================================================================
Under the terms of the current notes payable to a financial institution, the Company and/or its subsidiaries are required to maintain certain financial ratios and are limited with respect to cash dividends, capital expenditures and the incurrence of additional indebtedness without prior approval. Principal payments are required as follows: $500,000 payable on October 1, 1999; $500,000 payable on October 1, 2000; $1.000 million payable on October 1, 2001; and the balance outstanding payable on November 12, 2001. Common stock warrants of 121,049 exercisable at $6.61 per share, which were issued in connection with the subordinated debentures, remained outstanding at December 31, 1998. These warrants expire on May 31, 1999. A summary of annual principal reductions of long-term debt as of December 31, 1998 is as follows:
ANNUAL PRINCIPAL (IN THOUSANDS OF DOLLARS) REDUCTIONS - - ---------------------------------------------------------------------- 1999 $ 500 2000 5,000 2001 12,650 2002 625 2003 1,500 2004 and later 20,000 - - ---------------------------------------------------------------------- Total $40,275 ======================================================================
page Allegiant Bancorp, Inc. - - --------------------------------------------------------------------------- 34 1998 Annual Report Notes to Consolidated Financial Statements 26 Note 10 - - ----------------------------------------- Common Stock and Earnings Per Share On July 1, 1998, the Company's Board of Directors declared a six-for-five stock split (in the form of a stock dividend) of the Company's Common Stock to shareholders of record on January 8, 1999, payable January 29, 1999. Common stock was credited and capital surplus was charged for the aggregate par value of shares that were issued. The stated par value of each share was not changed from $.01. On September 19, 1997, the Company's Board of Directors declared a five-for- four stock split (in the form of a stock dividend) of the Company's common stock to shareholders of record on January 7, 1998, payable on January 21, 1998. Common Stock was credited and capital surplus was charged for the aggregate par value of the shares that were issued. The stated par value of each share was not changed from $.01. On September 19, 1996, the Company's Board of Directors declared a 10% stock dividend to shareholders of record on January 2, 1997, payable on January 15, 1997. The transaction was valued based on the closing market price of the Company's Common Stock at the date of declaration. All per share data in this report have been restated to reflect the aforementioned stock splits and stock dividend. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share gives effect to all dilutive potential common shares that were outstanding during the year. The components of basic and diluted earnings per share as prescribed by SFAS No. 128 are as follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996 - - --------------------------------------------------------------------------- Net income $ 4,534 $ 2,415 $ 1,808 =========================================================================== Denominator: Weighted average shares outstanding 6,250,910 4,481,724 3,298,013 Effect of dilutive securities: Stock options and warrants 383,946 403,579 410,808 Dilutive potential common shares 383,946 403,579 410,808 - - --------------------------------------------------------------------------- Denominator for diluted earnings per share- adjusted weighted average shares 6,634,856 4,885,303 3,708,821 =========================================================================== Basic earnings per share $ 0.72 $ 0.54 $ 0.55 Diluted earnings per share 0.68 0.49 0.48
Note 11 - - ----------------------- Employee Benefits PENSION PLAN. The Company has a defined contribution pension plan in effect for substantially all full-time employees. Salaries and employee benefits expense includes $124,000 in 1998, $39,000 in 1997 and $30,000 in 1996 for such plans. Contributions under the defined contribution plan are made at the discretion of Company management. PHANTOM STOCK PLAN. In December 1994, the Company's Board of Directors approved a Phantom Stock Plan for the President, under which the Company agreed to pay a cash award to the President of the Company based on the increase in book value of shares of the Company's Common Stock, from December 31, 1994 until the earlier of December 31, 1998 or the year immediately preceding the year the President's employment terminates. The annual provision under this plan for the years ended December 31, 1998, 1997, and 1996 was approximately $47,000, $225,000 and $55,000, respectively. Deferred compensation included in accrued expenses and other liabilities totaled $365,000, $318,000 and $93,000 at December 31, 1998, 1997 and 1996, respectively. Note 12 - - ---------------------------------------------------------- Stock Option Plans and Directors Stock Purchase Plan The Company has reserved 1,454,000 shares of its Common Stock for issuance under various stock option plans offered to directors and certain key employees of the Company and its subsidiaries. Options are granted, by action of the Board of Directors, to acquire stock at 110% of fair market value at the date of the grant, for a term of up to 10 years. 1998 Annual Report Notes to Consolidated Financial Statements page -------------------------------------------------------------------------- Allegiant Bancorp, Inc. 35 27 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- At December 31, 1998, $525,000 shares remained available for option grants under these programs. The following tables summarize option activity over the last three years and current options outstanding:
Year ended December 31, 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------------ WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE SHARES OPTION PRICE SHARES OPTION PRICE SHARES OPTION PRICE - - ------------------------------------------------------------------------------------------------------------------------------ Outstanding, beginning of year 768,230 $ 6.42 691,987 $ 5.11 509,938 $3.82 Granted 146,386 14.84 284,273 9.20 190,245 8.54 Exercised (378,767) 4.51 (204,580) 5.79 (7,865) 3.82 Canceled (18,009) 11.28 (3,450) 10.00 (331) 8.00 - - ----------------------------------------------- ---------- ---------- Outstanding, end of year 517,840 10.02 768,230 6.42 691,987 5.11 =============================================== ========== ========== Weighted-average fair value of options granted during the year $ 3.59 $ 2.74 $ 2.28 ==============================================================================================================================
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - - --------------------------------------------------------------------------------------------------------------------------------- WEIGHTED- NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED- OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE EXERCISE PRICE 1998 LIFE PRICE 1998 PRICE - - --------------------------------------------------------------------------------------------------------------------------------- $ 2.76 - $ 3.97 46,790 0.7 years $ 3.68 43,462 $ 3.65 $ 4.13 - $ 7.92 101,488 2.0 years 6.78 97,858 6.88 $ 8.78 - $10.45 213,174 3.0 years 9.68 141,684 9.43 $11.58 - $18.57 156,388 4.2 years 14.49 64,432 15.33 $ 2.76 - $18.57 517,840 2.9 years 10.02 347,436 9.08 =================================================================================================================================
The Company has a directors stock purchase plan whereby outside directors of the Company and its subsidiaries may elect to use their directors' fees to purchase Common Stock at market value. Twelve thousand shares were purchased at an average price of $11.50 in 1998; 13,000 shares were purchased at an average price of $10.74 in 1997; and 25,000 shares were purchased at an average price of $7.27 in 1996. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans. Accordingly, no compensation expense has been recognized for its stock-based compensation plans. Had compensation cost for the Company's stock-based compensation plans been determined based upon the fair value of the grant date for the awards under these plans consistent with the methodology prescribed under SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
Year ended December 31, (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1998 1997 1996 - - --------------------------------------------------------------------------------------------------- Net income: As reported $4,534 $2,415 $1,808 Pro forma 4,208 1,988 1,534 Basic earnings per share: As reported 0.72 0.54 0.55 Pro forma 0.67 0.44 0.47 Diluted earnings per share: As reported 0.68 0.49 0.48 Pro forma 0.63 0.41 0.42
The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option-pricing model using the following weighted- average assumptions:
Year ended December 31, 1998 1997 1996 - - -------------------------------------------------------------------------- Dividend yield 1.80% 0.90% 0.93% Volatility 30.80 16.38 34.23 Risk-free interest rate 5.02 6.44 6.41 Expected life 5 years 5 years 5 years
Note 13 - - ------------------------------ Concentrations of Credit Substantially all of the Bank's loans, commitments and commercial and standby letters of credit have been granted to customers that are depositors of the Bank and in the Bank's market area. Investments in state and municipal securities also involve governmental entities within the Bank's market area. The concentrations of credit by type of loan are set forth in Note 4. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers. page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------------- 36 1998 Annual Report Notes to Consolidated Financial Statements 28 Note 14 - - --------------------------- Financial Instruments 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 commitments to extend credit, standby letters of credit and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amounts of these instruments reflect the extent of the Bank's involvement in particular classes of financial instruments. The Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and financial guarantees written is represented by the contractual or notional 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. A summary of the notional amounts of the Bank's financial instruments with off-balance sheet risk at December 31, 1998, 1997 and 1996 follows:
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Commitments to extend credit $82,530 $84,604 $73,522 Standby letters of credit 6,496 3,868 1,310
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, equipment and real estate. Standby letters of credit and financial guarantees written 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 contractual obligations of Bank customers. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The carrying amount and estimated fair values of the Company's financial instruments were as follows:
DECEMBER 31, 1998 DECEMBER 31, 1997 - - ------------------------------------------------------------------------------------------------------------------ CARRYING FAIR CARRYING FAIR (IN THOUSANDS OF DOLLARS) AMOUNT VALUE AMOUNT VALUE - - ------------------------------------------------------------------------------------------------------------------ Financial Assets: Cash and due from banks, federal funds sold and other overnight investments $ 17,123 $ 17,123 $ 16,472 $ 16,472 Securities available-for-sale 42,740 42,740 44,918 44,918 Securities held-to-maturity 12,040 12,132 31,951 32,146 Loans 489,227 492,746 479,669 479,502 Financial Liabilities: Deposits $450,766 $452,788 $484,641 $484,728 Short-term borrowings 53,542 53,566 53,579 53,663 Long-term debt 40,275 40,219 23,275 23,817
1998 Annual Report Notes to Consolidated Financial Statements page -------------------------------------------------------------------------- Allegiant Bancorp, Inc. 37 29 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein: CASH AND SHORT-TERM INSTRUMENTS: The carrying amounts of cash and due from banks and federal funds sold approximate their fair value. SECURITIES: Fair values for held-to-maturity and available-for-sale securities are based on quoted market prices or dealer quotes, where available. If quoted market prices are not available for a specific security, fair values are based on quoted market prices of comparable instruments. LOANS: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for fixed-rate loans are estimated using discounted cash flow analyses and applying interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The fair values for non-performing loans are estimated using assumptions regarding current assessments of collectibility and historical loss experience. DEPOSITS: The fair values disclosed for deposits generally payable on demand, such as non-interest bearing checking accounts, savings accounts, NOW accounts and market rate deposit accounts, are by definition, equal to the amount payable on demand at the reporting date. The carrying amounts for variable-rate, fixed-term market rate deposit accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of similar remaining maturities to a schedule of aggregated monthly maturities on time deposits. SHORT-TERM BORROWINGS: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings approximate their fair values at the reporting date. LONG-TERM DEBT: The fair value of the Company's long-term debt is based on quoted market prices for similar issues or estimates using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of debt instruments. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments and the present creditworthiness of such counterparties. The Company believes such commitments have been made on terms which are competitive in the markets in which it operates; however, no premium or discount is offered thereon and accordingly, the Company has not assigned a value to such instruments for the purposes of this disclosure. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgements regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates. Note 15 - - ------------------------ Regulatory Matters The Company and the Bank are subject to various regulatory capital requirements administered by federal and state 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 Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and the Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital amounts and classifications also are subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulators to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table on page 39) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of December 31, 1998, the Company and the Bank met all capital adequacy requirements to which they are subject. As of June 30, 1998, the date of the most recent notification from the regulatory agencies, the Bank was categorized as well capitalized under the regulatory framework. page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------------- 38 1998 Annual Report Notes to Consolidated Financial Statements 30 The actual and required capital amounts and ratios as of December 31, 1998 and 1997 for the Company and the Bank are listed in the following table:
TO BE WELL CAPITALIZED UNDER FOR CAPITAL PROMPT CORRECTIVE (IN THOUSANDS OF DOLLARS) ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS - - --------------------------------------------------------------------------------------------------------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO - - --------------------------------------------------------------------------------------------------------------------------------- As of December 31, 1998: Total Capital: (to Risk-Weighted Assets) Allegiant Bancorp, Inc. $41,272 8.68% $38,059 8.00% N/A N/A Allegiant Bank 51,931 10.93 37,999 8.00 $47,499 10.00% Tier 1 Capital: (to Risk-Weighted Assets) Allegiant Bancorp, Inc. 35,319 7.42 19,030 4.00 N/A N/A Allegiant Bank 45,991 9.68 18,999 4.00 28,499 6.00 Tier 1 Capital: (to Average Assets) Allegiant Bancorp, Inc. 35,319 5.83 24,221 4.00 N/A N/A Allegiant Bank 45,991 7.61 24,185 4.00 30,232 5.00 - - --------------------------------------------------------------------------------------------------------------------------------- As of December 31, 1997: Total Capital: (to Risk-Weighted Assets) Allegiant Bancorp, Inc. $36,250 8.14% $35,646 8.00% N/A N/A Allegiant Bank 39,820 9.35 34,081 8.00 $42,601 10.00% Tier 1 Capital: (to Risk-Weighted Assets) Allegiant Bancorp, Inc. 28,457 6.39 17,823 4.00 N/A N/A Allegiant Bank 35,237 8.27 17,040 4.00 25,560 6.00 Tier 1 Capital: (to Average Assets) Allegiant Bancorp, Inc. 28,457 6.15 18,521 4.00 N/A N/A Allegiant Bank 35,237 7.76 18,156 4.00 22,695 5.00
Note 16 - - --------------------------------------------- Restrictions on Cash and Due From Banks At December 31, 1998, $1.926 million in cash and due from banks balances were maintained in accordance with the guidelines set forth by the Federal Reserve Bank to maintain certain average reserve balances. Note 17 - - ------------------------------- Other Income and Expenses A summary of the components of other income and other expenses exceeding 1% of revenues in each of the years presented is as follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Gain on sale of branches $2,370 $ -- $ -- Mortgage banking revenue 2,299 1,300 312 Leasing revenue 1,527 433 -- Gain on sale of mortgage loans 1,112 27 99 Furniture and equipment 1,752 943 689 Occupancy 1,523 738 448 Depreciation of operating leases 1,340 394 -- Goodwill amortization 910 358 67 Operating losses 722 938 144 Supplies 489 428 202
1998 Annual Report Notes to Consolidated Financial Statements page -------------------------------------------------------------------------- Allegiant Bancorp, Inc. 39 31 cont'd Notes to Consolidated Financial Statements - - -------------------------------------------------- Note 18 - - ---------------------------------------------------- Parent Company Condensed Financial Information Following are the condensed financial statements of the Company (Parent Company only) for the periods indicated: Balance Sheets
December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- ASSETS Cash $ 1,044 $ 1,555 $ 115 Investment in subsidiaries 60,046 53,301 23,555 Other assets 1,707 3,034 639 - - --------------------------------------------------------------------------- Total assets 62,797 57,890 24,309 LIABILITIES Long-term debt 13,650 13,650 7,663 Other liabilities 1,043 2,169 260 - - --------------------------------------------------------------------------- Total liabilities 14,693 15,819 7,923 Shareholders' equity 48,104 42,071 16,386 - - --------------------------------------------------------------------------- Total liabilities and shareholders' equity $62,797 $57,890 $24,309 ===========================================================================
Statements of Income
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - --------------------------------------------------------------------------- Income Dividends from subsidiaries $ 1,000 $1,475 $1,600 Total Income 1,000 1,475 1,600 Expenses Interest on long-term debt 1,183 812 828 Personnel expense 1,674 350 42 Other operating expenses 799 248 204 - - --------------------------------------------------------------------------- Total expenses 3,656 1,410 1,074 - - --------------------------------------------------------------------------- Income before income tax benefit and equity in undistributed income of subsidiaries (2,656) 65 526 Income tax benefit 1,448 490 430 - - --------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries (1,208) 555 956 Equity in undistributed income of subsidiaries 5,742 1,860 852 - - --------------------------------------------------------------------------- Net income $ 4,534 $2,415 $1,808 ===========================================================================
Statements of Cash Flows
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - ------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net income $ 4,534 $ 2,415 $ 1,808 Adjustments to reconcile net income to net cash provided by operating activities Net income of subsidiaries (6,742) (3,335) (2,452) Dividends from subsidiaries 1,000 1,475 1,600 Other, net 346 (558) 237 - - ------------------------------------------------------------------------------------ Net cash provided by operating activities (862) (3) 1,193 INVESTING ACTIVITIES Contributions of capital to subsidiaries (1,000) (13,979) -- Other, net (15) -- -- - - ------------------------------------------------------------------------------------ Net cash used by investing activities (1,015) (13,979) -- FINANCING ACTIVITIES Cash dividends paid (917) (331) (187) Net issuance of common stock 2,283 12,753 61 Issuance of long-term debt 13,650 3,000 -- Principal payments on long-term debt (13,650) -- (956) - - ------------------------------------------------------------------------------------ Net cash provided (used) by financing activities 1,366 15,422 (1,082) - - ------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (511) 1,440 111 Cash and cash equivalents at beginning of year 1,555 115 4 - - ------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 1,044 $ 1,555 $ 115 ====================================================================================
Note 19 - - ------------------------------------------ Restrictions on Subsidiary Dividends Subsidiary bank dividends are the principal source of funds for payment of dividends by the Company to its shareholders. The payment of dividends by the bank is subject to regulation by the Federal Deposit Insurance Corporation. The state-chartered bank is also subject to regulation by the state of Missouri. These payments are not restricted as to the amount of dividends that can be paid, other than what prudent and sound banking principles permit and what must be retained to meet minimum legal capital requirements. Accordingly, dividends of approximately $11.997 million could be paid in December 31, 1998 without prior regulatory approval. Extensions of credit by subsidiaries to the Company are permitted by regulatory authorities but are limited in amount and subject to collateral requirement. At December 31, 1998, approximately $3.993 million would have been available under Federal Reserve Bank guidelines. page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------------- 40 1998 Annual Report Notes to Consolidated Financial Statements 32 Note 20 - - -------------------------------------------------------------------------- Supplemental Disclosure for the Consolidated Statement of Cash Flows Supplemental disclosures of noncash investing and financing activities, and additional disclosures including details of cash and cash equivalents from acquisitions accounted for as purchases and dispositions of branches, were as follows:
Year ended December 31, (IN THOUSANDS OF DOLLARS) 1998 1997 1996 - - ------------------------------------------------------------------------------------ Fair value of assets purchased (disposed) $ 17,492 $ 46,682 $ -- Liabilities assumed (transferred) (40,154) 119,691 -- Issuance of common stock -- 10,587 -- - - ------------------------------------------------------------------------------------ Net cash received (paid) for acquisitions and dispositions (22,662) 83,596 -- Cash and cash equivalent acquired -- 1,533 -- - - ------------------------------------------------------------------------------------ $(22,662) $ 85,129 $ -- ==================================================================================== Cash paid during the year for: Interest on deposits and borrowings $ 28,096 $ 20,930 $14,750 Income taxes 3,345 2,768 1,393 Noncash transactions: Transfers to other real estate owned in settlement of loans $ -- $ 330 $ -- Loans securitized -- 7,102 9,209 Common stock issued in acquisition of Reliance Financial, Inc. -- 10,587 -- Conversion of subordinate debentures to common stock -- - 504 Conversion of directors' fees to Common stock 135 136 148 Conversion of employee stock bonus to common stock -- 63 --
Note 21 - - ------------------------------------ Summary of Quarterly Financial Information (Unaudited) The following is a summary of quarterly operating results for the years ended December 31, 1998 and 1997:
1998 - - ------------------------------------------------------------------------------------------ (IN THOUSANDS OF DOLLARS, FIRST SECOND THIRD FOURTH EXCEPT PER SHARE AMOUNTS) QUARTER QUARTER QUARTER QUARTER - - ------------------------------------------------------------------------------------------ Interest income $12,270 $12,288 $12,452 $12,208 Interest expense 6,841 7,052 6,835 6,539 - - ------------------------------------------------------------------------------------------ Net interest income 5,429 5,236 5,617 5,669 Provision for possible loan losses 400 315 465 1,240 Securities transactions 12 46 4 6 Other income 1,097 2,130 1,946 4,083 Other expense 5,118 5,295 5,112 5,770 Income taxes 393 725 783 1,125 - - ------------------------------------------------------------------------------------------ Net income $ 627 $ 1,077 $ 1,207 $ 1,623 ========================================================================================== Earnings per share: Basic $ 0.10 $ 0.17 $ 0.19 $ 0.26 Diluted 0.09 0.16 0.18 0.25 1997 - - ------------------------------------------------------------------------------------------ (IN THOUSANDS OF DOLLARS, FIRST SECOND THIRD FOURTH EXCEPT PER SHARE AMOUNT) QUARTER QUARTER QUARTER QUARTER - - ------------------------------------------------------------------------------------------ Interest income $ 7,536 $ 8,337 $10,124 $11,768 Interest expense 4,374 4,625 5,729 6,738 - - ------------------------------------------------------------------------------------------ Net interest income 3,162 3,712 4,395 5,030 Provision for possible loan losses 493 628 556 720 Securities transactions -- -- 25 (23) Other income 636 556 938 1,166 Other expense 2,303 2,475 3,408 4,883 Income taxes 401 465 556 294 - - ------------------------------------------------------------------------------------------ Net income $ 601 $ 700 $ 838 $ 276 ========================================================================================== Earnings per share: Basic $ 0.17 $ 0.17 $ 0.18 $ 0.02 Diluted 0.15 0.15 0.17 0.02
1998 Annual Report Notes to Consolidated Financial Statements page -------------------------------------------------------------------------- Allegiant Bancorp, Inc. 41 33 Allegiant Bancorp, Inc. Board of Directors - - ------------------------------------------------------------------------------ [PHOTO] Standing left to right: - - ---------------------------------- John K. Krause President Jenkin-Guerin, Inc. Leland B. Curtis Partner/Principal-Attorney Curtis Oetting Heinz Garrett & Soule Charles E. Polk, Jr. Attorney Stinson, Mag & Fizzell Kevin R. Farrell President and Chief Executive Officer St. Louis Steel Products C. Virginia Kirkpatrick President and Chief Executive Officer CVK Personnel Management Marvin S. Wool Chairman, Chief Executive Officer and President Dash Multi-Corp. Chairman Allegiant Bancorp, Inc. Chairman Allegiant Bank Seated left to right: - - ---------------------------------- Lee S. Wielansky Managing Director-Investments Regency Realty Corporation Vice Chairman Allegiant Bank Shaun R. Hayes President and Chief Executive Officer Allegiant Bancorp, Inc. President and Chief Executive Officer Allegiant Bank Leon Felman President and Chief Executive Officer Sage Systems, Inc. Allegiant Bancorp, Inc. Executive Officers - - ------------------------------------------------------------------------------ Marvin S. Wool Chairman, Chief Executive Officer and President Dash Multi-Corp. Chairman Allegiant Bancorp, Inc. Chairman Allegiant Bank Shaun R. Hayes President and Chief Executive Officer Allegiant Bancorp, Inc. President and Chief Executive Officer Allegiant Bank Sandra L. Friedman Executive Vice President and Chief Financial Officer Allegiant Bank Senior Vice President and CFO Allegiant Bancorp, Inc. Allegiant Bank Directors - - ------------------------------------------------------------------------------ Keith Barket President Barket Realty Frank J. Cusumano Consultant Kemoll's Restaurant William Davidson President Davidson & Associates Kevin R. Farrell President and Chief Executive Officer St. Louis Steel Products Sandra L. Friedman Senior Vice President and CFO Allegiant Bancorp, Inc. Executive Vice President and Chief Financial Officer Allegiant Bank William H. Gibson, Jr. Chief of Dental Health Care St. Louis County Department of Health Paul F. Glarner Executive Vice President and Chief Lending Officer Allegiant Bank Sidney H. Guller Chairman Essex Industries, Inc. Shaun R. Hayes President and Chief Executive Officer Allegiant Bancorp, Inc. President and Chief Executive Officer Allegiant Bank Brian Matthews Chief Executive Officer CDM/Primary Network William H. Nottke President Riverdale Packaging and Riverdale Display Charles E. Polk, Jr. Attorney Stinson, Mag & Fizzell Jon M. Pyzyk President and Chief Executive Officer Kohner Properties Fr. Richard J. Quirk Executive Director Catholic Commission on Housing John Weiss President Brentwood Volvo-Manchester Leasing Lee S. Wielansky Managing Director-Investments Regency Realty Corporation Vice Chairman Allegiant Bank Marvin S. Wool Chairman, Chief Executive Officer and President Dash Multi-Corp. Chairman Allegiant Bancorp, Inc. Chairman Allegiant Bank Allegiant Bank Senior Management Group - - ------------------------------------------------------------------------------ Shaun R. Hayes President and Chief Executive Officer Allegiant Bancorp, Inc. President and Chief Executive Officer Allegiant Bank Sandra L. Friedman Executive Vice President and Chief Financial Officer Allegiant Bank Senior Vice President and CFO Allegiant Bancorp, Inc. Paul F. Glarner Executive Vice President and Chief Lending Officer Donald M. Davis Senior Vice President Commercial Loans Michael Jung Senior Vice President Commercial Loans West Region John M. Meek Senior Vice President Commercial Loans Central Region James L. Schaller Senior Vice President Retail Banking Jeanne Whitmire Senior Vice President Mortgage Lending Richard Markow President Allegiant Trust Company Leda Sander President Edge Mortgage Services, Inc. Karen E. Box Vice President and Director Human Resources Jeffrey R. Heutel Vice President Compliance Officer David Maher Vice President Controller Kimberli Palmer Vice President Operations Christy Siburt Executive Assistant and Secretary Allegiant Bank Vice President, Investor Relations Allegiant Bancorp, Inc. John Svetina Vice President Mortgage Sales Thomas Daiber Director Internal Audit page Allegiant Bancorp, Inc. - - ---------------------------------------------------------------------- 42 1998 Annual Report Officers and Directors 34 Banking Center Directors - - ------------------------------------------------------------------------------ CENTRAL Patrick J. Barrett, Jr. President, Neonatal Division Biomedical Systems Bill Bounds (Chairman) Accountant Humes & Barrington PC Richard C. Goldberg President The Goldberg Group Sandy Grote Owner Grote Industries George Hensley, Jr. President Hensley Construction, Inc. Mark Mehlman President Mehlman Realty Company Jacque Phillips President Accu-Care Home Nurses, Inc. Carey Prewitt President The Charles L. Crane Agency Vince Vogler Attorney Vincent D.Vogler & Assoc. Arthur Weiss President Weiss & Yess PC CLAYTON Stephen Adams Vice President/General Manager of St. Louis Stores Enterprise Leasing Steve Adelman President Adelman Management Corporation Judith L. Brown Broker/Owner ReMax Associates Lawrence H. Greenberg President Greenberg & Associates Paul Henderson President The Henderson Group, Inc. Peter Katsinas President Forest Park Lumber Co. Joy Liss Broker Stifel Nicolaus Joel Schraier Partner Bergman Schraier & Co. P.C. Robert Taylor President St. Louis Electronics John Weiss (Chairman) President Brentwood Volvo George (Butch) Welsch President Welsch Heating & Cooling Co. ST. LOUIS CITY Jon Dalton (Chairman) Partner Bryan Cave LLP William Davidson President Davidson & Associates James E. Godfrey, Jr. Attorney Godfrey & Associates Edward E. Gruener President Gruener Office Interiors David Mason Judge, Circuit Judge 22nd Circuit Charles E. Polk, Jr. Attorney Stinson, Mag & Fizzell Milton (Peter) D. Rothschild President Rothschild Development, LTD Robert Wood President Robert Wood Realty Freeman Bosley, Jr. Attorney Caldwell, Hughes & Singleton NORTH James Bowen Ron L. Chitwood President C-K Plastics, Inc. Rainey Crawford, Jr. Regional Manager/Gov't. Affairs Ford Motor Company Ken Glass President Safeguard Business Systems Michael L. Hammach (Chairman) President CATCO, Inc. Kerry Klarfeld President Klarfeld Real Estate Company, Inc. Dennis Norman President Saaman Corp. SOUTH Myron Applebaum President Applebaum & Associates Stephen Bahn Principal Voss Bahn Commercial RE Services John Bowman Former President Reliance Federal Savings Bank Thomas C. DeVoto Partner DeVoto, Paperner, DeVoto & Nalick Glenn Heitmann (Chairman) President and Chief Executive Officer Heitmann & Assoc., Inc. Yogi Patel Doctor Barnes Jewish Hospital Constantine (Gus) Pulos Attorney Pulos, Blankenship & Jianakoplos PC ST. CHARLES David Anderson Vice President Gundaker Realtors Gerald Bamberger Attorney Gerald J. Bamberger & Assoc. Tom Brown Partner Motivational Concepts, Inc. Roger A. De La Torre, MD Doctor Laparoscopic & Vascular Surgery Stephen Lundergan (Chairman) President Richlund & Associations William Mullen President U.S. Cable David Wright Vice President Kaplan Real Estate Co. TRUST Mark R. Bahn Attorney McAvoy & Bahn Daniel Bruntrager Partner Bruntrager & Billings Stephen B. Daiker Attorney Bryan Cave LLP Bradley Faerber Certified Public Accountant Lopata, Flegel, Hoffman & Co. Sheldon Harber Financial Planner Asset Strategies, Inc. Ben Keller Attorney Rosenblum Goldenhersh Silverstein & Zafft, P.C. Charles McCarter Attorney McCarter & Greenley Matthew G. Perlow Attorney Blackwell Sanders Peper Martin Harvey G. Schneider Attorney Evans & Dixon Bradford L. Stevens (Chairman) Attorney Dankenbring Greiman Osterholt & Hoffmann UNION Tom Buescher CPA/Partner Hochschild, Bloom & Co. Charles Hurth Attorney Neil Kruel (Chairman) President A.J. Kruel Corporation Fred Springmeyer Vice President-Sales CK Plastics Harvey Mefford Retired Rod Schwentker Owner Pro-Body Works WARRENTON Dr. Susan D. Alberts Chiropractic Physician Wesley Dalton Attorney Rod Gossett President and Accountant Gossett Tax Services Karen L. Gregory Principal Rebecca Boone Elementary Toni Hawley Director of Economic Development Warrenton Area Economic Development Thomas Nittler (Chairman) Vice President-Finance Warrenton Products, Inc. Gregory Renaud President Cut-N-Trim Landscaping, Inc. Scott A. Sanders Certified Public Accountant Janet Schamma Retired Allegiant Bank Retail Banking Officer WEST Jackie Joyner Kersee President JJK & Associates H. Bart Baker Producer Lockton Companies B. Thomas Beattie Broker Beattie & Hawkins William Benedict Doctor University Internists of St. Louis Robert Chambers (Chairman) President KW Chambers Steve R. Garner President Town & Village Properties Mike Hejna President Gundaker Commercial Group Andrew Katzman Owner ARK Investments Vince Nangle Certified Public Accountant Nangle & Associates John O'Connell Vice President-Finance Hayden Homes Tom Shelby Chief Executive Officer Camie-Campbell Int'l., Inc. Kenneth Stricker Vice President- Chief Financial Officer The Jones Company Allegiant Bank Executive Management Committee - - ------------------------------------------------------------------------------ [PHOTO] Standing left to right: Seated left to right: - - ---------------------------------------------------------------- Karen Box Paul F. Glarner Vice President, Executive Vice President Human Resource Director and Chief Lending Officer James L. Schaller Shaun R. Hayes Senior Vice President, President & Chief Retail Banking Executive Officer Christy Siburt Sandra L. Friedman Corporate Administrator Executive Vice President and and Assistant Secretary Chief Financial Officer 1998 Annual Report Officers and Directors page ------------------------------------------------------ Allegiant Bancorp, Inc. 43 35 Shareholder Information CORPORATE HEADQUARTERS Allegiant Bancorp, Inc. 2122 Kratky Road St. Louis, MO 63114 314/692-8200 ANNUAL MEETING The 1999 annual meeting of shareholders of Allegiant Bancorp, Inc. will be held on Thursday, April 29, at 4:00 p.m. at the Sheraton West Port Hotel. INVESTOR RELATIONS Security analyst and other investor inquiries should be directed to: Allegiant Bancorp, Inc. Investor Relations Department 2122 Kratky Road St. Louis, MO 63114 314/216-7446 A copy of the Company's Annual Report on Form 10-K as filed with Securities and Exchange Commission is available on request by writing to: Allegiant Bancorp, Inc. Shareholder Information 2122 Kratky Road St. Louis, MO 63114 TRANSFER AGENT Communications regarding share transfer, lost certificates, change of address and dividend inquiries should be directed to: UMB Bank 928 Grand Blvd. P.O. Box 410064 Kansas City, MO 64141 MARKET MAKERS STIFEL NICOLAUS & CO., INC. TRIDENT SECURITIES, INC. 501 North Broadway 1275 Peachtree Street, N.E. St. Louis, MO 63102 Atlanta, GA 30309 314/342-2261 404/249-7700 A.G. EDWARDS AND SONS KNIGHT SECURITIES, LLP 1 North Jefferson 525 Washington Blvd. St. Louis, MO 63103 Jersey City, NJ 07130 314/955-3000 CORPORATE COUNSEL AUDITORS Thompson Coburn LLP Ernst & Young LLP DIVIDEND REINVESTMENT The Company offers a dividend reinvestment and stock purchase plan to registered shareholders. Information about the plan may be obtained by writing to: Allegiant Bancorp, Inc. Shareholder Information 2122 Kratky Road St. Louis, MO 63114 Common Stock Share Data (symbol: "ALLE") The Common Stock (symbol: "ALLE") has been traded on the Nasdaq National Market since May 15, 1996. From January 1, 1996 to such date it was traded on the Nasdaq Small Cap Market. As of March 20, 1999, the number of shareholders of the Common Stock was approximately 2,300. The following table sets forth the high and low trading prices, as well as dividends per share for the periods shown, as reported by Nasdaq. Such prices reflect interdealer prices, without retail mark-up, mark-down or commission, and have been adjusted to reflect all stock splits and stock dividends.
DIVIDENDS DECLARED HIGH LOW AND PAID - - --------------------------------------------------------------------- 1998 First Quarter $21.042 $11.000 $0.025 Second Quarter $19.167 $13.333 $0.025 Third Quarter $15.000 $10.417 $0.033 Fourth Quarter $10.833 $ 9.167 $0.042 1997 First Quarter $ 9.000 $ 8.000 $0.020 Second Quarter $11.500 $ 8.000 $0.020 Third Quarter $12.667 $10.417 $0.020 Fourth Quarter $12.333 $10.958 $0.025
page Allegiant Bancorp, Inc. - - ----------------------------------------------------------------------- 44 1998 Annual Report Shareholder Information EX-21.1 6 1 Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT (as of March 30, 1999) Allegiant Bank Missouri Allegiant Investment Company Delaware Allegiant Real Estate Investment Trust Delaware Allegiant Insurance Services Co. Missouri Kratky Road, Inc. Missouri EX-23.1 7 CONSENT OF AUDITORS 1 Exhibit 23.1 - Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Allegiant Bancorp, Inc. of our report dated January 21, 1999, included in the 1998 Annual Report to Shareholders of Allegiant Bancorp, Inc. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-13451) pertaining to the Allegiant Bancorp, Inc. 1996 Stock Option Plan, the Allegiant Bancorp, Inc. Directors Stock Option Plan, the Allegiant Bancorp, Inc. 1994 Stock Option Plan and the Allegiant Bancorp, Inc. 1989 Stock Option Plan and in the Registration Statement (Form S-8 No. 333-26433) pertaining to the Reliance Financial, Inc. 1996 Stock Option Plan and in the Registration Statement (Form S-3 No. 333-65699) of Allegiant Bancorp, Inc. and in the related Prospectus pertaining to the Allegiant Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan of our report dated January 21, 1999, with respect to the consolidated financial statements incorporated herein by reference of Allegiant Bancorp, Inc. /s/ Ernst & Young LLP St. Louis, Missouri March 29, 1999 EX-23.2 8 CONSENT OF EXPERTS 1 (BDO Seidman, LLP letterhead) CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Allegiant Bancorp, Inc. St. Louis, Missouri We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-13451 and 333-26433) and on Form S-3 (File No. 333-65699) of Allegiant Bancorp, Inc. (the Company) of our report dated March 13, 1998, relating to the consolidated financial statements of the Company as of and for the years ended December 31, 1997 and 1996, appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. /s/ BDO Seidman, LLP St. Louis, Missouri March 27, 1999 EX-27 9 FINANCIAL DATA SCHEDULE
9 THE SCHEDULE BELOW CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ALLEGIANT BANCORP, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 13,693 0 3,430 0 42,740 12,040 12,132 495,669 (6,442) 596,274 450,766 53,542 3,587 40,275 0 0 65 48,039 596,274 44,412 4,295 511 49,218 21,948 27,267 21,951 2,420 68 21,295 7,560 7,560 0 0 4,534 0.72 0.68 8.57 1,495 283 0 2,300 5,193 1,226 1,171 6,442 5,941 0 501
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